In parallel to this pandemic-stricken year in which time often seemed to stand still, businesses rapidly went digital and made structural changes to their payments operating models. Global economies moved quickly in ways that accelerated change, bringing lasting impact to consumer behaviour, fraud patterns and risk mitigation needs.
Consumers adopted new shopping behaviours and digital habits during the crisis. We at Visa utilised our expertise and resources to help financial institutions, merchant partners, governments, and consumers to navigate during these unprecedented times. Looking ahead to next year, we believe many of the changes in digital payments will carry over. More importantly, the experiences of this year will accelerate innovation and force companies to ensure their mistakes are not repeated in 2021. A few predictions for 2021 include:
SMALL BUSINESSES TO INCREASE INVESTMENTS IN CYBER SECURITY: The flight to digital by new consumers was noticed early on by businesses. As per a Deloitte report, 48.0 per cent of consumers reported that overall online spending had increased since the outbreak of Covid-19. These consumer behaviours will be instrumental for small businesses to innovate and meet customer expectations on security. Merchants who invested in new strategies to on-board customers and new ways to pay, either online, in-app or contactless will be rewarded through new customer acquisitions, existing customer retention and growth in sales.
But as merchants and consumers move online, so are cyber criminals. Small businesses will need to update their fraud prevention strategies to support omnichannel commerce. A sure shot way is for small businesses to turn to reputable partners that can provide payment security aligned to their business goals and interests.
RISK & SECURITY IN MODERN PAYMENT INFRASTRUCTURES: Advances in payment innovation between fintechs and established financial institutions have led to wide scale adoption of digital payments. Businesses are modernizing legacy payment infrastructure and quickly embracing new, faster ways to send money, settle payments and share information, also by relying on new players like fintechs. Real time payments, digital currency and open banking support innovation that match the expectations of digitally savvy businesses and will subsequently drive digital commerce for decades to come. It is critical for businesses to be mindful of customer data privacy and the principles of open banking by sharing data ethically and correctly across all their functions.
Fintech and financial institutions need to have improved mechanisms to spot potential and atypical fraud activities. 2021 will be crucial for growth in volume of real time payments; industry discussions on customer protection and data privacy will be at the forefront and industry players working together to resolve new vulnerabilities as they are revealed.
STRONG CUSTOMER AUTHENTICATION TO BECOME IMPORTANT: As financial transactions continue to be digitised in Bangladesh, critical challenges in mitigating cyber-security risks have risen too, with the growing number of new-to-digital consumers. To safeguard themselves from vulnerabilities, consumers are moving away from passwords and adopting stronger customer authentication standards across their digital devices while making payments.
According to World Economic Forum's Global Risks Report 2020, data theft is one of the top risks that businesses are likely to face in the long term. Accelerated by Covid-19, demand for solutions that help businesses to digitally verify consumer identity will grow. Reviewing and further strengthening the existing compliance and regulatory framework by the regulator during these transformative times will become even more important. The concept that digital identity is one of the building blocks required for an economy to function in the digital age will gain further traction in 2021.
INCREASE IN ROLE OF ARTIFICIAL INTELLIGENCE (AI) AND MACHINE LEARNING (ML): Digital experiences continue to become mainstream with the pandemic providing a fillip. The world financial system is moving closer to a digital, cashless future and with a rise in online consumption; 2021 will witness a surge in a new generation of digital customers.
Visa has been using AI since the 1990s as part of its mission to make payments safer and easier.
When an attempted payment is initiated at a merchant, Visa's Advanced Authorisation uses AI to analyse more than 500 risk attributes in approximately a millisecond and produce a score that reflects how risky the transaction is (AI blocked $2.0 billion in payment-card fraud in Latin America in 2019). The goal is to help financial institutions decide whether to authorise or decline a given transaction and at the same time create more confidence among consumers in digital payments. This use of AI is helping companies around the world improve customer experience, drive business growth and mitigate the threats to payment security.
To provide a secure payment experience while monitoring an exponential increase in transactions, we believe that more financial service providers will build new payment security solutions applying technologies such as AI and ML to automate risk detection. In the recent past, such technologies were vital in creating payment security solutions such as EMV 3DS, tokenisation and deployment of many capabilities to strengthen real-time payment fraud monitoring. AI and ML will be instrumental in preventing payment risks in this time of increasing cyber security risks.
Vipin Surelia is Chief Risk Officer, India & South Asia, Visa. [email protected]