Although time seemed to stand still in many ways during the pandemic, in other areas such as digital payments change was accelerated, with a lasting impact on consumer behaviour, fraud patterns and a need to mitigate risk. Many of these changes will carry on into 2021 and beyond. More importantly, the experiences of 2020 will accelerate innovation and force companies to learn from their mistakes to ensure they are not repeated.
Here are my five predictions as to how the digital payments landscape will change this year:
Changing consumer habits will require better fraud prevention
According to Visa’s consumer security study, on an average, nearly 60 per cent of consumers surveyed in UAE, Saudi, Egypt and Kuwait said they will continue to use contactless payments more in-store even after the pandemic, while over 50 per cent said they will continue to opt paying online using cards or digital wallets, rather than cash-on-delivery.
This shift in consumer behaviour will drive merchants to innovate to meet changing customer preferences. Investments will include developing new ways to onboard customers and accept payments online, in-app, contactless and through IoT devices (such as wearables, in-car, smart speakers, smart appliances). They will be rewarded through new customer acquisitions, existing customer retention and a growth in sales.
But as merchants move online, so are fraudsters. Payment security is difficult and not everyone has the expertise to do it well. Merchants will need to update their fraud prevention strategies to support omnichannel commerce and if in-house expertise is not available, merchants should turn to proven, reputable partners.
A stronger authentication process will help to bolster payment security
Accelerated by Covid-19, demand for dynamic security solutions that help merchants ensure their customers engage in safe online shopping practices will be on the rise. A Visa consumer security study revealed that nearly two-thirds of consumers in the UAE (66 per cent) and Saudi Arabia (70 per cent) would prefer a convenient authentication process that doesn’t require them to enter a one-time-passcode (OTP) for standard and recurrent transactions. Similarly, for 59 per cent of consumers in Kuwait and 88 per cent in Egypt, an authentication process that doesn’t require them to enter an OTP was considered to be more convenient.
Modernising payment infrastructure could reveal new vulnerabilities
A growing number of central banks and FinTechs are challenging tradition and exploring new and faster ways to send money, settle payments and share information. Real-time payments, digital currency and open banking support innovation that matches the expectations of digitally-savvy consumers and will help to drive digital commerce for decades to come. However, faster payments open up opportunities for faster fraud and the sharing of customer information must have data privacy in mind.
FinTechs and central banks need to have mechanisms in place to spot atypical patterns that can be an indicator of fraud. It is also important that the principles of open banking and the sharing of data is used responsibly and ethically across all products, services and technology. 2021 will see payment volumes in real time payments continue to grow, digital currencies continue to become mainstream, consumer and data privacy at the forefront of many discussions and industry players working together to resolve new vulnerabilities.
Government agencies will implement stronger measures to avoid fraud losses
Globally, fraud activities spiked during the first phase of the pandemic. For example, in the US, government benefits meant for vulnerable citizens affected by the pandemic were targeted by fraudsters. By using stolen identities to apply for benefits, fraudsters were able to effectively siphon away the funds making fewer funds available to individuals who needed them the most.
If government agencies want to avoid further losses, they will need to revisit their processes and technologies used to support the verification of eligibility and distribution of benefits. Strengthening authentication capabilities to better assess government benefit eligibility will be a priority in 2021.
Momentum behind digital identity will continue to build
The move away from passwords and knowledge-based authentication will accelerate with adoption of strong customer authentication standards like FIDO (Fast ID Online, a protocol now available for all major browsers and mobile devices).
Plans for government and bank-led electronic identity schemes (e-ID) will advance along with trust frameworks and regulation to inform how various parties can interact. Accelerated by Covid-19, demand for systems that help banks and merchants to digitally verify consumer identity will grow. Relying parties who are unable to manage identities will effectively become targets for fraud.
Hector Rodriguez is senior vice president and regional risk officer for Visa's Central Europe, Middle East and Africa region