Context

Digital payments in India are witnessing consistent growth at a compound annual growth rate (CAGR) of 12.7%.

Growth potential and challenges involved in digital payments

• Expected growth in mobile wallet payment: The mobile wallet market is expected to continuously grow at a CAGR of 52.2% by volume between 2019-23, according to a recent report by KPMG.
  • This digital explosion can be seen in the accelerating rise in the download and use of electronic wallets as well as an unprecedented increase in digital transactions/payments.
  • UPI/IMPS use growth: Payment systems such as UPI/IMPS are likely to register average annualised growth of over 100%, according to RBI’s 2021 vision document.
• Challenge of Cybersecurity: Cybersecurity is one of the most critical challenges faced by stakeholders of the digital payment ecosystem.
  • Types of risks involved: With more and more users preferring digital payments, the chances of getting exposed to cybersecurity risks such as-
  • Online fraud
  • Information theft.
  • Malware or virus attacks are also increasing.
  • Digital payment frauds account for about half of all bank frauds in India.

Steps taken by the RBI

• Guidelines issued: In view of risks, the Reserve Bank of India (RBI) has also issued some guidelines as security and risk mitigation measures for digital payments.
  • It has also issued guidelines that limit the liability of customers on unauthorised electronic banking transactions
• Steps taken: The central bank has taken steps for securing card transactions, internet banking, electronic payments, ATM transactions, and prepaid payment instruments (PPIs).

Securing the fintech revolution

• Fraudsters building advanced technologies: The changing nature of cybersecurity attacks such as-
  • Web application attack.
  • Ransomware.
  • Reconnaissance.
  • The DDoS attack clearly establishes cyber-risk as a new reality.
• What needs to be done to secure the fintech revolution?
  • A robust regulatory framework.
  • An effective customer redressal framework.
  • Foolproof security measures to enable confidence and trust.
  • Incentives for larger participation and benefits similar to cash transactions- are some measures that can help ensure long-term success for digital payments.
• Leveraging technology: Technology can be leveraged for making popular methods of cashless payments secure.
  • Biometric authentication-enabled cards can provide a greater layer of security by enabling replacement of the traditional PIN.
  • Through biometric authentication, consumers can authenticate transactions by placing their finger on a fingerprint sensor embedded in the card.
  • Ensuring security: Safety is ensured as the consumer’s fingerprint is stored only in the secure chip within the card and the same chip is used to match the scanned fingerprint with the stored one.
  • The biggest advantage: The biggest advantage is that the bank or merchant cannot access the consumer’s biometric data, which also counters potential privacy concerns.

Conclusion

To reap the advantages of the promising fintech revolution steps must be taken to secure the digital environment.

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