Digital finance key growth driver but risks abound

A bright new world of opportunity is dawning for consumers and businesses across Africa as digital payment innovation and online commerce bring inclusion and economic growth across the continent. But certain hurdles remain in the way of the ideal of borderless, cashless, seamless and inclusive digital payment ecosystems: safety and security concerns and the question of trust remain key in delivering new digital payment environments.

Consumers are often hesitant about digital transaction safety. For those new to the digital environment and not well versed in the risks of phishing, vishing and SIM swap fraud, the entire digital environment could appear to be fraught with risk. In South Africa alone, the South African Banking Risk Information Centre (SABRIC) reported recently that incidents of digital banking crime grew by 75 percent to 23 466 between 2017 and 2018.

Fraud risks are exacerbated by the fact that the existing system is set up so that identifiable credentials—like credit card numbers—can often pass through systems in a way that readily steal-able and vast amounts of user data is stored in integrated databases, so that when one location gets hacked, identity data and details are then exposed en masse.

New digital financial services present an opportunity to drive financial inclusion and prosperity, bringing new levels of convenience and more cost effective transactions to millions.

However, when consumers and merchants are confronted with services and solutions they have never seen before, trust stands between interest and actual adoption. Consumers want the assurance that their money will be safe, their personal information properly secured, and their entire transaction will be concluded within a trusted environment.

Safety, security and trust are the areas where responsibility and opportunity lie for financial services providers, mobile application developers and fintech specialists.

Certain key components of the environment must be locked down, and consumers and merchants alike must have the assurance of safety.

PAYMENT PLATFORMS: By consolidating innovative new mobile and digital payment solutions into secure and trusted platforms, service providers are able to build assurance into their products and services from the ground up.

Simplified, secure digital commerce: Digital commerce complexities will increase as new interfaces such as voice and chat-initiated commerce proliferate, and as more players emerge to take advantage of this opportunity. Consumers want a simple, predictable and intuitive way of interacting, from authentication to the actual transaction, but consistency is the missing piece of the puzzle, and security is crucial. Partnering with merchants, issuers, digital players and more in this growing payments ecosystem can deliver consistency and security through industry standards across all payment scenarios.

By tokenizing every transaction and creating the next generation of card-based checkout experiences for consumers with Secure Remote Commerce, an EMVCo standard for security and interoperability in e-commerce, we are working towards a secure and consistent payment experience and standardised payment information storage.

Digital Identity: This is the key to accessing the increasingly digitised, globalised economy, and in a perfect environment, people’s identity will be verified immediately, safely and securely, access will be gained without memorising a complicated password, and no identifying data will be given away or put at risk. While the world has not yet achieved the digital identity ideal, governments are getting involved and regulating bodies around the world are becoming more proactive about defining standards for digital identity.

With technologies such as biometrics, Artificial Intelligence and blockchain emerging as the enablers, the world is moving toward efficient, foolproof systems of digital identity. Data best practice: Today’s environment puts the onus on individual organisations to develop responsible data practices, balancing innovation with how that innovation will impact individuals and society. Players need to manage data practices and innovation with individuals at the centre of consideration in an environment that is in a constant state of change and evolution. This requires specialised knowledge and the commitment to transparently and clearly share data practices with users; regulatory frameworks that adapt at the speed of innovation; and advanced security practices that address data ownership, accuracy and storage.

Identity data management: Enhancing the security of digital identity demands a system where identity information is not held in one place, but is scattered widely, and in the information that does pass through the system cannot easily be linked back to identifiable, useful information—like credit card numbers or national ID numbers. People need to be in control of what digital identity is released and to whom.

The writer is head of market development for Sub-Saharan Africa at Mastercard.