1.

INTERNET BANKING

Introduction
The rapid development of Internet technology has offered various kinds of conveniences in various jobs, one of
which is business transactions. Internet development has a significant influence in various aspects, one of which
is in the banking world.
E-banking is also known as internet banking, online banking, or virtual banking. It's available through a bank's
website or mobile app. E-commerce is the digital exchange of goods and services that takes place through
online platforms. E-commerce transactions involve the electronic transfer of funds in exchange for products or
services.
E-banking, or electronic banking, is an online service that allows customers to access their bank accounts and
conduct financial transactions. E-banking is used for both financial and non-financial transactions, such as:
• Financial
transactions: Making and receiving payments, transferring funds, and paying bills, investment in
mutual funds, insurance, gold bonds etc.
• Non-financialtransactions: Checking account balances, changing PINs, updating personal information, issuing
cheque books, booking FDs.

Not all account holders get access to internet banking. If a customer would like to use Internet banking
services, they must register for the facility while opening the account or later. The customers have to use the
registered customer ID and password to log into their internet banking account.
The various services available are:
1. Check the account statement online.
2. Open a fixed deposit account.
3. Pay utility bills such as water bills and electricity bills.
4. Make merchant payments.
5. Transfer funds.
6. Order a cheque book.
7. Buy general insurance.
8. Recharge prepaid mobile/DTH.
9. Apply for loans
10. Buy insurance (Vehicles, term, health, house, travel etc.)

The advantages of internet banking are as follows:

1. Availability: The customers can avail the banking services round the clock throughout the year. Most of
the services offered are not time-restricted; the customers can check their account balance at any time and
transfer funds without having to wait for the bank to open.
2. Easy to Operate: Using the services offered by online banking is simple and easy. Many find transacting
online a lot easier than visiting the branch for the same.
 3. Convenience: The customers need not leave their chores behind and go stand in a queue at the bank
branch. They can complete their transactions from wherever they are. Pay utility bills, recurring deposit
account instalments, and others using online banking.
4. Time Efficient: Customers can complete any transaction in a matter of a few minutes via internet banking.
Funds can be transferred to any account within the country or open a fixed deposit account within no time
on net banking.
5. Activity Tracking: When customers make a transaction at the bank branch, they will receive an
acknowledgement receipt. There are possibilities of them losing it. In contrast, all the transactions they
perform on a bank’s internet banking portal will be recorded. Customers can show this as proof of the
transaction if need be. Details such as the payee’s name, bank account number, the amount paid, the date
and time of payment, and remarks if any will be recorded as well.
6. Online banking is fast and efficient: Funds can be transferred between accounts almost instantly,
especially if the two accounts are held at the same institution. Consumers can open and close a number of
different accounts online, from fixed deposits to recurring deposit accounts that typically offer higher rates
of interest.
7. Consumers can also monitor their accounts regularly: By allowing them to keep their accounts safe.
Around-the-clock access to banking information provides early detection of fraudulent activity, thereby
acting as a guardrail against financial damage or loss.
8. Online Bill Payment: One of the great advantages of online banking is online bill pay. Rather than having
to write checks or fill out forms to pay bills, once customers set up their accounts, all it takes is a simple
click or even less, as they can usually automate their bill payments. With online bill pay, it’s easy to manage
the accounts from one central source and to track payments into and out of the account.

Disadvantages of Internet/Online Banking

The disadvantages of internet banking are as follows:
1. Internet Requirement:
An uninterrupted internet connection is a foremost requirement to use internet banking services. If customers
do not have access to the internet, they cannot make use of any facilities offered online. Similarly, if the bank
servers are down due to any technical issues on their part, customers cannot access net banking services.

2. Transaction Security:
No matter how much precautions banks take to provide a secure network, online banking transactions are
still susceptible to hackers. Irrespective of the advanced encryption methods used to keep user data safe,
there have been cases where the transaction data is compromised. This may cause a major threat such as
using the data illegally for the hacker’s benefit. There’s also the risk to identity theft or actual theft if
someone gains unauthorized access to your account via a hacked or stolen password or log-in credentials.

