Digital Payments: Challenges and Solutions: Srihari Kulkarni, Abdul Shahanaz Taj
Digital Payments: Challenges and Solutions: Srihari Kulkarni, Abdul Shahanaz Taj
Abstract: In modern times, commercial banking occupies an important place in the financial frame-work of
every economy. Banking system is a dynamic sector of economy. They keep changing and this continuing
process of change constantly challenges those who are responsible for management of the banks and those who
observe and study their performance. The nature of banking system has shifted after financial “big bang” of
mid 1970s and mid 1980s in the U.S.A and the U.K financial markets respectively. With the explosive growth of
the Internet, electronic-commerce (e-commerce) is an increasingly important segment of commercial activities
on the web. In Digital payments world million dollar question comes in at every stage what is more important
security or speed. Digital payments are to finance what invention of wheel was to transport. It offers an
unprecedented opportunity to our people, most of who live in rural India or are migrants in big cities. It
promises access to formal financial services and benefits from e-commerce, especially for those who continue to
be excluded. In addition to accelerating financial inclusion, opening new business models and markets -digital
payments can improve the State's ability to curb tax leakages, funding of criminal activities and reduce cash
related costs. 2015 year can be written down as year of awareness & noticing payment methods other then
cash. Year 2016 was the year of financial services with greater technology with too much of Innovations there
after trials and adoptions. The phenomenal global growth in digital payments may be attributed to four factors
–
(i) Digital and technology revolution
(ii) Entry of several non-banking PSPs(Payment Service Providers) into payments space
(iii) Customers becoming more demanding and expecting instantaneous and one-touch payment solutions
(iv) Progressive changes in the regulatory framework.
The focus of this paper is to identify and explain the different methods of digital payment, we analyze the
challenges of digital payments from different perspective and provide preliminary security countermeasures for
each of the issues. Finally, a number of solutions have been proposed based on the problem and discussed on
the prospect of digital payment system.
Keywords: Challenges, Different Methods, Digital Payments, Security, Solutions.
I. Introduction
Cash may not be a king anymore, the adoption of digital payments is picking up at an extreme pace,
everyone from vegetable vendor to chai-wala is adopting the digital payment system to move away from the
cash crunch.
New technologies, players and consumer expectations are changing the payments marketplace more
than ever. The opportunity of the new digital payment ecosystem comes with risks. From cyber security and
privacy to the impact of legacy technology and new competitors, it is far from clear sailing for organizations
wanting to be a player in the future payments marketplace.
In wake of the government initiatives towards transformation towards digital economy, and many
private companies, payment bank licenses issued by RBI, witness the transformation. ―Faceless,
Paperless, Cashless‖ is one of professed role of Digital India. The emphasis is on the different methods of digital
payments by considering the challenges and providing solutions according to the existing scenario.
III. Challenges
On a macro level, consumer level and the business perspective, the challenges being faced are-
3.1 Unbanked population
The government along with Reserve Bank of India (RBI) implemented and initiated numerous schemes
like PradhanMantriJan Dhan Yojana, digital India payments limited etc., to promote financial inclusion,
especially in rural India. Despite all the efforts, about 19 percent of the Indian population still doesn‘t have
access to banks, according to a study jointly conducted by ASSOCHAM and the consultancy firm, Ernest &
Young.Recent data from the government and other sources refute a claim that declared 99% ofhouseholds to be
in possession of bank accounts but the facts are stated above.All the popular methods of payment like E-wallets
United Payment Interface and BHIM etc., are dependent on bank accounts, if not also smartphones and internet
access.
3.2 Cybersecurity
Globally, numerous events of hacking occur, of email accounts, databases, bank details tec. The
increasing digital transactions pose cyber security as the main challenge for public, institutions and
government.Mobile Banking Malwareis sophisticated virus infecting banks mobile apps user to steal password
details and even Hinders the twofactor authentication, by presenting victims with a fake version of the
login screenwhen they access their legitimate banking application. Jailbreak or Rooted Devices, this is a practice
to gain unrestricted or administrative access to the device's entire file system, by breaking its inherent security
model and limitations, allowing mobile malware and rogue apps to infect the device and control critical
functions.
