Our digital landscape is continuously growing and within it, our phones are becoming even more of a one-stop shop. We use our phones for communication, either through text messaging or phone calls; for taking photos; for sending and receiving emails; for setting alarms; for listening to music or audio books; for reading books; for asking google questions; to access social media; and most relevant for today's topic - we use our phones in place of physical debit or credit cards. Being able to use your phone to complete payments has decreased the need for our physical debit and credit cards and streamlines handling online, or in-person purchases. There is an obvious convenience with this being digitized, but is it secure?
What do you mean by digital payments and physical payments?
Digital payments refers to the use of a cell phone, or laptop/computer, to store payment methods and use it in place of a physical payment method (such as your debit or credit card). Some popular digital payment methods include Apple Pay, Google Pay, Samsung Pay, Venmo, Zelle, etc. These payment methods can be easily accessed using your cell phone, or are made specifically to be used on your cell phone (Apple, Google, and Samsung Pay). Physical payment methods would be the use of your physical debit or credit card, cash, checks, and/or gift cards.
What risks are involved with digital payments vs physical payments?
Some common risks for digital payment methods include:
- Fraud - Fraudsters are evolving alongside our technology, and this threat is present with both digital and physical cards. Common schemes to fraudulently access your digital payments are purchasing scams (such as fake concert tickets, or asking you to send them money after sending you money). Once you send a digital payment, there is difficulty with getting it back even if it was a fraudulent event.
- Data Breaches - If your phone is stolen or hacked, then your digital payments are at a high risk of being wrongfully accessed.
- Glitches/System Failures - Sometimes our digital devices don’t operate perfectly, and glitches or system failures can make digital payments inaccessible or not operate as intended.
Some common risks for physical payment methods include:
- Robbery/Theft - This is pretty self-explanatory, your physical cards can be stolen if they are not adequately protected, or if you are robbed.
- Skimming/Cloning - There are devices that can be added to card swipe terminals (ATM’s, gas pumps, etc.) called “skimmers”, which take your card data from the magnetic stripe. There are also “shimmers”, which take your card data from the magnetic chip. These are small devices that are easily placed onto card swipe terminals, making it easy for your card data to be compromised. Cloning is a result of this data being stolen, and creating a duplicate of the card that was compromised from the skimmer/shimmer.
- Physical Loss - This is also self-explanatory, sometimes we are silly and we lose our physical cards. Cards and cash are both small and light, making it easy to drop one without recognizing it, or leave it behind somewhere unintentionally.
Neither option is perfectly secure, but there are times when digital payments are actually more secure than physical payments. All digital payments have clear and detailed trails of transaction information, making it easier to identify fraudulent transactions. When you use a digital payment feature such as Apple Pay, your card number is not provided through the transaction. Apple Pay does not store your card number, instead they use a unique device account number to operate and identify the card. Some other advantage of Apple Pay specifically is the requirement for biometric identification/confirmation. To make a purchase using Apple Pay, you must provide your face ID, thumb print on older Apple devices, or the card pin if you are using an Apple computer.
How can you limit these risks with digital payments?
To limit risk with the use of digital payments, consider the following:
- Implement Multi-Factor Authentication (such as biometric authentication)
- Use strong and unique passwords
- Confirm adequate encryption where you are submitting the payment (look for “https” in the URL, or an image of a lock next to the URL).
- Monitor your transactions (this applies to physical payments using cards as well!)
- Try to use digital payment methods that tokenize your card information. Apple Pay, Google Pay, Samsung Pay, and PayPal all do this. This makes it much more difficult to access your actual card information. Some digital payment methods that do NOT tokenize your card information are: Venmo, Zelle. These are not tokenized since they are directly connected to your bank accounts, and that information is stored within the apps.
Stay safe, and rest assured knowing that digital payments are not an insecure payment method!