Paying the price of electronic payments

Cash is no longer king, despite the fact that for the last decade or so we have heard transaction banks bang on about the supremacy of cash, at least to corporate treasurers that are cash-rich or looking to unlock cash trapped in inefficient parts of their business.

However, a report published by the UK Payments Council, concludes that cash's reign as king is over with cash usage rising just 7% over 10 years and comprising just 59% of all transactions (down from 73% a decade ago), with more consumers using electronic forms of payment such as debit cards, online payments or contactless cards.

Unlike the US, which while declining year on year, still has some challenges in terms of weaning companies and their customers off paper cheques, by 2018 the Payments Council predicts that fewer than 1% of UK payments will be made by cheque.

Yet, with the increasing use of electronic payments whether it is debit or credit cards, ACH or online, comes the increased risk or threat of fraud, particularly as transaction volumes rise. Jim Woodworth, head of business services at payments software provider, ACI Worldwide says financial institutions need to ensure that their systems are able to support the growth in the number of electronic payments, while reducing the risk of fraud.

Nick Ogden, founder and CEO of Voice Commerce, which provides voice authentication solutions for payments, also highlighted the heightened fraud implications associated with increased use of electronic payments whether it is cards or mobile. "The threat of fraud and identity theft becomes more prevalent as hackers get better at cracking these new payment technologies," he says.

This highlights the need for the industry to devise more secure means of authentication, that are cost effective and non-intrusive for the user. So as more payments are made online, banks not only face the challenge of ensuring their legacy payments infrastructure, some of which dates back 30 years or more, is up to scratch, but also that they are able to monitor and detect potentially fraudulent transactions in real time and to ascertain someone is who they say they are when making a payment without the user having to jump through too many onerous hoops.

And as electronic solutions revolutionize the way we pay, are consumers and companies likely to place more onus not only the speed and efficiency with which they can make a payment, but also how secure it is? In other words when we shop around for payment services will security be more front of mind than it has been historically?