Security As A Lens For Navigating The Future Of Digital Payments

The Indian fintech landscape has been in a phase of rapid growth supported by new and sector-first tech innovations and thriving consumer/business demands. The total addressable market for Indian fintech is expected to reach $2.1 tn by 2030. 

In fact, the Economic Survey 2022-23 states that, India has the highest fintech adoption rate of 87% among the public, compared to a global average of 64%. These growth matrices testify India is one of the most innovative players in the fintech world. 

As a country that is enabling and empowering the unbanked and underserved population, India has a growing tech-savvy generation, a high number of enterprises as well as small businesses with inclusive financial services. Digital Payments, as a sector, has been essential in spearheading this revolution. 

While this upward trend is definitely boosting our economy, it also comes with certain vulnerabilities and challenges. In 2022, India encountered approximately 7 lakh cyber or malware attacks, ranking 10 among the nations that witnessed such attacks, with the finance sector being the most susceptible. 

In light of this, it is imperative to stay ahead of evolving breaches and vulnerabilities. This can only be done by consistently building, enhancing and addressing security aspects of fintech products and solutions.  

Innovative Security Measures Driving Digital Transactions 

Today, building and continuously strengthening the ecosystem for safe and secure digital transactions is non-negotiable. In fact, it is good to see the consistent progress in safeguarding customers/businesses through government initiatives, policies and regulations, and advanced tech innovations. 

For instance, the shift towards a risk-based KYC approach, particularly prioritizing higher-risk merchants, is a significant step towards enhancing the security and efficiency of the e-KYC process. 

This year’s Union Budget’s emphasis on this strategic shift indicates a proactive approach to risk mitigation, which is commendable. Similarly, Indian fintech companies are making significant strides by harnessing evolved technologies like contactless payments and tokenisation to protect sensitive information as well as prevent data exposure. 

Overall, the right government support and regulations will help foster a more robust and secure fintech ecosystem. Perhaps, a government-funded open-source infrastructure solely for security purposes that can be integrated into other software and platforms can help boost this further.

Payments Aggregators As Security Guardians 

Payment aggregators (PAs) have emerged as key players between merchants and the complex network of banks and payment gateways, simplifying transactions for both parties. As this particular type of intermediary, PAs have become synonymous with seamless and secure transactions because of robust security measures including encryption, tokenisation, and fraud detection algorithms. 

Besides protecting merchants and consumers from potential financial loss, PAs have also bolstered the market’s confidence in digital transactions, driving a swifter adoption of cashless payments. 

PAs leverage nuanced AI/ML integrations, which have demonstrated remarkable success in payment security. AI-powered fraud detection assists in identifying and preventing fraudulent transactions, leading to substantial reductions in financial losses and improved customer trust. For instance, AI algorithms can identify unusual spending patterns, detect unauthorised account access attempts, and analyse large-scale data breaches to proactively safeguard user accounts. 

Also, it can assist merchants in identifying fraudulent orders and preventing chargebacks, ensuring secure and seamless payment experiences for customers. The utility of such systems will certainly witness requisite refinements, creating robust and intelligent solutions to combat evolving security concerns.

This imperative is also attracting much-needed regulatory attention. For example, this June, the RBI rolled out Draft Master Directions on Cyber Resilience and Digital Payment Security Controls for payment system operators (PSOs) – making this another positive intervention for all stakeholders to enhance security control. 

The Roadmap Of Security Evolution 

The Indian fintech sector has drawn in investments exceeding $25.8 bn since 2014, leading to the creation of 22 unicorns and 33 soonicorns. Our country has a significant R&D advantage to combat cyber fraud and malware. 

As a matter of fact, India is among the very few nations that protect digital payment users with a two-factor authentication process. Along with government-backed initiatives, multiple stakeholders are making great efforts to ensure absolute cybersecurity in the world of finance. 

Interestingly, the unprecedented collaboration among fintechs, government bodies and regulators, collectively working to devise resilient solutions, distinguishes the current landscape from preceding years. Innovations such as next-gen firewalls, vulnerability management, and Secure Access Service Edge (SASE) are thriving in our country, inspiring new talent and international markets. Other technologies, such as Extended Detection and Retention (XDR), also take root in India from global markets. 

As the sector continues to innovate, digital payments will continue to further fuel the growth of our economy – offering convenience, efficiency, and inclusion. The Indian fintech space, dominated by the progress of digital transactions, has set precedence for other international markets to follow. 

This progress has put us on the map for its level of accessibility, interoperability and secure robust infrastructure, making us a critical innovation hub in APAC while expanding our financial inclusion programs to Europe and the rest of the world.