The success of digital payments depends on a new framework

An overview of the digital financial sector and the area’s need for this technology.

In an era of constant technological evolution, the use of various technologies, including mobile devices, has had a huge impact on the financial services industry. As a result, this sector is facing major changes as new technologies translate into new forms of value (money) exchange.

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In reality, digital payment concepts are constantly evolving, as technological advances are changing the universe of payment methods as we know them today. Disruptive innovations like Apple Pay continue to gain traction on a global scale. Contactless payment solutions can eliminate the security flaws of traditional credit and debit cards, but it is important to create a capable and secure network before digital payments can actually start to be made.

Traditional banking institutions under pressure

Financial control is no longer in the hands of the financial sector. This is because today’s business minds are connecting society and money through new and innovative formats. Smartphones and tablets, for example, have recently become the most used payment devices by the 79.4 million American consumers who shop online. Nearly 51% of North American online consumers make purchases using a mobile device.

New services like Google Wallet, Apple Pay, and other mobile payment methods are becoming incredibly common in financial services. However, questions to consider are: who will be the main providers in the financial services market in the future and what types of payment ecosystems will emerge?

According to a report published in 2014 by Capgemini, transactions with mobile payment methods are expected to grow by 60.8% in 2015. In the same period, the growth of electronic payments (e-payments) will slow down to 15.9%. Nonetheless, the continued growth in the levels of these two payment methods is putting pressure on all investors in the sector to quickly start adopting these channels.

To make matters worse, due to this phenomenal growth, many banks have placed themselves on the sidelines of this scenario by formulating a clear payment strategy, and are at high risk of becoming increasingly marginalized.

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Companies that use legacy systems in their own back office They suffer limitations due to various external forces and internal challenges. The main external challenge arises from multiple initiatives by regulatory agencies and the industry itself to strengthen data security and privacy and compensate for a glaring lack of global standards for exchanging values ​​in the digital world. Other external challenges include excess payment processing capacity, which has put pressure on traditional business models, and the need to find revenue from other sources of volume growth. Understanding these challenges is essential to develop a reliable network that enables banking transactions in a more efficient and secure traffic network.

What will the new world look like in a space with virtual currencies?

A reliable and cost-effective network is vital to the success of virtual payments and the financial industry. Him structure The basis of securities movement is changing dramatically, as non-financial institutions operate more points of origin leveraging their network and easy access to end customers. Regulatory bodies, such as the US Federal Reserve System, have recognized the transition to digital currency and have issued an open call to the industry to submit innovations to improve the speed, cost and security of transactions.

However, one of the main concerns remains security despite the continuous innovations developed to increase the protection of the entire payment flow; There is not yet a 100% reliable, transparent and traceable infrastructure.

Recently, some virtual currencies – the so-called cryptocurrencies, like Bitcon – have become an extremely popular online payment method. And as mobile payment methods and new “currencies” gain popularity for transferring value in the digital economy, designing and building a customized and secure network for these virtual payments will be more than necessary.

A typical approach created from a network security perspective to protect the “Internet of Money” includes access level control systems – and software. The network can detect and mitigate the risks of invaders or other intruders wishing to evade software and system access controls, which are normally relevant. The power of the network lies in being a parallel and separate threat detection and management system, whose specific objective is to protect company assets.

For new payment schemes to be truly secure, they need to focus more on the security of value (money) transfers, which requires an infrastructure (network) that generates lower costs, increases speed and optimizes security. New and traditional economic actors in the fluid model of supporting the transfer of values ​​from one entity to another will find it necessary to work to have a new structure. Such an ecosystem/network must emerge as a standards-based, secure, global and efficient model in which new digital monetary value exists and circulates.

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http://blogs.cisco.com/financialservices/digital-payments-lack-the-framework-for-success-and-that-needs-to-change