Does convenience cause risk?

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Thanks to technology, it has become far easier to make payments, but how safe are contactless payments and what are South Africans’ options?

Covid-19 has had a major impact on all spheres of our lives, and one of the spheres already influenced, is the way we buy and pay for goods. Whether you buy using a credit card, an app, a virtual card, or these days, even your watch, contactless payments have gained traction and are here to stay.

The “Visa Back to Business Study – 2021 Outlook” found that 65% of consumers now prefer contactless payments. Only 16% of consumers would prefer to return to the traditional way of paying, once the world has returned to normality with the help of vaccines, while 74% would still use contactless payments, and 47% don’t want to buy at shops that don’t have contactless payment options.

The difference in how people buy and pay was already evident in 2020 with several banks that released interesting figures at the time. Absa said as early as November 2020 that contactless payments had doubled since May that year, and Standard Bank’s figures showed a drop of 15% in cash transactions, while scanning platforms, such as SnapScan, showed an increase of 15%.

Clayton Hayward, CEO of Ukheshe Technologies, a fintech company, says the Covid-19 pandemic has not only changed spending habits, but revolutionised it.

“The Mastercard Economic Institute’s Economy 2021 report states that Covid-19 has permanently changed consumer spending habits. We have seen this in the growth within the fintech sector, the levels of disruption, and the many opportunities to finally address financial inclusion. It is all about digital platforms and how these can address these new and more demanding consumer needs. Thankfully, we were already on this course, Covid-19 just pushed us into fast-forward mode.”

Hayward mentions that one of the great benefits of contactless payments is, of course, the possibility that infections are reduced.

“The convenience and safety of this is paramount. Whichever method you choose, none of them include the consumer having to hand over their device.”

Cowyk Fox, managing executive of everyday banking at Absa, says the nature of the pandemic, compounded by the heightened hygiene and health requirements fast-tracked the number of customers adopting digital transactions.

“Absa has seen a record number of contactless transactions since June 2020, with an increase of 300% in this regard.”

Nelisa Zulu, head of cards and payments at Standard Bank SA, says contactless payment spend has grown by more than 200% year-on-year. “We increasingly see how clients’ preferences shift towards digital alternatives for payment.”

What are the options in SA?

Digital innovation has enabled several payments options locally, such as contactless, virtual cards, QR codes, tap-and-go, etc, says Hayward.

“Apple Pay and SamsungPay have also launched, super apps are becoming more common and we are also seeing chat services, such as the new TelkomPay in WhatsApp, reaching consumers for the first time. The digital transformation of payments in SA with contactless payments via QR and tap has seen huge growth. More recently, Nedbank launched its new mobile POS app, basically turning your cell phone into a merchant terminal. It is evident that consumers have a need for more convenient contactless payment options.”

According to Hayward, QR is starting to gain favour in the e-commerce space with consumers feeling safer when they don't need to provide their card details online.

“There will always be risks in the payments space, and the floor limits that are being implemented for tap payments are aimed to manage this.”

Jason Viljoen, head of FNB digital payments, says the bank’s scan-to-pay and tap-to-pay features on the FNB app continue to record double digit percentage month-on-month usage growth. A significant portion of the growth in digital payments stems from the rapid adoption of scan-to-pay on the app for QR payments.

Viljoen says FNB also offers alternatives, such as Samsung Pay, Fitbit Pay and Garmin Pay, and more options are on the way. “Virtual cards have also been made available, with over R300m in spend and 250 000 virtual cards activated since January this year.”

Viljoen mentions that there are no additional costs for using virtual cards and clients are also rewarded through eBucks.

Zulu says Standard Bank SA is offering easy and convenient payment solutions for clients through its relationships with Samsung Pay, Garmin Pay, Fitbit Pay and Masterpass, as well as its own Snapscan. “It also includes the easy option of simply tapping your card or paying with the Standard Bank app. Our first virtual prepaid card allows users to stay in control of their spending. The virtual card is separate from the transactional account and provides clients with an additional layer of security when shopping online.”

