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Security in Emerging Payments: Offering the Payment Methods Customers Want, Safely

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Security in Emerging Payments: Offering the Payment Methods Customers Want, Safely


As technologies like mobile devices, big data, the cloud, Internet of Things, and machine learning converge to drive new consumer behaviors, those behaviors inevitably involve payments. Emerging payment methods like contactless payments and voice-activated transactions are coming to the fore, but some businesses may hesitate to accept them due to security concerns. When it comes to payments, businesses have to find a balance between pleasing customers and ensuring security.

Are security concerns valid?

Many of the new payment types—particularly real-time payments—are faster. Today’s consumers want everything to happen instantly, with a click of a button, so it’s only natural that the market would respond with faster payments. When the velocity of payment increases, though, there’s less time to detect fraud. Some new payment modes also remove the security structures that legacy payment systems have in place.

But no matter the payment type, fraudsters will always adapt their methods to overcome security measures. Fraud is a problem that will never go away; banks and their business customers just have to manage and mitigate it as effectively as possible. Fraud technology is evolving, too, so businesses can safely adopt new payment methods as long as they keep their fraud and security measures up to date.

Some effective security measures

Basic security measures like using SSL protocol to encrypt information on a website and ensuring PCI compliance are steps any business can take to make payments safer. Tokenization, which enables customer authentication during a purchase, is another helpful technology that prevents customers’ card data from being stolen in a data breach. The “token” is a random string of characters that replaces sensitive information like the customer’s 16-digit card number. The number is useless to fraudsters if stolen in a breach. Tokenization can be used with any payment platform.

One more authentication measure for card transactions is 3-D Secure, an XML-based protocol designed to be an additional security layer for debit and credit card payments. Visa, MasterCard, American Express, and others use a version of 3-D Secure, which creates a secure password for the payer’s credit card. Every transaction is then verified with the password.

Sticking with the tried and true

Even with these and other security measures in place, businesses may still be nervous about accepting new payment types. If so, they can start with incumbent providers’ offerings first. FinTechs, established providers, and banks have built new payment types that use existing, proven payment rails. Same-day ACH, for example, uses the ACH rails, making it seamless, fast and secure. Long-time payments provider The Clearing House now offers real-time payments (RTP) through its member banks; RTP is an entirely new payment system but is provided by trusted players. The Federal Reserve may even offer its own version of real-time payments in the coming years.

A digital-first approach

Payments technology is evolving swiftly, and consumers will keep demanding new payment types as they gain popularity. Banks are responding in kind by taking a digital-first approach, which means that they are coming faster than ever to market with new products and services. Often they accomplish this through partnerships with FinTechs. For example, a FinTech might develop a cool new mobile payment app for retailers and partner with a bank to process the transactions. In these arrangements, FinTechs provide innovative new technology and agile development, while banks bring capital, consumer trust, added security and compliance expertise to the table. Partnership with a well-known bank facilitates consumer adoption, too, because consumers feel more at ease using a new app backed by a trusted institution.

Meeting ever-evolving needs

At First National Bank of Omaha, we have found that collaborating with FinTechs helps us to meet our customers’ ever-evolving needs—quickly. It’s inevitable that new payment modes will come to market. Some of them—like payments using fingerprint authentication—may be safer than traditional methods. Visa and MasterCard were disruptors in their day; now they are challenged by a new breed of disruptors. Still, the ‘legacy’ rails continue to innovate. Like Visa and Mastercard, we continue on our innovation path in partnership with our customers and FinTechs to push forward the next market disruptor, securely, and make consumers happy in the process.

About the Author

Jason Hagan leads Wholesale payments strategy and product development for First National Bank of Omaha. He joined the bank in 2013 to develop and implement the bank’s payments and partnership strategy. Jason also leads the Wholesale Bank Investment process.

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The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations.