Secure Payments

What is Secure Payments?

Secure Payments can be defined in a plethora number of ways, but our group consolidated its focus to three salient factors: (1) payments facilitated by industry-leading encryption and fraud prevention tools, (2) identity protection and safeguarding of identifiable transactional information, and (3) 24/7 monitoring to mitigate unauthorized access.

Case Study 1: Paypal/Venmo

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PayPal is officially one of the largest Internet payment companies in the world. PayPal's platform operates as a payment processor by supporting online money transfers, and serving as an online electronic alternative to traditional paper methods such as checks and money orders. PayPal also operates as a payment processor for online vendors, auction sites, and other commercial users, for which it charges a fee.[4] As of 2017, PayPal is reported to have an estimate of 197 million active accounts operating in 202 markets using over 25 currencies worldwide. PayPal's service facilitates for online financial transactions in which it grants users and businesses the ability to transfer funds electronically. Moreover, PayPal account users can alter settings in their accounts to set currency conversions. [1]

Dan Schulman, the president and CEO of PayPal, released his company's detailed fiscal report which disclosed PayPal's yearly revenue of $9.24 billion, an increase of 19% from the previous year. His report also includes other salient features of PayPal as well, which shows that its user base has grown upwards of nearly 20%. With so many users, the question of secure payments related to PayPal has never been more important. [5] PayPal's secure payment systems operate with the following procedures in place: (1) Personal data privacy — transactions only require a login and password, thereby not requiring you to expose bank details and credit card information, (2) 24/7 Monitoring — PayPal has a dedicated security team who monitors transactions 24/7, (3) Secure Technology — PayPal's SSL encryption keeps online transactions guarded and encrypted from start to finish, (4) Fraud Prevention — PayPal has announced its "Purchase Protection" program which states that should your purchase constitute as fraudulent, PayPal will reimburse all accrued costs, (5) Dispute Resolution — if there's an issue at all with a transactions, PayPal will put the funds on hold until everything is resolved, (6) Global Buyer Protection — PayPal securely transfers payments throughout the globe. [3]

Similarly, Venmo, another online payment platform our group discussed, was bought out by PayPal in 2014 for $800 million. While its standard security features are similar to PayPal's, our group voiced concern that perhaps Venmo's own security and data encryption features are only as secure as you make them. Venmo works in a similar fashion to PayPal by simplifying money transfers between parties through linking a credit card, debit card, or checking account into its service. Venmo uses bank-level security and and data encryption to protect users against unauthorized transactions, and allows users to set up unique PINS for mobile applications in addition to SSL layered security. As a fail-safe measure, when all else fails, Venmo requires users to only be liable for $50 worth of losses, provided Venmo is contacted within two business days. [2]

Case Study 2: Alipay

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Alipay (or zhifubao支付宝 in Chinese) is a third-party online payment platform launched in 2004 and is one of the most widely accepted forms of payment in China. As of June 2016, Alipay has over 450 million registered users and over 200 financial institution partners, offering payment services for around 10 million small and micro merchants. Even a tiny fast food take-out vendor uses Alipay to accept payment, and many micro merchants would choose to accept either cash or Alipay as their payment options while not accepting credit cards.[6]

Since 2014, Alipay has grown as the world’s largest mobile and online payment platform, although most of the users are within China. Alipay is no doubt the most-used online payment, but perhaps not global enough.[7]

How does it work? First, sign up via the app with a valid mobile number. Second, link you Alipay account with your bank’s debit card. However, the debit card must be issued by a mainland Chinese bank. Without a Chinese bank account, you cannot sign up. This is the reason why most foreigners cannot sign up for Alipay. But if you do have one, you can now use your Alipay account at just about anywhere in China. For on location payments, just tap on the “pay” button to load your QR code that can be scanned by retailers.[8]

How is it used? Alipay is not simply limited to making payments to offline merchants. The app can also be used to shop online, book vacations, pay insurance bills and even pay the utility bills. Even some American businesses accept Alipay as well, such as Neiman Marcus or Saks Fifth Avenue, although Alipay has not extended its operations to small and micro merchants in the US.[9] You can also pay friends and family with an Alipay account using money you have in Alipay, just like Venmo. In China, you can also use your Alipay account as an automatic payment option for payments within mobile apps like Uber, Taobao (Chinese version of Amazon) and Didichuxing (Chinese version of Uber).[10]

In short, Alipay is China's leading online payment platform with more than 450 million active users. It is likely to remain as the leader of mobile payments in China, although China's tightening financial regulations pose challenges.

