By Mark McCallum, country manager, South Africa, Orange Business Services
On the back of the digital transformation, the virtual money market has seen exponential growth and has changed the way that many people deal with money. While it may be difficult to imagine a cashless society, it’s important to understand that money is merely an agreement to use something as a medium of exchange. The function and purpose of cash is, therefore, assigned by our cultural and social systems.
Technological advancement has coincided with currency reform throughout human history. The advent of writing in early Mesopotamia provided new ways to number commodities, forming the basis of accounting and the industrial age brought society towards a sustainable monetary system. A personal computer and mobile phone of the information age enabled more convenient transactions through e-commerce and credit card processing. We now find ourselves in a hyper-connected digital world, with start-up entrepreneurs and corporate giants all competing to shape the manner in which we exchange 21st century goods and services.
So, as our society evolves, the evolution of technology in today’s world seems limitless. With access to the Internet on a mobile phone, users are able to perform transactions, check bank accounts, make payments and transfers, and even open and close accounts without having to leave their home or carry cash. This is changing the way individuals manage their finances, making security imperative to protect users against online fraud.
To better understand the virtual currency landscape, and the need for security, it is important to look at some of the top emerging trends: mobile fiat currency, corporate value currency, virtual world currency, and peer-to-peer currency. Although the nuances of these categories may blend together, the virtual money is created, circulated, and adopted in different ways by different users across the globe. Mobile fiat currency is more popular in the African region, as it allows consumers to send and transfer legal tender using their mobile phone. Many African countries still lack credit card penetration and this has brought mobile innovation to the forefront. One popular service called M-Pesa sends funds via text messages. Customers hand over cash to any one of thousands of participating retailers. They are then credited virtual money on their phone, which can be dispersed through SMS or exchanged back for cash at any time. As of 2015, 21.8 million people in Kenya subscribe to M-Pesa and the transactions that flow through M-Pesa amount to 60% of the country’s GDP, according to SEPA report (2015).
Another type of mobile fiat currency involves “carrier billing,” whereby a consumer pays using their phone number (rather than their credit card number), and the charges are billed directly to their phone bill. By linking their phone to their Pay Pal account, users can do things like book a hotel room in under 60 seconds or buy a friend a beer with a tweet. With these services, companies stand to profit from even more frictionless payments than we have now.
This new payment environment has the tools to completely disrupt the hierarchy in the banking system, as the use of the technology implies that no permission is needed from any third party to make a payment. It basically gives every actor in the system the same rights and duties. Keeping communications systems safe is fundamental to keeping personal data and businesses safe.
According to a KPCB report (2015), mobile digital media is now outpacing desktop usage, adults with access to digital media use mobile 51% of the time compared to 42% for desktop usage and 7% for all other devices. Financial institutions seeking to remain competitive and keep customer satisfaction high must offer mobile access to their customer base. Many banks recognise the value of mobile banking, as it provides them with avenues and opportunities to reach geographically remote or rural markets, to focus on new markets, to overcome infrastructure limitations and improve efficiency, to access payment systems.
However, with all these opportunities financial institutions must assume the risks associated with all sorts of online and mobile banking. These risks come in many forms, including malware, corrupt apps, flawed authentication, lost or stolen devices and more. Mobile devices have evolved from telephones to pocket-sized computers and malware specifically targeting mobile devices has become a very real and prominent threat. Mobile malware can consist of viruses, Trojans, spyware, malvertising and rootkits. Using mobile apps for banking is thought to be safer than logging in via your mobile browser. However, every mobile platform has unique characteristics that these apps must prepare for, developers may not fully understand the risks associated with mobile banking and accidentally leave vulnerabilities open for fraudsters to exploit.
Third-party apps open users up to a multitude of risks since these programs may leverage credentials from other applications, even if these apps have weaker security in place. For instance, a shopping app could leverage your banking login information to access your bank’s services to facilitate a transaction. Also free Wi-Fi is a desired luxury for mobile device users. It can be found in restaurants, coffee shops, airports and many other public places. But when accessing free Wi-Fi, it is important for the user to understand that the activity they are conducting may be visible to someone else. When using public Wi-Fi hotspots, one could also expose oneself to fraudsters. Online thieves want your banking details and your personal information, such as your name, address or phone number. These personal details may be harmless on their own, but once they are combined, you can be at a higher risk for fraud.
An IBM study (2015) found 58% of security experts at financial institutions ranked mobile concerns as a risk indicator inhibiting their organisation’s full deployment of a mobile security strategy. However, there are steps financial institutions and other consumer organisations can take to reduce their mobile fraud risks. Organisations must adopt mobile malware detection and technology solutions. Having the right tools in place to stop threats is key to safeguarding consumers and financial institutions alike.
To shape the future of digital money, we need to better understand where our money system has been, where it is now, and where we would like it to go next in terms of keeping it safer for the user.