3. Difficult for Beginners: There are people in India who have been living lives far away from the web of the
internet. It might seem a whole new deal for them to understand how internet banking works. Worse still, if
there is nobody who can explain them on how internet banking works and the process flow of how to go about
it. It will be very difficult for inexperienced beginners to figure it out for themselves.
4. Securing Password:

Every internet banking account requires the password to be entered in order to access the services. Therefore,
the password plays a key role in maintaining integrity. If the password is revealed to others, they may utilise the
information to devise some fraud. Also, the chosen password must comply with the rules stated by the banks.
Individuals must change their password frequently to avoid password theft which can be a hassle to remember
by the account holder himself.

5. No Relationship with Personal Banker:

Over time, customers can develop a relationship with a personal banker if they visit a traditional bricks-and
mortar location. If customers are dealing with an online bank, on the other hand, they’re typically handed off to
an anonymous customer service agent who is unlikely to know them from the next customer. If customers are
really in a bind, financially speaking, having a relationship with someone who can help and who knows the
customers well can be a major advantage over a strictly online banking relationship.

ELECTRONIC PAYMENT SYSTEM:

Introduction:
The way we pay for goods and services is changing. Consumers want convenience. It’s a plain and simple truth.
Millennials and Gen Z are the two generations that make up the majority of the Indian population. A recent study
showed that these two generations spend around six hours per week shopping online. This just goes to show that
there is a huge audience for business to expand their presence and increase their revenue online.

The Early Online Payment System

In 1994, the Stanford Federal Credit Union was credited as the first financial institution in North America to
launch its online banking services for all of its customers. Presidential Bank soon followed their steps in 1995,
being the first bank in the country to offer their clients access to their accounts online.

Seeing how there's a potential for digital transformation within the banking industry, more financial
corporations soon followed suit. Outside of supporting card payments, they began to supply electronic cash
alternatives as well, such as digital cash, e-money and tokens.

Paypal - Transforming Digital Payments

1. Digital payments continued to evolve when Paypal first entered the market in the late 90s, and they
became one of the first payment service providers to be established globally.
2. A lot of Paypal's innovation was unheard of at the time, being one of the first companies to allow payments
via mobile payment apps and using their email addresses.
 Asia’s Initial Adoption of Online Payment

Starting from the early 2000s, several companies across Asia were also trying to keep up with the technology
changes and provide online alternatives in making payments.
China

• China’s digital payment revolution started with two tech juggernauts: Alibaba and Tencent.
• Alibaba was established in 1999 as a B2B ecommerce. It introduced its digital payments
solution, Alipay in 2003.
• Later in 2005, Tencent introduced their first online payments brand called Tenpay. This was created to
support its successful online gaming business but later integrated into its most successful social messaging
platform, WeChat. The payment brand then rebranded itself as WeChat Pay, where users can transfer money
through the messaging app.
India

• One of the first online payment systems in the country dates back to 1996, where the Industrial Credit and
Investment Corporation of India (ICICI) began to offer their clients online banking services in their retail
branches.
• History of digital payments in India 2008, the National Payments Corporation of India (NPCI) started to create
a more established payment and settlement infrastructure in the country. That has since given birth to various
products and services, including India’s unique digital identity system Aadhaar in 2010 and many more.

Definition
Electronic payment systems (EPS) are digital infrastructure that allows for the transfer of funds between
entities or individuals. They use technologies like mobile payment apps, online banking, and electronic point-
of-sale terminals. An electronic payment system is a way of conducting financial transactions or payments over
an electronic medium, rather than using traditional methods like cash or checks. These systems have become
more common with the proliferation of internet and mobile technology. They include online banking, mobile
wallets, credit/debit card payments, electronic funds transfer (EFT), and platforms like PayPal, Venmo, and
cryptocurrency-based payments.

Types of EPS/ Common Methods of E-Payment

There are many types of EPS, including:

Credit or Debit Card Payments – These are the most common forms of electronic payments. Customers use
their credit or debit cards to make purchases online or in physical stores. Transactions are processed through
secure payment gateways. When paying by card, an electronic payment device initiates the online payment
transfer. The consumer will have to fill out their card details and have their transfer cleared by their bank.

Payment networks or payment gateways that provide the infrastructure for banks to issue card under their brand.
E.g. Visa, MasterCard, Rupay. Both offer a range of products, including credit, debit and prepaid cards, as well as
business solutions and global ATM services. They encrypt sensitive payment information to ensure security and
facilitate transactions between the merchant and the customer’s bank.

Internet Banking – This is done by digitally transferring funds over the Internet from one bank account to another.