Case Study 3: Samsung Pay

‘Samsung Pay’ is a digital form of payment platform which was introduced by Samsung in October 2014. Samsung have applied this ‘Samsung Pay’ on Galaxy S6 and Galaxy S6+ first as they have applied Magnetic Service Transmission (MST) into the phone which allows Samsung phone to store all the data of one’s card which allows one to pay in-person or in-app. [11] Since Samsung Pay supports more than 650 banks and credit unions, it allows ‘Samsung Pay’ user to store as many cards as they want instead of carrying wallets full of cards. Also, unlike ‘Apple Pay,’ Samsung Pay does not require additional NFC Payment machine which also provides comfortableness as well. [11]

‘Samsung Pay’ was launched officially on August 2015 in Korea and now launched on several different countries as well: U.S., China, Russia, Australia, Spain, Singapore, Brazil, Puerto Rico, Thailand. [12] ‘Samsung Pay’ is based on the patent technology based on ‘LoopPay’ of U.S.’ venture business which was taken over by Samsung. The patent technology allows magnetic payment system via magnetic field which allows ‘Samsung Payment’ to be paid without swiping. [12]

To use ‘Samsung Pay,’ card numbers, fingerprints, password, and SMS confirmation must be passed through on ‘Samsung Payment’ app. [14] Once card information is registered, the information will be encrypted and sent to card company which then will be switched into virtual token which stands for the card number. [14] Therefore, the exposure of this virtual token would not equivalently mean exposure of card information which is the strength of ‘Samsung Pay.’

In order to provide security, it uses temporary tokenized information instead of card digits so that trade information does not get stored in the database. [13] Also, they have provided fingerprint verification technology to go through the processes of payment to double up the security as well. [14] Lastly, Samsung Electronics have come up with Samsung Knox technology which they have developed themselves which constantly monitors the phone to keep the information safe. [14] In addition, it also encrypts all the card information in a separate and secure data vault at all times. [14]

Case Study 4: Bitcoin

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Bitcoin is an electronic form of payment that has no banks, no transaction fees, and lets you remain completely anonymous. Created by a person using the alias Satoshi Nakamoto, Bitcoin has grown substantially popular among merchants as a cheap and fast way to make transactions, especially international transactions. [15]

There are two ways in acquiring bitcoins. One is to buy them off of an exchange marketplace where you can buy and sell bitcoins, sort of like the stock market. You can also mine bitcoins by using computers to solve complex math puzzles. Bitcoins are stored in either a cloud or a computer and is called a digital wallet. This allows users to either send, receive, or use bitcoins however they please and they only need an internet connection. Unlike banks, however, they are not insured by the FDIC which means that if bitcoins are lost or stolen, there is no way in retrieving the money you lost.[16] An incident of this occurred with James Howells who accidently threw away a hard drive that contained 7,500 bitcoins which is roughly about 9 million dollars. He tracked it to a garbage dump, but was unsuccessful in retrieving it as the landfill was enormous. What's even worse is that money is completely gone because it is not insured by anything.[17]

Bitcoin is not completely risky however and does have some security measurements. Bitcoin uses something called blockchain which is essentially a ledger that records every single transaction made with bitcoin. This prevents users from sending the same bitcoin to different people and making sure that possession of a bitcoin is properly transferred from user to user.[18] This does not stop hackers, however, from stealing bitcoins from big companies. Bitfinex, a major bitcoin exchange, got hacked and robbed of 120,000 bitcoins which is equivalent to around $60 million in 2016.[19]

Despite the security flaws and generally unsafe nature, bitcoin is still growing among merchants as more and more companies, such as Microsoft, are starting to accept them.[20] Bitcoin is also huge in the black market and is used for drugs, child pornography, weapons, and other illegal activities due to the anonymity of using bitcoin, though some of these services are fake and just steal bitcoins from users.[21] Bitcoin's double-edged nature makes it hard for governments to legitimize bitcoin, yet it still continues to grow and become universal. So much so that bitcoin could possibly be the solution to Venezuela's inflation problem.

Once Venezuela's top currency, the 100 bolivar note, is now worth about 2 cents. To solve this problem, the government started printing out higher valued bills, but that only added to the inflation issue. This is where bitcoin comes in. Because there is no international fee and because it can all be done online, bitcoin can easily be sent and received from outside sources like humanitarian aid and merchants. This would help the people obtain an income of actual value to buy certain products off of Amazon and different merchants that are starting to accept bitcoin more and more. While bitcoin may not be the most financially secure thing when compared to a bank, it may be the necessary stepping stone to help Venezuela solve their financial crisis and rebuild their economy.[22]

Due to bitcoins unpredictable nature in the market, it's hard to tell how the value will rise or fall in the coming years. But one thing is for sure, bitcoin will become more and more universal and relevant due to its easy use and cost efficiency. It wouldn't be surprising if bitcoin became a universal currency around the globe.

Future Growth and Potential

The future of payment is on our phones now. The future of the retail would be dominated over the internet in few decades. In fact, the future is here already. On April 19th, 2017, South Korea announced their 'coinless society' where all changes in coins would be deposit onto prepaid cards such as transportation cards. [23]
Technology of 'Secure Payment' will become more secure in the near future and more essential to our lives. However, the 'secure payment' nowadays are severely threatened by the threat of freud, thus enhancing the importance on 'security.' In order to tighten the security, significant investments are being invested into technology to build strong security. In 2014, Visa have joined forces with a diverse group of payment networks, banks, credit unions, acquirers, retailers, point-of-sale device manufacturers and industry trade groups to establish the 'Payments Security Task Force,' which aims to eradicate payment fraud with advanced security. [24]

Secure payments are closely associated with web-analytics, as understanding and optimizing web usage can maximize the profitability of secure payments.

Bibliography
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