Tuesday, June 6, 2017

Intuitive Payment Gateways in Emerging Markets


[Guest Post by Arthur Jones]

While protectionist rhetoric and a call for reducing free trade worldwide have been on the rise in certain countries, global trade continues to push beyond borders. Now more than ever, emerging markets are beginning to take center stage as leaders in eCommerce and trade at large.

Emerging markets are home to 85% of the world’s population, with 90% of people under 30 residing in countries that are transitioning from agriculture and resource-based economies to service and investment-heavy markets ripe with burgeoning middle classes ready to spend.

Yet, how will this emergent middle class pay for goods and services? In many countries around the world, cash is still king. However, with keen government support, innovative technology, and widespread adoption of smart mobile devices driven by the IoT (internet of things,) cashless economies are set to usher in new consumer frenzies in Southeast Asia, South America, and Africa.

From digital payment gateways to mobile wallets, let’s take a look at how the emerging markets are setting up shop online.

Cash-Centric to Cash-Free

According to a report from PWC, the payment processing sector is primed for a shake-up. In their 2017 report, Emerging Markets: Driving The Payments Transformation, the global finance and consulting firm found that: ““The payments business, traditionally dominated by banks, is witnessing increasing competition from new entrants, most of which are non-bank players. These include retailers, telecommunication providers, technology companies, startups and others players that specialize in niche value-added services in the payments processing chain.”

PWC’s Global FinTech Survey from 2016 breaks down merchant and consumer tech adoption. In many cash-heavy economies, typically affluent urban areas in emerging markets have long been bastions of electronic POS and ATM use. This has been the case within cities in Brazil, China, Mexico, Nigeria, and South Africa. Meanwhile, mobile wallets and mobile POS use have been seeing steady growth in urban India, China, and Brazil. Interestingly enough, the emergent mobile commerce (mCommerce) sector is seeing rapid adoption in key African markets, specifically Kenya, South Africa, and Nigeria, where telecommunications and smartphone capabilities among middle-class consumers are reaching parity with more established economies.

India: A Cashless Case Study

In terms of cashless emerging economies, India is seen by many as a litmus test for how policy can dictate the terms of progress. In December 2016, Forbes contributor, Wade Shepard, wrote on a cashless future for the world’s largest cash-centric economy.

India is the midst of a massive demonetization scheme led by Prime Minister Narendra Modi along with several high-ranking government officials. In essence, the strategy set by the prime minister was to nullify all 500 and 1,000 rupee banknotes and to replace them more secure 500 and 2,000 notes. This policy came as a shock to much of the country since it was announced in a surprise television announcement on Nov. 8th, 2016.

For context, Forbes reports that hard cash accounted for up to 95% of all transactions in India, with 90% of vendors lacking card readers or any means to accept electronic payments. 85% of workers were still being paid in cash prior to Modi’s demonetization. In fact, Forbes also found that even Uber in India accepted cash in order to acclimate to the local consumer culture, a first for the global ride-sharing company.

Modi prides himself as a staunch enemy of corruption, and Shepard asserts that the demonetization scheme was rushed into implementation to catch the black market off-guard. However, the planned 50-day transition is estimated to take months as the government “catches up” to replace the nullified bank notes with secure replacements, effectively forcing the majority of India’s consumers and entrepreneurs to adopt cashless alternative payment methods. And although the goal of the campaign was to initially combat corruption, much of Modi’s recent rhetoric seems centered on transitioning India to a cashless economy.

Whether India at large is ready to accept these changes or not seems to be irrelevant as the government intentionally lags in replacing obsolete banknotes. According to HSBC’s Indian affiliate, new bank accounts are being opened at an astonishing rate, and even traditional market vendors from launders to vegetable sellers have begun setting up mobile POS at their stands.

A Digital, Cash-Free Future

With forward-looking policy makers along with an innovative generation of digitally-adept millennials, emerging markets will only adopt cash-free payment methods at a faster rate as the digital pandora’s box stays firmly open. While the transition will by no means be effortless or uneventful, this massive paradigm shift will dictate how the next generation of non-Western economies lead the way for a bright future in global trade and commerce.