Direct Debit – Direct debit transactions transfer funds from a customer’s account with the help of a third party.

E-Wallet (Digital wallets) – E-wallets store users' payment information securely and allow transactions via
mobile apps or websites. Users can add funds to their wallets or link their bank accounts and credit/debit cards
for seamless payments.
Examples: Apple Pay, Google Pay, Samsung Pay, PayPal.

Mobile Payment Systems- These systems use mobile technology to facilitate payments, often via QR codes,
NFC (Near Field Communication), or mobile apps. Mobile payments are widely used in retail, transit systems,
and peer-to-peer transfers.

Examples: Paytm, Phonepe, Google pay, Mobikwik, Airte Money, Jio Money,contactless payments through
smartphones.

Cryptocurrency Payments-Digital currencies like Bitcoin, Ethereum, and other cryptocurrencies can be used
for transactions. Cryptocurrency payments are decentralized and often have lower fees but come with volatility
[Link] example-Bitcoin payments via blockchain, crypto wallets like MetaMask or Trust Wallet.

E-cash – It is a form where the money is stored in the customer’s device which is used for making transfers. E-
cash refers to digital currency that can be used for online and offline transactions. It operates similarly to
physical cash but in an electronic form. E-cash is designed to provide the convenience of digital payments while
maintaining the anonymity and flexibility of physical cash.
E-check – This is a digital version of a paper check used to transfer funds within accounts.
Contactless payments – Contactless payments are becoming popular for quite some time. These payments are
done using RFID (Radio frequency Identification) and NFC (Near field communication) technology. The
customer needs to tap or hover the payment device or a card near the payment terminal, earning it a name, ‘tap
and go’.
UPI payments – NPCI (National Payment Corporation of India) has developed an instant real-time payment
system to facilitate interbank transactions. This payment system is titled UPI (Unified Payment Interface).
Payments via UPI can be made via an app on a mobile device.
For example- Paytm, Bhim, Google pay, Phone pay.
Biometric payments – Biometric payments are done via using/scanning various parts of the body, e.g.
fingerprint scanning, eye scanning, facial recognition, etc. These payments are replacing the need to enter the
PIN for making transactions making these payments more accessible and easier to use.
Payments are done via Wearable devices – Wearable devices are rapidly becoming popular among
customers. These devices are connected to the customer’s bank account and are used to make online payments.
An example of a wearable used for making an online payment is a smartwatch.
 AI-based payments – As machine learning and Artificial Intelligence is creating a revolution all around the
world, AI-based solutions are becoming more popular. Payments based on AI such as speakers, chatbots, ML
tools, deep learning tools, etc are making it easier for businesses to maintain transparency.
QR payments – QR code-enabled payments have become immensely popular. QR code stands for ‘Quick
Response’ code, a code that contains a pixel pattern of barcodes or squares arranged in a square grid. Each part
of the code contains information. This information can be merchant’s details, transaction details, etc. To make
payments, one has to scan the QR code with the mobile device.

How e-payment system works

Working of e-payments can be explained in the following three steps,
Payment initiation – Customer finalizes the product/service and chooses the payment method to initiate the
transaction. Depending on the payment method, the customer enters the required information like card number,
CVV, personal details, expiration date, PIN, etc. The chosen payment method either redirects the customer to an
external payment page or a bank’s payment page to continue the payment process.
Payment authentication – The information submitted by the customer along with other details like payment
information, customer’s account information is authenticated by the operator. The operator can be a payment
gateway or any other solution involved. If everything gets authenticated positively, the operator reports a
successful transaction. On the contrary, if there is any problem with any of the authentication checks, the
transaction fails. After the successful transaction, the customer gets a payment confirmation.
Payment settlement – After the successful authentication process, payment from the customer’s bank gets
transferred into the merchant’s account by the online payment service provider.

