Need For Better Fraud Prevention Strategies Amidst Surge In Payment Digitization: Report
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There has been a significant boost in the digitization of payment method in the country. According to a joint report by Data Security Council of India (DSCI) and PayPal India, the e-commerce market in India is expected to grow to $200 bn by 2026 from $50 bn in 2018, thus highlighting the utmost importance of safeguarding online payment method for customers, micro, small and medium enterprises (MSMEs), and business across the country.
Surge In Digital Payments
The report titled - Fraud & Risk Management in Digital Payments which captures sophisticated online payment fraud mechanisms, threats in the payment ecosystem, and the role of technologies among other, highlighted that unified payment interface (UPI) transactions in the country have crossed 1.49 bn in volume and $41bn in transaction value, in July 2020. The RBI has estimated that the number of digital transactions is likely to clock at INR 8707 crore by December 2021 from INR 2096 crore in December 2018. In terms of card payment, the country till March last year has issued 925 million debit and 47 million credit card, only second to China.
The digital payment has become a go-to method for transaction due to the deep penetration of Internet flanked with cheap tariff rate. The report pointed out that Internet userbase is anticipated to touch 835 million by 2023 from 560 million in 2018.
A surge in internet users has tailwind the booming of the e-commerce sector in the country, with tier-I cities witnessing a growth of 73 per cent whereas, tier-II and tier-III cities are seeing colossal growth of 400 per cent.
Types of Fraud
The report has highlighted various types of fraud scenarios such as buyer side, merchant side and cybersecurity frauds, and recent fraud case studies with their modus operandi.
According to the report, the main prevent such fraud continues to remain fraud detection, multilevel awareness, investigation and legislative challenges, and cross-industry collaboration. Apart from this, privacy laws, security as a cost overhead and organized criminal involvement are hurdles to reduce frauds.
The report highlighted that future fraud possibilities can shape up from exploitation of supply chain vulnerabilities, exploiting risk transfer controls and spoofing current fraud prevention mechanisms.
Suggesting solutions, the report mentioned that technologies such as artificial learning or machine learning, computer vision and neuro-linguistic programming (NLP) can help to prevent frauds.
Commenting on the report, Rajesh Pant, national cybersecurity coordinator, government of India (GOI), said, “Digitization and cybersecurity is at the core of Digital India’s mission and online payment safety is paramount for India to emerge as a leader globally. The Government has taken many steps to support businesses, SMBs across their digital journey, however,upcoming legislations and strategies will further aid the positive momentum. COVID has also provided an opportunity to fast-track both adoption and regulatory focus.”
Rama Vedashree, chief executive officer, DSCI, said, “Digital Payment Safety is one of our key focus areas to alleviate the emerging concerns and underlying causes leading to mushrooming payment frauds. This report is an attempt to initiate discussions and develop solutions towards real-time fraud prevention and mitigation strategies. The Government is already working closely with the Industry and COVID has proved to be an accelerator. In order to find the right balance between enablement and protection, it is critical that a collaborative effort be undertaken by all stakeholders involved, to establish a comprehensive fraud management framework for digital payments in India.”
Steven Chan, senior director, head of government relations, APAC, PayPal, said, "COVID-19 has been a catalyst for digitalization as businesses are rapidly adapting their strategies to evolve with changing consumer behaviours. As a result, we have seen a significant acceleration of digital payment adoption and India is at the forefront of this transformation. While we have witnessed a tremendous shift in commerce and financial services, there has been increased in cyberattacks and the global pandemic has revealed gaps in business continuity plans and IT operations. The joint DSCI-PayPal report examines the various types of fraud focusing on consumers, merchants, and cybersecurity as well as future fraud possibilities, amplified by COVID-19, such as supply chain vulnerabilities and risk transfer controls. Small businesses and vulnerable communities will continue to struggle as the pandemic and its economic consequences continue to play out. Therefore, developing the right solutions will be essential to enhancing small business resiliency and the recovery of the overall economy.”