PROTECTING PAYM

For a couple of months, consumers in the UK have been able to make payments from their mobile phones just using mobile numbers through the new Paym app. Since the Payments Council launched the Paym mobile payment system, take-up has been slow. Indeed, research from CSC found that many banking apps are struggling to cope with the level of customer use they receive.

Nevertheless, there are many players looking to break into this mobile payment market within the banking and retail sectors – from mobile wallets like Zapp and PayPal’s recently acquired mobile payment startup Card.io to mobile banking apps such as the Barclays PingIt service – and for good reason. Mobile payments are an ever-increasing medium, with mobile retail accounting for 32% of online sales between November 2013 and January 2014. Figures from the Office of National Statistics found that 72% of UK adults bought goods and services online in 2013.

Being able to make payments using mobile technology is a big step forward in future-proofing the consumer payment journey. Using this new app, sending and receiving money is now much simpler and quicker. With more than 50% of consumers using online banking and 17% already in favour of using mobile banking apps to check their accounts and make payments, there is huge room for growth in this market.

Gabe Hopkins

There is no doubt that mobile technology is revolutionising the way we live, from wearables to the Internet of Things: this year, IDC reported that over 281 million smartphones were shipped worldwide and smartphone sales now exceed feature phone sales.

FICO recently completed a worldwide study of smartphone consumer attitudes to mobile banking, which revealed that the most popular banking activities smartphone consumers want to do more of on mobile are:

• Checking bank account balances (75%)
• Receiving notifications of potential fraudulent activity (59%)
• Making payments from their account (53%)
• Transferring money between personal accounts (50%)
• Receiving information about new products and services (43%)

As the high placement of fraud alerts shows, there is an appetite among consumers to send money from wherever they are with a few clicks on their phone, but there is also a strong awareness that transactions need to be secure. We’ve found that consumers are willing to invest energy and time to improve the security of their accounts, and other outcomes. The mobile phone is a modern consumer’s remote control to control many aspects of their life.

An increasing concern among end consumers is whether new mobile payment methods like Paym, as well as the personal details they share, are safe and secure. And it’s no wonder consumers are concerned — data from Euromonitor International shows that card fraud in the UK rose 16% from 2012 to 2013, reaching its highest level since the peak in 2008.

Recent years have seen fraud countermeasures taken within and across the UK, with a lot of financial crime being pushed away from traditional tactics, and the point of “cash out” moving from physical theft to CNP fraud, and from the UK to overseas. Nonetheless, criminals are always on the hunt for vulnerable links in the chain, and when you squeeze fraud out of one channel it bulges in another. The need for consumer awareness, education, understanding and vigilance remains paramount, especially as the number of ways payments can be made continues to expand to different devices.

On the whole, Paym seems like a great idea. It’s refreshing to see the banking industry respond relatively quickly and efficiently to customer demand and emerging competitors. Consumers don’t want to be emailing around sensitive financial details and banks have started to realise that even if those details aren’t vulnerable to compromise, consumers may well still be concerned.

However, as we’ve seen with the introduction of Chip & PIN and more recently Verified by Visa, it is essential to listen to the law of unintended consequences. However carefully new schemes are planned and executed, they always open new fraud vectors for ever more desperate thieves.

Desperate digital thieves are remarkably ingenious. They will use a wide and expanding range of techniques to separate you from your money. In online banking, we see fraudsters able to execute a full account takeover, and act in a way which is apparently indistinguishable from the way that you might interact. That presents a real problem and the financial services industry must maintain its position – one step ahead of the fraudster.

New channels such as Paym prompt financial institutions to review their fraud defenses in a new light. There are several recent technological innovations, for example, that could bolster protection for Paym. These include analytics that adapt to changes in customer behavior and advances in identity validation, which can allow issuing banks can respond to emerging challenges quickly and then continue to refine strategies as further evidence accumulates.

Banks must take a full 360 degree view of Paym, predict all potential fraud vectors and then ask the most important questions – how can I make it easier for my customer to make a payment while still protecting their identity and freedom? We can all create a 100% secure solution – just reach for the off-switch – but it is much more challenging to respond to consumer demand for a simple intuitive way to transfer whilst balancing the need to protect and secure customer data.

Gabriel Hopkins, Senior Director, Product Management,  FICO