Advantages
EPS offer many advantages, including:
1. Convenience- EPS are convenient and accessible. Transactions can be completed quickly from anywhere with
internet access, eliminating the need to visit a bank or carry physical cash.
2. Payments can be made 24/7, facilitating instant transfers.
3. Reduced Costs-Electronic payments can reduce administrative costs associated with handling cash and checks,
such as physical storage, printing, and mailing.
4. Some platforms may offer lower transaction fees compared to traditional banking methods.
5. Security- EPS use security measures like encryption and authentication protocols to protect sensitive financial
data. Advanced encryption and fraud detection methods make electronic payments safer than cash, as funds are
secured against loss or theft.
6. Transactions are automatically recorded and tracked, making it easy for individuals and businesses to monitor
and manage their finances.
7. Reports and statements can be generated easily for accounting or budgeting purposes.
8. Unlike carrying large amounts of cash, electronic payments reduce the risk of physical theft or misplacement.
9. Transactions are insured, adding an extra layer of protection.
[Link]-EPS allow for faster payments.
 ELECTRONIC FUND TRANSFER
Electronic funds transfers (EFTs) are a general banking process that includes debit and credit card transactions,
and is used to transfer money electronically from one bank account to another.
An electronic funds transfer (EFT) is a digital transfer of cash or funds through an online payment system. An
EFT can be performed within the same bank, or between banks, and typically uses payment systems such as the
Automated Clearing House for (ACH) payments, Fedwire or SWIFT for wire transfers, or credit card and debit
card networks.
EFTs are becoming increasingly common in B2B payments as many businesses shift from traditional paper
checks towards more efficient and lower-cost. The EFT can happen between accounts within one bank or
between accounts across multiple banks. Other transaction types that are considered EFT include direct deposit,
ATMs, virtual cards, e-check (used globally), peer-to-peer payments, and personal computer banking.

An EFT transfer is usually very straightforward. There are two parties: the sender of funds and the receiver of
funds. Once the sender initiates the transfer, the request channels through a series of digital networks from the
Internet or a payment terminal to the sender’s bank and then to the receiver’s bank. Senders can be anyone from
an employer to a business to an individual paying a vendor for a service such as electricity. Likewise, recipients
can be entities like employees, goods suppliers, retailers, and utility companies. Most payments are cleared and
completed within a couple of days.
• Examples
Credit card payments, debit card transactions, online bill payments, direct debit, and direct deposits are all
examples of EFTs.
Key Features of EFT

1. Paperless Transactions: All transactions are done electronically, eliminating the need for cheques or cash.
2. Speed and Efficiency: EFTs are generally faster than traditional methods like mailing checks. Many
transactions are processed in a few minutes to a few hours, while others may take up to one business day.
3. Automation: EFTs can be set up as recurring payments, automating bill payments or payroll disbursement.

Types of Electronic Funds Transfer (EFT)

Types of EFT Transactions (electronic funds transfer) include:

Direct Deposit: Employers use EFT to deposit employees' salaries directly into their bank accounts.
Government benefits and tax refunds may also be distributed via direct deposit.
Direct Debits/Automatic Payments: Bills and recurring payments (such as utility bills, loan payments, or
subscription services) are automatically deducted from a customer's account on a regular schedule.
Wire transfer:A fast and secure method of sending money electronically, often used for large or urgent
transfers. Wire transfers may be domestic or international. Wire transfers are domestic or international
electronic fund transfers to a recipient’s bank account made through the SWIFT(Society for Worldwide
International Financial Telecommunications) network internationally and for cross-border payment transactions
for the transfer of money.

E-Commerce transactions
 Point of sale (POS) transactions. When a customer uses a debit or credit card at a store, funds are transferred
electronically from the customer's account to the merchant’s account.

Credit card or debit card transactions

• Peer-to-peer payments
• Phone-initiatedfunds transfers, and
• ATM (automated teller machine) transactions. Withdrawing, depositing, or transferring money between
accounts using an Automated Teller Machine (ATM) is also an EFT transaction.

Electronic Check (E-Check): A digital version of a paper check where the payer authorizes the transfer of
funds from their checking account.
• NEFT, RTGS, IMPS (Immediate Payment service)

How Does Electronic Funds Transfer Work

So how does an EFT payment work? It’s fairly straightforward, and generally requires five things: a sender, the
sender’s financial information, a receiver, the receiver’s financial information, and one or more digital banking
networks to handle the transaction.

