Banking on Authentication in a World of Faster Payments

We’re living in a world where everything operates at light speed.

It wouldn’t be wrong to say, that across every walk of life — convenience and immediacy win the day!

Over the course of the pandemic, consumers have gravitated to online shopping channels. This brings us to the case of payments. The seismic shift to digital channels has also led to the rise of faster and more seamless payment methods.

Traditional payment methods are fading away and digital payments are now desirable across the board! From mobile wallets to QR codes, and everything in between, digital payments are becoming an increasingly popular option for many today. According to reports, the digital payments market is expected to reach a whopping $10.5 trillion in value by 2025.

With shopping and payments moving from ‘high street’ to online, there have been growing concerns around payment security and the protection of data.

The ease at which payments are made today makes it even more important to ensure that the payment is being made by the right person and is received by the right party. This is where authentication and identity come into the picture. To be able to keep up with the growing demand for digital payments, a focus on holistic authorization and a stronger identity security strategy is needed.

It’s time to make way for authenticated payments

Here’s the thing: Where money goes, fraudsters will follow.

For years now, cybercrime has cost the world billions, and today, the losses from cybercrime are reaching record-highs. Financial data will always be an attractive avenue for fraudsters — and this makes it all the more important to beef up payments’ security with stronger authentication protocols.

The customer’s trust gets eroded every time there is a data breach. Banks, payment providers, and merchants need to look at ways of providing a frictionless payment experience that is also secure on all levels.

This calls for making authenticated payments mainstream. Authenticated payments are much in line with international regulations like the PSD2 directive.

Enhance the security of payment flows with authentication

By nature, authenticated payments validate who a user is. This approach combines strong authentication and identity factors to ensure that the customer’s card details and personal data are not being used without their knowledge, to make a payment. So, what are these authentication and identity factors?

While identity factors refer to valid government Ids, the authentication mechanism requires the customer to provide information on the below three factors:

• Something the customer knows, e.g., a password
• Something the customer has, e.g., a credit card or a mobile phone
• Something the customer is, e.g., using biometric technology like fingerprint scanning

This way merchants can gather multi-factor authentication from customers for online transactions. As faster payments are soon becoming the future of payments, I strongly believe that authenticated payments will be an integral part of every payment system.

Europe is already headed in the right direction. The EU’s Revised Payment Services Directive (PSD2) has made Strong Customer Authentication (SCA) a regulatory requirement — in order to win over consumer confidence and make online payments more secure and smoother.

Richard Dratva, digital banking specialist and Vice Chairman of CREALOGIX Group recently tweeted in support of the initiative.

#OpenBanking – less fraud:
“In almost all instances, the share of fraudulent payments in the total payment volume and value is significantly lower for transactions that are authenticated with strong customer authentication (SCA) than those that are not.”https://t.co/HXSmDvQD2h

— Richard Dratva (@RichardDratva) January 20, 2022

Final thoughts

While there is no silver bullet for eliminating fraud, payment authentication can help a great deal in securing online transactions and preventing chargebacks. EMV® 3-D Secure (3DS) and biometrics have seen massive adoption rates and have become the global standard for authenticating card-not-present (CNP) transactions.

As mentioned in my earlier post, machine learning algorithms play a huge part in identifying fraud at an early stage. Joining forces with an expert and layering multiple forms of authentication is the best way to lower the possibility of processing fraudulent transactions.

Organizations that are looking to upgrade their legacy systems and incorporate payment authentication; must look at not only enhancing security but creating a positive, frictionless experience for the end-user.

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