ValidSoft: Securing the bright future of m-payments – Pat Carroll
The global mobile payments market is growing steadily, but significant barriers such as a lack of consumer confidence threaten its development. ValidSoft's CEO Pat Carroll explains how the company's fraud detection and prevention solutions strengthen the mobile world.
Consultancy firms McKinsey and Efma recently released a joint report on the future use of mobile phones in banking across Europe.
While it revealed that there are strong signs of a consumer and technological revolution in retail banking, driven by advances in mobile technology, it highlighted that banks are not currently investing enough in its growth - despite recognising it as the way forward.
While technology research group Gartner expects the global mobile payments market to reach 349 million users and transactions to reach $429 billion in 2015, it is clear there is still a long way to go.
"Mobile payments are yet to reach their full potential," begins Pat Carroll, chief executive officer at ValidSoft.
"It is still an evolution for banks; some think it might be two to five years until mobile solutions become fully developed. I think that there are two issues hindering their full deployment."
The first issue involves security. Due to the levels of fraud that accompanied the initial growth of online shopping and banking, consumers have become very aware of the threats fraudsters pose to their personal data and identities.
The recent UK press hacking scandal has also now brought the security of mobiles phone and the overall mobile channel into question. Carroll notes, "The hacking scandal has not only been a shock to the public, it has also created a great sense of insecurity. Consumers have been made aware of how easily personal information can be obtained and this has helped foster an environment in which no one fully trusts mobile solutions (such as solutions for payments) that are already on the market."
Against this backdrop, security should be an essential element of any mobile payments offering but, according to Carroll, there is still a lot of work for banks to do in this area. "Ultimately, there's still a long way to go before banks truly integrate security into their thought process and start to implement it from day one when developing a new product or solution."
He continues, "Security is a real consideration for consumers and a perceived weakness in this area could have a serious impact on the overall take-up of any system. Using it as a differentiator and coming up with something that is far better and more secure than what has gone before could therefore go a long way towards generating traction."
The second concern, as Carroll explains, is the business model, which is not the same for mobile applications as it is for more traditional modes of banking. Within a mobile payment ecosystem, banks and security software companies must collaborate with a new partner, namely telecoms/mobile network operators. If mobile payments are to be a success, banks must recognise that they are one of the five key stakeholders needed. The other four are: merchants, mobile phone operators, consumers and the security industry. Despite all the promise - and media excitement - without any one of these parties, adoption of mobile payments will be far slower than it could be.
"Mobile payments is a new game that only very few industry players are able to truly grasp at the moment," he continues. A company such as ValidSoft, which is part of a telecoms group, has a critical advantage.
A strong partnership
An emerging global leader, ValidSoft is now part of Elephant Talk, an Amsterdam-based telecoms firm. The security software company provides products and services designed to meet the needs of organisations operating in environments where e-channel applications provide a competitive advantage, such as the banking industry.
ValidSoft combats mobile payment fraud through the use of a proprietary mobile transaction verification and authentication platform. Using patented, voice-based, out-of-band authentication and transaction verification, ValidSoft's VALid platform combines visible and invisible protection against multiple mobile threats, including types of pseudo device theft such as SIM swapping and unconditional call forwarding (CFU) fraud, man-in-the-middle and man-in-the-browser (MitM/MitB) attacks, and traditional fraud vectors such as phishing, key-loggers and screen scrapers.
"The other side of the coin is that, because we are part of a telecoms company, we understand not only the technology itself, but also how mobile operators think, the way in which they operate and what issues they face," explains Carroll.
"The two industries don't know how to talk to one another. "On top of that, there is the security element, which is another concern altogether. That's what we bring to the market - and it's quite essential."
The potential of m-payments
The opportunity for growth in mobile payments is huge.
In the UK Payments Council's national payments plan, unveiled in October 2011, continued reference was made to the industry-wide project the Council is undertaking to research and deliver account-to-account mobile payments in the UK. Recently, 45 of the world's leading mobile network operators have committed to supporting and implementing SIM-based near field communications (NFC) services using an interoperable set of standards devised by the GSMA.
One key use of NFC is for payments - another significant step forward for mobile payments that highlights the concerted progress happening in this area. The technology is coming and mobile is set to become the payment method of choice among many 21st-century consumers. It is the banks that act on this opportunity now that stand to reap the rewards; those that stand still will not.
"Mobile networks have a huge customer base that is already loyal and has immense reach," states Carroll. "This poses a threat to banks and they now face a decision - not whether to invest in this technology, but how to invest. Either banks have the capabilities in-house or they need to invest in them by partnering with an outside company to create an application."
If one thing's for sure, it is that consumers will decide on the success of any m-payments scheme. "It all comes downto how solutions are seen. As a consumer, if you trust and are truly convinced of the value of a product, then you are more likely to adopt it," Carroll concludes.
Banks need to use security as a differentiator and show customers that it has been considered from the outset (by design). This will not only reassure consumers about the safety of their transactions, but will also ensure that the security does not in any way adversely affect usability or customer service.
Only by realising this and working in partnership will the best solution come to fruition.