An electronic fund transfer process looks something like this:

1. The sender initiates the transaction, using their financial credentials to authorize it.
2. The sender supplies the receiver’s credentials (bank name, account type, account number, routing number, etc.)
to specify which account they will send money to.
3. The digital banking networks involved usually hold the transaction briefly if it needs to be reversed, including if
it’s deemed suspicious.
4. If everything is valid, the transfer clears, and the money is moved from the sender’s account to the recipient’s
account.
 Advantages of Electronic Funds Transfer

Electronic fund transfer systems have become increasingly popular methods of doing business. This shouldn’t
be a surprise when considering their advantages over transactions that use physical money. For instance:

• Speed: Though they can sometimes take up to a few days to clear payment networks, EFTs are generally
faster than sending cash or checks through the mail.
• Flexibility: Many forms of EFTs can be done online, enabling business to be conducted pretty much
anywhere. A person doesn’t necessarily need to visit an actual store or visit a bank to withdraw money or
conduct other banking transactions.
• Automation: EFTs can be programmed to occur at specific intervals. This allows for making recurring
payments without having to repeatedly withdraw cash, write checks, or worry about payment deadlines.
• Cost: Transactions via cash or check involve several expenses. These include printing checks or bills,
paying for postage, and sometimes paying for an employee to handle the money. EFTs avoid most of these,
making them a cost-effective solution.
• Less human error: Cash or check transactions can be prone to human error. Someone may miscount or
miscalculate the amount of money to be transferred, or they may lose track of the cash or check in transit to
where it’s supposed to go (especially through the mail). EFTs significantly lessen these risks because
they’re handled mainly by computers.
• Security: Because EFTs verify and move money electronically, they involve less risk of theft or
counterfeiting than when dealing in cash and checks.

Disadvantages of EFT

1. Potential for Errors: Mistakes in entering account details or amounts can lead to incorrect transfers, and
reversing these errors can be difficult.
2. Fraud Risk: While generally secure, EFT is still susceptible to hacking or unauthorized access, especially if
security measures are not followed.
3. Dependence on Technology: EFTs require Internet access and functioning banking systems. Downtime or
technical issues with banks can delay transactions.
4. Limited Control: With automatic payments, users must ensure they have sufficient funds in their accounts to
avoid overdraft fees. It can be challenging to cancel or modify preauthorized payments.

Security Measures in EFT

1. Encryption: Sensitive data is encrypted to prevent unauthorized access during transmission.

2. Authentication: Multi-factor authentication, PIN codes, and secure passwords are used to verify users.
 3. Monitoring and Alerts: Banks monitor for unusual activity and may provide alerts for suspicious
transactions.

Regulations: EFTs are subject to banking regulations and consumer protection laws to ensure security and
protect against fraud.

The debit and credit card system allows individuals and businesses to make payments electronically,
eliminating the need for cash transactions. While they look similar and both enable electronic payments, debit
and credit cards function differently in terms of funding sources, spending limits, fees, and impacts on credit.

1. Debit Cards

• Source of Funds: Linked directly to a bank account (usually a checking account). When a customer make a
purchase, funds are deducted directly from his account.
• Spending Limit: Limited to the amount of money in the associated bank account.
• Interest and Fees: Generally, no interest is charged because the customer is using his own money. Pros: Helps
avoid debt since the customer is limited to available funds; often doesn’t require a credit check to obtain.
• Cons: Less protection against fraud, as unauthorized transactions can take longer to resolve compared to credit
cards.

2. Credit Cards

• Source of Funds: Essentially a short-term loan from the issuing bank, which the customer repay according to
their billing cycle. A credit limit determines how much a customer can spend.
• Spending Limit: Set by the issuing bank based on factors like credit score and income.
• Interest and Fees: Charges interest on unpaid balances carried over to the next billing cycle. High interest rates
can apply to overdue amounts, plus possible annual fees or late payment fees.
• Pros: Builds credit history if managed well; provides greater fraud protection; offers rewards (cashback, points,
access to airport lounges) on purchases.
• Cons: Encourages debt accumulation; high interest rates on unpaid balances; risk of impacting credit score with
missed payments.

Key Differences Between Debit and Credit Cards

• Funding Source: Debit uses personal funds; credit uses borrowed funds.
• Fraud Protection: Credit cards generally offer stronger protections.
• Impact on Credit Score: Credit cards affect the customer credit score based on usage and repayment history;
debit cards do not.
• Rewards Programs: More common and lucrative with credit cards.

How the System Works

1. Payment Process: When a transaction occurs, the card network (e.g., Visa, MasterCard) communicates with
the bank for debit cards or credit issuer for credit cards to authorize the payment.
 2. Transaction Posting: Debit card payments are deducted immediately or within a few days, while credit card
transactions appear on the cardholder’s statement for later repayment.
3. Fraud Detection and Dispute: Card networks and issuers provide fraud monitoring and the ability to dispute
transactions, with credit cards typically offering stronger protections.