Fox says Absa clients already have access to Apple Pay, Garmin Pay, Fitbit Pay and Samsung Pay. “We recently launched a QR payment functionality, which is free of charge. Clients register on the app and can scan in any QR code, such as Zapper, SnapScan and Pay@. So it’s not necessary to download any other service provider apps.”

Chipo Mushwana, executive of emerging payments at Nedbank, says the bank offers tap-and- pay, tap-on-phone (PocketPOS app), as well as the Nedbank sales point devices and scan-to-pay. Digital wallets, such as Apple Pay, Samsung Pay, Garmin Pay and Fitbit Pay, are also supported and there is also a contactless solution on Nedbank’s money app.

The risks

John Mc Loughlin is the CEO of J2, a technology business focusing on security services and solutions. He believes that one of the great benefits of contactless payments is its excellent security measures.

“It’s safe as long as we are in control of our cards, devices and watches and if we have the basic safety measures in place to keep them safe. It’s important to select unique passwords to keep our devices safe. Implement multifactor authentication and use the biometric capabilities available.

"Even the most secure payment app or platform is not going to be secure if your password is ‘1234’.”
John Mc Loughlin, CEO of J2

Hayward says it’s understandable that people are worried about security, but he believes that biometric authentication has led to a major shift in payment safety and also in the way how data is encrypted.

Mc Loughlin’s advice is to never let your card out of your sight and he warns against interacting with unknown platforms or websites.

“Do not share your personal identification number (PIN), passwords or one-time PIN (OTP) with anybody. The new technology gives us the ability to secure our digital payment methods, but it’s your responsibility to use it effectively. Do the basics to prevent a disaster.”

Viljoen reckons that FNB’s payment products are supported by the latest security technology, but people should remember that fraudsters regard the human element as the most vulnerable. “Consumers need to be constantly vigilant and never divulge their banking details with anyone, including card details, user names, passwords, etc.”

Fox also believes that contactless payments are very secure provided that the bank has considered the risks.

“The security of contactless cards is strong, and the card details cannot be scanned by another device through the near-field communication technology that enables the tap-and-go functionality. Every bank has its own rules with regard to tap-and-go, such as the number of transactions and the amount allowed before the client must key in his or her PIN. The risk arises when the card is lost or stolen. In such case, a few low-value transactions could be made. The risk is carried by the issuing bank and in this case, the client should be refunded after a fraud investigation is completed. Point of sale (POS) devices used in the transaction should be registered with the Payment Association of South Africa or similar payment bodies registered in other countries. Criminals cannot process successful transactions if they don’t have a registered POS device.”

Fox adds that data theft is another risk that can take place when the security of the device hosting the payment information is weak.

“The risks of wearables (watches) are similar to those of contactless cards; the card’s details are simply stored on the wearable, such as a Garmin watch. Additional controls to mitigate risks include a multifactor control, such as an OTP and biometric authentication of passwords to authorise payments. Card details are also encrypted to protect the card.

“With QR payments, payment processing is subject to consumer authentication using their PIN. Once again, biometric data and OTPs offer additional security.”

Mushwana says contactless transactions are protected by the same EMV standards (Europay, Mastercard and Visa) as ordinary transactions.

“Plastic cards are secured with an EMV chip,which protects the data. When these cards are loaded onto digital wallets, these cards are tokenised thereby providing additional security. Digital wallets and Nedbank’s scan-to-pay transactions are also authenticated by the cardholder on the device (with a PIN or biometric data) before the payment is initiated.”

The road ahead

What we know now about contactless payments, is definitely not the last we’ll see. According to Hayward, more interesting innovations are expected in this area. “We expect more developments in the QR space regarding buy-now-pay-later, account-to-account payments and support for digital wallets and loyalty payments."

"We also expect the virtual card networks to grow and maybe this will mean the end of wallets.”
Clayton Hayward, CEO of Ukheshe Technologies

Read more
This article originally appeared in the 11 June edition of finweek. You can buy and download the magazine here.

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