Author Bio: Arthur Jones is a freelance fintech consultant. With an MBA and years of experience at the IMF, Arthur enjoys utilizing his expertise to help new entrepreneurs acclimate to new global payment gateways market research, consumer insights, and the latest trends in eCommerce.


Friday, April 7, 2017

Security Threats Facing Online Payment Gateways

[Guest Post by Arthur Jones]
Most experts agree: it is a brave new world for payment gateway providers, which presents both opportunities and challenges. For nearly a decade, cyber security professionals have been warning about the ongoing rise of cybercrime. Agencies like the FBI regularly put out reports detailing the threats to the financial services industry, in particular. As outlets like TechRepublic have reported, this trend is only going to continue, and we may see record levels of cybercrime activity this year.
What kind of threats can we expect to face for online payment gateways? Let’s look at some major security challenges and how they may be addressed payment gateway providers as they continue to innovate and remain competitive in the marketplace.
Information Attacks
It is safe to say that a data breach is one of the most serious threats for payment gateways. Attacks like these can come in many different forms, and because they are smaller and require fewer resources, they are easier to carry out and occur much more frequently. If an attacker gets their hands on sensitive financial information, the losses can be catastrophic, putting companies at the risk of irreparable damage to customer trust.
There are many ways for attackers to breach a system. Phishing attacks consist of fake emails that can trick users into opening harmful links and installing malware or giving up sensitive information. Such attacks can open up system vulnerabilities, giving attackers access to valuable information.
Untrustworthy insiders can also get access to sensitive information and compromise security systems from within the business. Or hackers can gain access to sensitive systems through security breaches in compromised hardware and software.
Credit Card Fraud
Payment gateway providers may be concerned about threats to their internal data systems, but there are external threats to take into account as well. Attackers use skimming devices and other technologies all of the time, which can steal credit card information wherever a credit card is used. After this sensitive information is acquired, attackers can commit credit card fraud wherever they please, which can go undetected until banks or card holders notice suspicious activity related to any compromised accounts.
This is a sort of “death by a thousand cuts” threat for payment providers, as constant small attacks on credit card holders’ information can result in the gradual erosion of customer trust.
DDoS Attacks
Distributed denial of service (DDoS) attacks are a little trickier to deal with, as they can be very powerful and destructive on a systematic level. DDoS attacks are becoming more sophisticated, in that the attackers are finding specific structural weaknesses in internet infrastructure, and then exploiting those weaknesses to bring down large and powerful institutions. Additionally, the expanding internet of things (IoT) makes it much easier for attackers to use internet-connected devices like appliances, TVs, security cameras, and other machines to flood servers with requests, which crashes them.
Typically, only the largest financial institutions are targeted by these attacks. However, hackers are increasingly attacking broader internet structures like the DNS system, which can crash a wide range of businesses’ websites that are using the infrastructure. Fortunately, large attacks such as these have been less frequent, and most payment gateway companies will not have to deal with attacks like these as much. Nevertheless, a downed server poses a threat for payment gateway providers if they’re not able to process transactions in a timely manner.
Safer Transactions
It is important for cyber security professionals, payment gateway providers, and other financial services businesses to continue to develop secure technologies to protect their systems and data. The most promising avenues include advanced encryption, tokenization, and authentication methods, which go a long way towards cutting down on common cyber-attacks. The Payment Card Industry Data Security Standard (PCI DSS) is a powerful industry-wide tool to increase security with, and innovation in this field is welcome as well. Further, proper employee training can go a long way to reduce risk exposure. Ultimately, payment gateway providers and other tech and financial services businesses who innovate in these areas will come out stronger in the future.

Author Bio: Arthur Jones is a consultant for Allied Wallet. He is an innovator in eCommerce services and everything a company needs for success including a global payment gateway system, a prepaid affiliate debit card program, and much more. Arthur has extensive experience in the eCommerce and merchant services industry, and regularly writes about it for interested readers.