By Tapesh Bhatnagar, Head Digital Solutions, Giesecke+Devrient | G+D
As the digital landscape in India rapidly evolves, driven by the huge adoption of digital services by the Indians and supported by the ecosystem established by the Indian government, the country has emerged as the largest digital payments ecosystem in the world. In 2022, India accounted for 46% of the global real-time payments, adding that the digital payment transactions in India are more than the other four leading countries combined.
1 . In FY23, almost 114 billion digital payments were recorded across India. This was a significant increase compared to the previous three years.
2. This remarkable growth of digital transformation presents an array of challenges in day-to-day operations.
Risks Associated with Booming Digital Payments
The key enablers for digital payments in India are smartphone penetration, the cheapest internet data, and the availability of engaging consumer apps. However, awareness regarding best practices of security varies across different segments of users which makes them vulnerable to fraud attacks. The majority of financial institutions rely on legacy authentication methods like OTPs, making them vulnerable to phishing, harvesting, and replay attacks.
India’s e-commerce market is projected to grow approximately two-fold in 2026 3 yet the checkout process faces a series of complex hurdles that demand innovative solutions. Phishing attacks and social engineering scams are on the rise. Even time-limited One-Time Passwords (OTPs) generated from apps or hardware tokens are not immune to these threats.
Cybercriminals are finding new ways to intercept OTPs and stay one step ahead.
Customers expect secure transactions without sacrificing convenience. The lengthy authentication processes contribute to cart abandonment issues and potential loss to business. Security is vital, but convenience needn’t play second fiddle. Can they coexist harmoniously?
Navigating the security-user experience dilemma
1. Moving away from SMS-OTP: Imagine a future where something you have (your device) and something you are (your biometrics) seamlessly merge to create a more secure (phishing-resistant, device-bound) and frictionless payment authentication experience. Moreover, a survey by Mastercard found that 93% of consumers would be willing to adopt biometrics.
2. 3D Secure Authentication: Incorporating 3D Secure 2. x which captures more than one hundred data elements to enhance security and offer richer transaction analysis for e-commerce card transactions. According to Visa and other sources 4 , 3DS 2. x will reduce cart abandonment by 70% and checkout times by 85%.
3. Blending Digital and Physical: Leveraging payment card technology for customer authentication to provide a seamless and secure payment experience
Winning the customer’s trust
Financial institutions must adapt to support new payment methods, combat fraud, secure customer data, and look for ways to streamline their customer’s checkout experiences, proving that convenience does not fall behind and an unsecured transaction environment is also not acceptable. As technology continues to evolve, organizations have more secure authentication options (as compared to OTPs) for more sophisticated customer experience.
Picture this: conducting e-commerce transactions seamlessly, with no need to switch between multiple windows, no redirects—just a simple glance at the camera, and the payment is complete. This can be achieved through the latest 3D Secure authentication protocol which uses the Fast IDentity Online (FIDO) based technology to deliver Out-of-band authentication.
Here, server-level verification of the customer’s biometrics is the first factor of authentication and the second factor is the possession of FIDO secret keys on the device. The whole customer experience feels like a single factor (presenting biometric identity) while technically it is two-factor authentication. It is high time that financial Institutions start evaluating the scalability & security of current authentication methods and explore modern options that further drive the growth of the e-commerce industry and trust in digital payments. Such an outlook is definitely going to benefit businesses by not only improving their topline (less cart abandonment, more sales) but also their bottom line (reducing fraud) as well as brand reputation.