Definition: Digital payments provide many benefits, such as speed of transaction and flexibility. However, there are also risks associated with digital payments, including potential data breaches and other security vulnerabilities. Therefore, both providers of payment services and consumers must take additional precautions to protect themselves.
Risks in Digital Payments explained
Digital payments depend on key infrastructure components like networks, electricity, and working devices such as computers, smartphones, and payment cards to function. Any breakdown in these components can potentially disrupt an entire economy. Notably, significant disruptions stemming from cyberattacks, power failures, and natural disasters emerge as primary challenges to a cashless economy.
The frequency of cybersecurity incidents leading to the exposure of personal data is now more common as financial institutions accumulate more personal information. Also, as online access to personal data expands, there is a noticeable increase in financial crimes that exploit social engineering mechanisms.
Challenges in digital payment security
- Security Risks: Digital payments carry significant security risks. Cybercriminals exploit vulnerabilities in payment systems to steal personal and financial data, resulting in identity theft, fraud, and unauthorized transactions.
- Data Breaches: Companies handling digital payments are susceptible to data breaches, exposing sensitive information like credit card numbers and bank details. This can lead to financial losses and misuse of personal data. Encryption of data adds an additional layer of security.
- Breaches in application: Since applications are user-facing, hackers can obtain access to them more easily than they can to the company’s network directly. Also, since digital payments rely on technology and internet access, technical problems, network outages, or power cuts can impact payment processes.
- Device Security: The security of the devices used for digital payments, such as smartphones, tablets, or computers, is crucial. If these devices are compromised, attackers could gain access to payment credentials.
- Cloud Computing: Financial services such as digital wallets, online banking, payment gateways, and others rely on cloud-based platforms. It's important to recognize the undeniable advantages of cloud computing, encompassing factors such as accessibility, scalability, and speed. However, this convenience also results in a substantial flow of data, and therefore, the protection of cloud-stored data is essential.
- Identity Theft: Identity theft involves malicious actors gaining unauthorized access to personal information, such as names, addresses, social security numbers, and financial data, with the intention of assuming someone else's identity for fraudulent activities. Cybercriminals target weakly protected databases or employ hacking techniques to steal login credentials.
- Legal and regulatory issues: The regulatory environment governing digital payments is constantly evolving. Users might encounter challenges if they inadvertently violate legal requirements related to their transactions. There are requirements to comply with diverse standards such as PCI DSS, GDPR, and PSD2, for example.
Utimaco provides various data protection solutions from data encryption, to tokenization, including dedicated payment hardware security modules.
