In the aftermath of demonetization, the Indian economy has taken giant steps in increasing the adoption of digital payments systems. The proliferation of smartphones, the increase of internet penetration, and a reduction in the costs of accessing the internet have created a perfect storm of variables that have driven an eight-fold increase in UPI transactions since November 2016. The digital payments space in India has had a transactional value of INR 3,37,267 Crore in 2018 and is growing at a CAGR of 17.4%. This growth is expected to continue, with Credit Suisse projecting that the country’s digital payments sector will grow around five-fold to reach a USD 1 trillion value by 2023. However, a major spike in digital payments frauds is the price the country is having to pay for its digital push.
The value of online fraud went up from INR 1,546 lakh in the quarter just before demonetization to a staggering INR 11,185 lakh in the December 2017 quarter, with the RBI reporting 10,200 cases of payments frauds across digital payment methods. A combination of fraudulent phone calls, e-wallet frauds, email spoofing and phishing attacks have left an unprepared Indian populace extremely vulnerable to targeted attacks from malicious actors. The government is taking this threat seriously, mooting various actions including a network of central and state officers to investigate cyber fraud, and a cess on digital payments to fund anti-fraud measures.
Why the solution must be technology-based
India’s two-step authentication protocol for digital payments, a legal requirement, is among the most stringent payment protocols in advanced economies. This has, unfortunately, not prevented these frauds. This is because securing digital payments requires that the systems and processes be foolproof, especially when the vast majority of Indians using these systems aren’t entirely familiar with how they work. Companies have to consistently warn users not to reveal passwords or other information to anyone since fraudsters call vulnerable members of the lay public and pretend to be from the bank and get all the information they want. In such a situation, a more proactive approach to security might help push back the wave of fraud transactions.
The balance to be struck is a difficult one – how can one make the transaction conducted digitally secure, but not so inconvenient that the individual would prefer using cash? Waiting for a single OTP is seamless and usually not inconvenient, but what if you’re in an area with poor network connectivity? Adding new security layers would elongate the process, making it inconvenient and removing the primary incentive users have to adopt it in the first place. In such a circumstance, the only reasonable response is to find a technology-enabled system that can prevent such fraud.
And what’s the best weapon against fraud? Information. If customers knew that the person they were about to transact with had initiated fraudulent transactions 60% of the time in the preceding month, they would be unlikely to follow through and do business with that person. Essentially, providing people with the information they need to decide their own appetite for transactional risk is a fantastic way to improve the security of the digital payments ecosystem. The requirement then becomes two-fold – a method of secure information dissemination, and a convenient and seamless way to exchange that and other payment information. Which is where the opportunity at the intersection of Blockchain and Soundwave technologies come in.
Blockchain, Soundwave, and secure digital payments
Blockchain – familiar as the underlying mechanical backbone of cryptocurrencies like Bitcoin – is currently cited as one of the most secure information storage systems in the world. It creates a distributed ledger that maintains a public record of every transaction that takes place in the system and also ensures that each instance of the ledger is compared to other instances. Even if one node of the distributed ledger is compromised, it is recovered through the information contained in the other nodes. To effectively hack or compromise a proper Blockchain would require unimaginable computing power seeking to hack millions of nodes at once. In other words, it’s more secure when compared to available solutions and would be the perfect carrier of historical transactional information.
Soundwave then becomes the perfect carrier of this information to-and-from your mobile phone. This technology enables seamless contactless payments by facilitating the transfer of information through sounds. This technology only needs a phone to possess the ability to make or record sounds, and it can be used to transfer previous transactional history as well as payment confirmation data instantly. Through this technology, users at the Point of Sale (PoS) would be able to transact safely and securely.
There are multiple reasons why this system would best address the security concerns of a swiftly digitalizing nation. The combination of these two technologies can ensure the easiest and most convenient payment system possible, as users will just have to be within hearing distance of the merchant’s emitter or receiver. Further, since the information is being conveyed through sound, there is no requirement for internet connectivity. As a consequence, the digital payments enabled through sound waves are designed to be internet-agnostic, more easily compatible, and far more convenient than current internet-reliant solutions.
With Blockchain providing security and bringing greater transparency, and Soundwave ensuring convenience and seamlessness, the best future for India’s digital payments ecosystem lies in combining the two to find the perfect balance. Anything else would run the peril of making more Indians feel unsafe when transacting online and pushing the Indian economy back into relying almost exclusively on cash.
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