Both types of cards are essential in today’s digital economy, serving different financial management and
spending needs.

UPI, or Unified Payments Interface, is a real-time payment system developed by the National Payments
Corporation of India (NPCI). It allows users to link multiple bank accounts to a single mobile application,
enabling them to send and receive money instantly without needing to enter extensive details like bank account
numbers or IFSC codes. Instead, transactions can be made using a unique UPI ID, a mobile number, or QR
codes, making it incredibly convenient and user-friendly.

Key features of UPI:

1. Instant Transfers- UPI enables real-time bank-to-bank transfers, allowing users to send money instantly.
2. 24/7 Availability-Transactions can be done anytime, even outside regular banking hours.
3. Single Platform for Multiple Banks-Users can access accounts from different banks within a single UPI app.
4. Secure-UPI uses two-factor authentication and transaction PINs, ensuring secure transfers.

Convenient Payment Methods-Payments can be made using UPI IDs, QR codes, mobile numbers, or account
numbers.

E-Wallet( Digital wallets) – E-wallets store users' payment information securely and allow transactions via
mobile apps or websites. Users can add funds to their wallets or link their bank accounts and credit/debit cards
for seamless payments.
Advantages of E-Wallets

1. Convenience-E-wallets allow for quick and hassle-free payments, whether online or at physical stores. Users
don't have to carry cash or cards and can complete transactions with just a few taps on their mobile devices.

2. Offers and Rewards- Many e-wallet providers offer cashback, discounts, loyalty rewards, and exclusive
deals, encouraging users to make more payments through their platforms.

3. Ease of Use- Setting up an e-wallet and adding money to it is straightforward. Most e-wallets have a user-
friendly interface designed for quick navigation and easy access to various services.

4. Enhanced Security- E-wallets use encryption, PINs, two-factor authentication, and biometric verification
(like fingerprint or face recognition) to protect transactions. Additionally, many e-wallets don't share sensitive
card or bank account details with merchants.

[Link] History- Users can easily track and review their spending, as e-wallets maintain a detailed history
of all transactions.
6. Speed-Payments are processed instantly, which is especially useful for making small purchases, paying bills,
or transferring money to friends and family.

7. Global Usage-Some e-wallets can be used internationally, making it easier to make payments or access funds
while traveling.

Disadvantages of E-Wallets

1. Internet Dependency-E-wallets require an active internet connection for most transactions. If the connection
is poor or unavailable, the user might face difficulties in making payments.

2. Limited Acceptance-Not all merchants or service providers accept e-wallet payments. Users may need to
have alternative payment methods for places that do not support e-wallets.

3. Transaction Limits-Some e-wallets have daily or monthly transaction limits, which can be restrictive for
users who want to make larger payments or transfers.

4. Security Concerns - Despite strong security features, e-wallets are still vulnerable to hacking, phishing, and
other cyber threats. Users must be cautious and follow security best practices to protect their accounts.

7. Privacy Issues-E-wallet providers may collect data on users' spending habits and transaction history. This
data can potentially be used for targeted advertising or shared with third parties.

8. Potential Fees - Some e-wallets charge fees for certain services, such as transferring money to a bank account
or making international payments. These fees can add up, especially for frequent transactions.

E-wallets offer great convenience and security for everyday transactions, but users should be aware of their
limitations and take steps to protect their digital wallets.

SECURITY ISSUES ON ELECTRONIC PAYMENT SYSTEM

[Link] Activities

Fraudulent activities are a persistent threat in the digital payment landscape. This can take many forms, such as
card skimming, fake online shopping sites, and phishing scams. These fraudulent activities are designed to steal
sensitive information, such as credit card numbers and login credentials, and use it for financial gain.

[Link] Breaches

Data breaches are another major concern in the digital payment world. This can happen when unauthorized
individuals gain access to sensitive information stored in a digital payment system or payment databases such as
credit card details, user credentials, or transaction records. The information stolen in a data breach can be used
for fraudulent activities or sold on the dark web. The methods employed for data breaching are- Hacking,
malware, and exploitation of software vulnerabilities. Exposure of sensitive financial information can lead to
widespread fraud and financial loss for both consumers and businesses.
[Link] and Ransomware Attacks
Malware attacks are another serious threat in the digital payment landscape. Malware, short for malicious
software, can infect a device and steal sensitive information, such as login credentials and credit card numbers.
Malware attacks can also be used to spread false information or take control of a device. It can result in loss of
sensitive payment data, disruption of payment services, and significant financial or reputational damage to
businesses. Ransomware is a type of malware that locks you out of your critical systems until you pay the
hacker to neutralize the threat.

