The ‘digital economy’ has been a buzzword across almost all sectors of businesses in Asia for years now. Rapid infrastructure growth and comfort among consumers with digital and online services have made the region particularly attractive for digital service providers. Vendors have been quick to adapt their market strategies to this. Apple, for example, launched Apple Pay in markets such as Hong Kong, Australia and Singapore just two years after its announcement to the public, as compared to the nine years it took for iTunes to reach our shores.
The move towards setting up a cashless economy has been most evident in India. In November last year, it banned its 500 and 1,000 rupee notes, essentially draining 86% of the currency in circulation. While the measure was implemented to combat corruption and the black market, the sudden cash scarcity also prompted a swing of dependency toward debit/credit card and mobile wallet payments. Paytm, India’s largest mobile wallet vendor, registered upwards of seven million transactions worth Rs. 1.2 billion (US$ 17.6m) in a day following the move. Another provider, PayU, saw its average daily transaction volume doubling immediately after the demonetisation.
Challenges facing the implementation of digital wallets
With more countries in the region pushing for greater use of digital wallets, there are some challenges that businesses and governments will have to work together to resolve.
For one, infrastructure and logistical needs must be addressed, with digital payments relying on stable and secure connections. This is likely to grow alongside mobile internet penetration in various parts of Asia. Markets such as Singapore and Hong Kong with high mobile internet penetration have already been identified as prime locations for mobile payment vendors, while emerging markets such as Vietnam and Indonesia will only continue to grow in their market potential. On the hardware side, vendors will also need to ensure that the necessary point-of-sales terminals can be made available to businesses in rural areas.
However, one of the greatest hurdles that businesses will have to overcome is that of consumer confidence. Trust can take a long time to build and incidents such as the recent breach at Hitachi Payments Services compromising over 300,000 debit cards in India do not help. In a time where the threat of cybercrime is constantly growing, it is important for businesses to step up efforts in protecting their data.
Three things businesses should do to prepare for the cashless economy
While going cashless may look difficult, the potential and convenience of it cannot be understated. There are a few things that businesses in India and across Asia can do to prepare themselves for the oncoming wave of cashless transactions.
Compliance with data security standards
As acquirers of personal data, it is important for businesses to recognise that they have an ethical obligation to keep customer information safe to the best of their ability. Ensuring that personal data is protected also helps companies to build trust among customers. Security is no longer just a marketing buzzword used to drive sales among consumers today, it is likely to become a far larger consideration in the near future as digital payments become mainstream. Businesses would do well to make the effort to ensure their operations adhere to existing data security standards such as the PCI DSS and ISO 27001. This gives customers the assurance that actions to prevent snooping around their data are being taken, such as ensuring that web connections used to send data are securely encrypted. By ensuring that not only they, but also their partners, suppliers and vendors are in compliance with such frameworks, businesses can create a much-needed, top-down system of trust among consumers.
Changing business mindsets toward cybersecurity
Adhering to standards outlined by experts within the security field is an essential step towards a secure cyberspace. However, an equally important part of the equation lies with business leaders themselves. In our current climate of digital transformation, security is no longer a problem that can simply be solved by purchasing the best defence or antivirus system and waiting for it to fend off threats. The only way to combat cybercriminals is to evolve as quickly as they do and stay one step ahead. Company executives must understand that the cybersecurity issue not one to be dealt with in private by the IT department. Instead, it has to be an effort that involves every stakeholder. Staff education initiatives should be included as part of a holistic approach to cybersecurity. Security concerns should also be made part of the boardroom agenda to ensure that business leaders are able to adequately consider security issues in their resource planning.
Education of consumers
As much as businesses can do their utmost to secure and protect data that is entrusted to them, it is often the end-user that is the weakest link in security. Individual consumers often carry a mindset assuming they are unlikely targets of cybercrime as compared to large enterprises worth much more. However, what they often fail to realise is that cybercriminals tend to gravitate towards the easiest – rather than the most valuable – targets. Through phishing and social engineering attacks, many consumers end up becoming cyber ‘drug mules’ carrying malicious code. As such, it is in a business’ own interest to take an active role in educating their customers on security best practices. By protecting their customers, they can effectively reduce the attack surface on their own assets and minimise risk of breach.
Nick FitzGerald, Senior Research Fellow, ESET