4 Dec
2024
Key takeaways:
Financial inclusion is an important focus area for several developed and developing countries across the globe in the 21st century. Despite rapid growth in global trade in the post-globalization era, people living in rural and remote areas of the world are unable to improve their standard of living due to poor infrastructure, thus creating a huge disparity in society. To reduce the inequality in income levels, several governments have started rolling out direct benefit transfers to help marginalized sections address their basic needs. Many economists support the idea of universal basic income to enhance the general purchasing power of the vulnerable population.
However, the main problem with the traditional disbursement of monthly installments is that they do not necessarily reach the intended recipient, and the time required for its dispatch defeats the entire purpose of the payment. In such a scenario, mobile payment services assist government entities, businesses, and financial organizations in sending money to the beneficiaries instantly. Moreover, in urban areas and metropolitan cities, people are gradually moving away from credit and debit card systems and transitioning toward mobile payment systems to avail services such as SMS transactions and direct mobile billing.
Integration of biometric authentication technology in mobile payment systems
In the last few years, the growth of the mobile payment industry is attributed to rise in penetration of smartphones across the globe. The sector, which accounted for $1.48 trillion in 2019, is estimated to register a revenue of $12.06 trillion by 2027, rising at a CAGR of 30.1% during 2020-2027. In developed and developing countries such as the U.S., India, China, Australia, the UK, Japan, Germany, and France, surge in preference for mobile banking services has increased the revenue share of the industry. However, rise in security and privacy concerns create hurdles in the growth of the industry.
To address these concerns, mobile payment software developers have started integrating biometric authentication technology to improve the security of the systems, thereby enhancing the trust of their audience base. Currently, there are two main biometric systems that are widely used to secure financial transactions, such as fingerprint scanners and iris recognition solutions. In some cases, voice samples of the user are obtained for future verification purposes. These tools aid banks in verifying the authenticity of the user at various stages, including registration, authorization, and confirmation.
Biometric systems feature advanced sensors and cameras to capture fingerprint data minutely. The pictorial information, thus, obtained is then converted into a digital stream and stored on the in-built chipsets. Whenever the user wants to complete a financial transaction, the stored digital template is matched with the current data stream, thereby offering a comprehensive security solution. Compared to traditional passwords and OTPs, this system is a much more secure system as it intrinsically connects to a user based on his/her body traits, thereby making it hard for an imposter to breach the software application.
In August 2024, Mastercard, an American multinational credit card company, announced the launch of its new device-based biometric Payment Passkey Service at Global Fintech Fest in Mumbai, India. The system has been specifically designed to make online transactions and shopping on e-commerce websites easier and more convenient. Mastercard, in its press release, highlighted the Annual Report for 2023-2024 by Reserve Bank of India, which stated that there was a 300% rise in online fraud in the last two years. The company asserted that its new product aims to tackle the problem of security breaches by incorporating a tokenization model for payments, thus reducing the chances of unauthorized access to the system.
Impact of AI on digital payments
Along with other technologies such as 5G and biometric authentication, AI has contributed to the expansion of the mobile payments industry. AI-based tools are embedded into these systems to extract data from various sources to prepare a profile of the user. The natural language processing techniques used by AI aid the system in collecting information on behavioral patterns, transaction history, and purchasing trends of the consumer to provide personalized offers, thus enhancing customer satisfaction and engagement.
In addition, AI plays an important role in improving the cybersecurity of digital payment systems. AI-powered solutions help in scrutinizing the details of every user and detect fraudulent transactions by using neural network technology based on the patterns and insights obtained from analyzing large data sets. Moreover, in case of security breaches, these systems alert the user quickly and suggest measures to disengage the unauthorized entity.
In conclusion, increase in adoption of digital technologies to ensure the financial inclusion of vulnerable sections of society has broadened the scope of the mobile payment industry. The development of biometric authentication systems and AI tools to improve transaction speeds and cybersecurity has impacted the industry positively.
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Akhilesh Prabhugaonkar
Author's Bio- Akhilesh Prabhugaonkar holds a bachelors degree in Electronics Engineering from the reputed Vishwakarma Institute of Technology. He has a special interest in the fields of forensics, world history, international relations and foreign policy, sports, agriculture, astronomy, security, and oceanography. An ardent bibliophile and melophile, Akhilesh loves to write on topics of his interest and various other societal issues. This love for writing made him enter the professional world of content writing and pursue his career in this direction.
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