[Link] Scams

Phishing scams are a form of fraudulent activity that use email or other forms of communication to trick
individuals into revealing sensitive information, such as login credentials and credit card numbers. These scams
often take the form of an email or message that appears to come from a trusted source, such as a bank or
payment provider, and requests sensitive information.

These security threats are a reality in the digital payment landscape and individuals and businesses must be
aware of the dangers and take steps to protect themselves. In the following section, we will examine the impact
of these security threats and what can be done to mitigate the common digital payment risks.

[Link] and Identity Theft

Cybercriminals may steal personal and financial information to impersonate legitimate users and make
unauthorized transactions. The fraud and identity theft can be through phishing attacks, data breaches. This can
result in loss of funds, compromised personal information, and damage to the user’s credit score or reputation.

6. Denial-of-Service (DoS) Attacks-Attackers overload a payment system’s infrastructure, causing it to

become slow or unavailable, disrupting transactions and causing inconvenience. It occurs by flooding servers
with excessive traffic resulting in loss of revenue, customer dissatisfaction, and reputational damage.

[Link] Vulnerabilities in Payment Application- Bugs or weaknesses in payment software can be

exploited by attackers to gain unauthorized access or manipulate transactions resulting in compromised
payment systems and potential financial or data loss.

[Link] force attacks- this type of cyberattack involves hackers repeatedly using several passwords to guess
the right password eventually.

SOLUTIONS TO SECURITY ISSUES

The security of electronic payment systems is critical to maintaining trust and protecting financial assets. As
technology evolves, so do the methods used by attackers, making it essential for organizations to stay proactive
and continuously improve their security measures. Balancing convenience with security will be key to the
success of any electronic payment system.

[Link]-Factor Authentication and multiple factor authentication

Two-factor authentication (2FA) is a security solution that requires two forms of identification before granting
access to sensitive information. This can include a password and a unique code generated by an app or sent via
text message, providing an extra layer of security to protect sensitive information. With 2FA in place, even if a
password is stolen, it is much more difficult for fraudsters to access sensitive information. Use secure biometric
authentication (e.g., fingerprint or facial recognition) where possible.

[Link] and Secure Storage of Data

Encryption is the process of converting sensitive information into a code that can only be decrypted with the
proper key. Use strong encryption protocols, such as SSL/TLS, for secure communication.

[Link] of Trusted Payment Gateways

Trusted payment gateways are secure platforms that process digital payments and protect sensitive information.
These gateways use advanced encryption and security measures to ensure that sensitive information is protected
from theft or fraud.

By using a trusted payment gateway, individuals and businesses can ensure that their digital payments are
secure and that sensitive information is protected. Monitor and update payment gateway software regularly.

[Link] and Detection of Fraudulent Activities

Monitoring and detecting fraudulent activities are another critical component of securing digital payments. This
can include the use of advanced algorithms and artificial intelligence to detect suspicious transactions and
identify potential fraud. The firms should implement real-time fraud detection and prevention mechanisms to
identify suspicious activity and block fraudulent transactions. They can also use artificial intelligence and
machine learning to analyze transaction patterns and detect anomalies.
By monitoring and detecting fraudulent activities, FinTech and related businesses can take steps to prevent
financial loss and protect sensitive information, which in turn enhances user satisfaction.

[Link] Software Updates

Regular software updates are a critical component of securing digital payments. These updates can include
security patches that address vulnerabilities and keep sensitive information protected. By keeping software up to
date, individuals and businesses can ensure that they are protected against the latest security threats in the digital
payment landscape.
[Link] Strong and Unique Passwords

Strong and unique passwords are essential for protecting sensitive information in the digital payment landscape.
This includes using passwords that are at least 12 characters long and contain a mix of letters, numbers, and
symbols.

It is also important to use a different password for each online account, as this makes it more difficult for
fraudsters to access sensitive information if one password is stolen.

