Latest Fintech Innovations Boosting the Security of Online Payments

One of the greatest challenges facing the financial services industry in 2020 is the prevalence of cyberattacks. Payment firms are developing innovative new ways to safeguard online transactions.

Karoline Gore explores some of the latest developments in fintech and what they mean for the security of online payments.

The current health crisis has ushered in a new era of digitalisation, with a recent McKinsey report showing that COVID-19 has sped up the adoption of digital technologies by several years. The share of digital or digitally enabled products, the report found, has been accelerated by an impressive seven years in a matter of months. This means that, for most companies, online security has become of the essence so as to avoid losses and maintain a sound reputation in their respective industries. These are just a few technologies that are enabling companies to breathe easier in the knowledge that neither their nor their customers’ sensitive data will be exposed.

Real Time Payments

Deloitte identifies ‘real-time payment’ as a key technology enabling consumers to enjoy faster settlement periods, notifications, and consolidated reporting. This technology is key in an era in which ubiquitous connectivity and the boom in the use of smart devices mean that many consumers are using their phones to pay merchants and friends. There are many ‘faster payment’ programs, reports Deloitte, including the Interbanking Electronic Payment System (SPEI), which clears low value transactions every 20 seconds throughout the working day, and ‘multiple batch’ clearing, which operates similarly to traditional systems but takes place various times a day. The ability of payers to receive quick notifications made quickly enables them to identify any fraudulent payments made.

Dynamic Security Codes for Credit Cards

Identity theft is something both sellers and buyers can experience during online transactions. However, there are key differences between gateways for payment and merchant accounts, along with the type of fraud experienced by each party in a sales transaction. Merchants can suffer cybersecurity issues when unwittingly contracting the services of fraudulent providers, while customers can experience identity theft if the payment gateway (the link between their bank and the merchant account) is weak. Dynamic security significantly boosts the safety of payment gateways through dynamic codes. The latter replaced static CVV2s on the back of cards via a tiny LCD that displays dCVVs changes periodically. App-based dCVV2s, meanwhile, remove the need for cards with batteries and LCD, which pose a greater cost for consumers.

Cloud-Based Payment Systems

Research firm Technavio predicts that global payment gateway systems are predicted to grow by $23.45 billion between 2020 and 2024. This can be attributed to cloud computing technologies being adopted in SMEs and the growing demand for cloud-based solutions to collect online payments. The cloud enables merchant services providers to rely on platform-as-a-service models.

The latter enable them to design, host, and release applications speedily, without having to run a personal server. As such, buyers can make payments through convenient mobile banking apps or by scanning QR codes. Cloud services allow for seamless integration between services like Apple Pay with electronic funds transfer at point of sale.

The boom in digitalisation and online sales models mean that greater security is key. The latter is being delivered by fintech innovations such as real time payments, dynamic security codes, and cloud-based payment systems. These technologies are working together to ensure security is quick, efficient, and informative in terms of real-time movements.

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