Outdated OSs and NoSecure Network ConnectionsFactors such as outdated operating system versions,
use of no secure or public WIFI network in mobile devices allowcybercriminals to exploit an existing online
banking session to steal funds and credentials.
After observing the responses received we hereby conclude that, most of the people are using the
digital payment system because of the convenience they are attaining, the need to go to banks for every purpose
decreased. And most of the respondents use digital payments weekly, debit and credit cards are the most
preferred methods of digital payments followed by e-wallets and net-banking, the biggest concern about digital
payments is security 60% of the respondents believe this as the major concern, net banking is the favored
method for high value transactions, greater number of people never changed their passwords while some people
change it once in six months and yearly, coming to the cyber hygiene, like installation of antivirus in their
laptops and computers the results stood closely that some people are using the antivirus whereas some people
are not using it, and storing details of their cards or bank credentials most of the people don‘t store their details
in phones and laptops. Last but not the least majority of the respondents voted for usage of digital payments for
some transactions even though the notes come back into circulation.
IV. Solutions
Considering security as the major issue, the solutions are discussed below
As A Responsible Cyber Citizen, Practice Basic Preventative Measures. The Above Challenges Can Be
Prevented By Following The Simple Steps Below.
4.1 Maintaining cyber hygiene, regularly update anti-virus / anti-malware software and applications, Avoid the
use of public Wi-Fi networks, which are target-rich for cyber thieves.Regularly change passwords, choose
strong password and separate passwords for different site. Install dual-factor authentication/tokens,
biometric solutions (e.g., fingerprint, facial recognition and iris scanning software) and other data
encryption software onto electronic devices. Backing up files onto external drive (to safely restore, in case
of eventuality), Only engage with verified social media pages and use official mobile apps linked from an
official web site. Prevent account data from being intercepted when entered into a mobile device. Prevent
account data from compromise while processed or stored within the mobile device. Protect against known
vulnerabilities. Protect the mobile device from unauthorized applications, Protect the mobile device from
malware. Support secure merchant receipts. It is recommended to set the maximum number of incorrect
password submissions no more than three.Choose a strong password to keep the account and data
safe.Review the account statements frequently to check for any unauthorized transactions.Report a lost or
stolen phone / device immediately to the service provider and law enforcement authorities.Never give the
PIN or confidential information over the phone or internet. Never share these details with anyone.Don‘t
click on links embedded in emails/social networking sites claiming to be from the bank or financial
institutions.Don‘t transfer funds without due validation of the recipient, as funds once transferred cannot be
reversed.Be cautious while using Bluetooth or WIFI in public places as someone may access the
confidential data/information.
4.2 The other macro, consumer and business-related solutions are presented below:
Considerable need for more effective laws, guidelines, and compliance trends that can support in
improving the process.Supply of PoS solutions in the market, leverage of technology, ease of compliance terms
is also essential in encouraging more retailers, merchants and professionals to embrace the solution more
effectively.Reduce the transaction charges over the digital payments and discourage cash transactions.Creating
awareness about the ease of usage is one of the essentials.Intrinsic need to improve and offer requisite
infrastructure for digital payments. successful adaptation of digital payments
V. Conclusion
India is among the fast emerging as one of the largest and strong economies. For sustained
development and growth with robust economic development, certain integral factors like improved
transparency, corporate governance etc, play a major role. All developments could be feasible only when the
population embraces the digital payments and digital transactions. Hence, if the challenges that are discussed are
addressed and improved solutions in terms of digital transactions with more secured features, ease of
transactions and reduced cost of managing the digital payments could lead to more potential developments and
supporting in improved conditions of digital payments processing.
References:
[1]. M-Wallet Report By ASSOCHAM, http://www.assocham.org/upload/docs/MWallet_Report_press.pdf
[2]. Pahwa, N., 2016. Cash vs Digital Money: why going cashless is going to be tough in India. [Online] Available at:
http://www.medianama.com/2016/11/223-cashless-india/ [Accessed 23 Feb 2017].
[3]. IMAP, 2017. Payments Industry in India, s.l.: IMAP
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