With today’s consumer, convenience is everything. The increasing demands for easier, more user-friendly ways to pay have fintech players working hard every day to find newer, faster, better solutions. However, as those in the payments industry work hard to make life easier for consumers, fraudsters are following closely behind looking for loopholes and weaknesses. This persistence keeps many payment processing providers, merchants, and consumers wondering whether taking advantage of alternative payment methods is worth the risk.
Options are Growing
The number of alternative payment methods (APMs) is growing, and at a rapid rate. Consumer and merchant adoption rates are only driving further innovation and evolution in the payments space. Juniper Research reported that mobile wallet transactions alone are expected to increase to $1.35 trillion this year. What’s more, digital wallets are dominating social conversation. Peer to peer payments are also becoming more popular, with nearly 100 million adults in the U.S. expected to use them in 2017. With alternative payment method use increasing, the use of credit cards is expected to decline.
Cards Have Increased Security
With the continuous innovation, has come much better security in credit and debit card usage. The EMV liability switch and security measures like P2PE have made it so that credit cards currently offer the best payment and identity protection. However, this heightened security in card-present transactions has caused many hackers and thieves to resort to fraud by means of APMs. Unlike fraud that involves a physical card, APM fraud is often much more difficult to track back to a perpetrator and usually hard to detect before the fraudulent transaction actually occurs.
APM Security is More Challenging
With alternative payment methods, there are many challenges to overcome in maintaining security for consumers and merchants. Unlike credit and debit card usage, fraud liability associated with APMs typically lies more with consumers. Although some APM providers like PayPal offer liability protection from fraudulent transactions, these protections are not legally required and are provided at the discretion of the company.
Alternative payment methods also often allow fraudsters the ability to hide behind the technology when completing illegal or fraudulent transactions. APMs are typically used to commit fraud in the following ways:
These types of fraud or illegal activity leave companies responsible for merchants or individuals that commit crimes using their platform or product.
The other concern typically associated with alternative methods of payment is the amount of data and personal information stored in their systems. More and more hackers are hard at work every day trying to find a way to access the payment information of the millions of consumers who use this technology every day. APMs are becoming prime targets for cyber attacks and theft. Often, its’s the same connectivity or easy-to-use features that allow fraudsters easy access to sensitive personal and payment data.
Addressing Concerns
Everyone involved in the chain of payments, including consumers, is left wondering whether the convenience of alternative payment methods is worth the risk involved. If you ask most fintech professionals, the answer is yes. Some would even argue that there are benefits to these new ways to pay, including:
Because keeping up with consumer demands is critical to keep businesses thriving, companies are advised to find a scalable balance between new payment method adoption and maintaining security for consumers and their own organizations. While these new alternative payment methods can be a great move for businesses looking to offer consumers the variety of payment options they desire, decision makers should remain aware of existing threats to cyber-security and ensure that security is top priority instead of an after-thought.