Roundtable

Building Security & Trust in Digital Payments

EVENT RECAP

The second in our series of 4 events dedicated to supporting the Fintech Scotland Research & Innovation Roadmap took place in Edinburgh on 7th December.

On this occasion industry leaders from across financial services, FinTech, banking, security and payments gathered to consider approaches to ‘Building security and trust in digital payments’

Payments is the leading area of innovation for FinTech companies in Scotland with 37% of firms represented in this area. Technological advances have led to progressive changes in payments processes, utilising innovations such as open banking and embedded payments making it faster and more convenient to pay and transfer money both locally and globally.

As digital payments have increased, so has the threat of online fraud, digital crime and cyber attacks on financial institutions. The UK Finance’s 2020 report ‘Our Fraud – the Facts’ highlighted that criminals successfully stole over £1.2 billion through fraud and scams in 2019.

This event, a roundtable discussion hosted by Pinsent Masons, saw a wide range of guests come together to give their view on the topic, including representatives from Lloyds Banking Group, Eeden Bull, BR-DGE, Transfer Mate, Occamsec, Police Scotland, Scottish Business Resilience Centre and the Payment Systems Regulator.

The group considered the exciting opportunities offered by digital payments alongside the strategies that financial services organisations need to deploy in order to build and maintain security and trust in these innovative solutions.

Key takeaways from the session:

-The group indicated that the high cost and incidence of fraud is a significant challenge. UK Finance figures show that in the first half of 2022 over £609 million was lost through fraud and a further £500 million was prevented. In Authorised Push Payments the most recent annual figure is £583m in scams – this is a 40% increase on the previous year and it is increasing year on year.

-The payment & transaction process is complex with many steps, all of which are susceptible to fraud, not just at the payment stage. In order to really tackle the issue a more joined up approach is needed across the entire payments process, including pre transaction, with multiple organisations collaborating across data, technology and innovation.

-Data sharing and data governance between all stakeholders is essential, including smaller orgainsations. Businesses and consumers could be incentivised and rewarded for sharing data and insights across the payments process to help make it safer and more transparent and to support in the early identification of crime and fraud trends.

-There are lots of industry solution providers in relation to identity, but the biggest challenge from a UK perspective is adoption. The UK is behind the curve in terms of driving adoption when compared to the EU, where each member state is creating a national digital identity. Estonia and countries in the Nordic regions have created highly functional systems, and the UK should be looking to make more progress in this space.

-It is critical that a balance is maintained between adoption, security, customer experience and trust. Experience and the end needs of the user and wider society are as important as industry priorities. When developing payment systems and processes, attention must be given to all groups across society, particularly those who are disadvantaged to ensure that payments are accessible and secure for everyone.