[Link] of Phishing Scams and Other Fraudulent Activities

Awareness of phishing scams and other fraudulent activities is essential for protecting against security threats in
the digital payment landscape. Phishing scams are emails or messages that appear to be from a trusted source
but are actually from fraudsters attempting to steal sensitive information.

By being aware of these scams and taking steps to protect against them, individuals and businesses can prevent
the loss of sensitive information and protect against financial loss.

[Link] of Payment Recipients

Verifying payment recipients is another important best practice for securing digital payments. This can include
confirming the identity of the recipient, checking the authenticity of their website, and using secure payment
methods.

By verifying payment recipients, individuals and businesses can protect against fraudulent transactions and
ensure that their digital payments are secure.

[Link] Education and Awareness

Educate users about common phishing techniques, safe online practices, and how to recognize fraudulent
communications. The firms should also encourage users to report any suspicious activity.

[Link] and Recovery Plans

The organizations should maintain regular data backups and have a robust recovery plan to minimize the
impact of ransomware or other disruptive attacks.

BIOMETRICS

Biometrics in electronic payment systems refers to using unique biological and behavioural traits to verify
identity for secure financial transactions. Biometrics enhances security by providing a more reliable
authentication method than traditional passwords or PINs, which can be forgotten, lost, or stolen. Since each
individual has unique biometric characteristics, biometrics significantly reduces the likelihood of unauthorized
access. Biometrics is the science of using a person's unique physical or biological characteristics to identify
them. There are two main types of biometric identifiers:
 Physiological characteristics: The shape or composition of the body.
Behavioral characteristics: The behavior of a person.

The basic premise of biometric authentication is that everyone is unique and an individual can be identified by
his or her intrinsic physical or behavioral traits.

Biometric verification becoming common

Authentication by biometric verification is becoming increasingly common in corporate and public security
systems, consumer electronics, and point-of-sale applications. In addition to security, the driving force behind
biometric verification has been convenience, as there are no passwords to remember or security tokens to carry.
Measuring someone’s gait doesn’t even require contact with the person.

Biometric devices, such as fingerprint readers, consist of:

• A reader or scanning device.
• Software that converts the scanned information into digital form and compares match points.
• A database that stores the biometric data for comparison.

Physiological Biometrics

Physiological biometrics take an individual’s physical characteristics as an input to recognize identity.

• Fingerprints

This is one of the most commonly used and oldest forms of biometrics and it uses the measurement of your
unique finger ridges to identify an individual. Widely used due to its high accuracy and ease of integration with
devices like smartphones and ATMs.

Advantages: Highly accurate and widely accepted.

Disadvantages: Injuries or worn-out fingerprints can affect accuracy.

• Facial Recognition-Uses facial features, such as the distance between the eyes, jawline, or nose shape, for
identification. Commonly used in mobile payment systems and digital wallets (e.g., Face ID on iPhones).

Advantages: Non-intrusive and can work from a distance.

Disadvantages: Can be affected by changes in appearance, lighting, or facial expressions.

• Finger/hand veins

The blood vessels under the skin of a human finger or hand have a unique pattern (formed by the veins and
vessels that take blood to the heart) and this authentication technology works on the unique pattern formed by
the veins and vessels.
Iris recognition

The color and pattern of the iris vary in individuals. The pattern of the iris and color is different for each
individual. It is the coloured part of the eye with a circular opening circular in the centre. The identity of an
individual can be verified accurately by the biometric devices as they take measurements of the unique muscle
folds in the eye.

Applications: High-security areas, banking, airport security.

Advantages: Extremely accurate and reliable.

Disadvantages: Expensive technology and requires user cooperation for scanning.

Facial recognition

Another commonly used and oldest form of biometrics. This technology requires only a digital camera and
facial recognition software. Facial recognition software takes measurements of the face like the distance
between both eyes, the distance between forehead and cheekbones, etc. Once the data is collected, a
sophisticated algorithm converts it into a facial sign that is encrypted. Facial recognition only requires a digital
camera and facial recognition software.

Voice recognition

This comes under both types of biometric authentication – behavioral and physiological. Physiologically, the
sound emitted by an individual helps in identifying the shape of the vocal tract, such as the nose, mouth, and
trachea. When it comes to the biological side, the pronunciation, variations in tone, movement, etc. are taken
into account. After combining data from both biometric types, a precise vocal signature is created

Applications: Phone banking, virtual assistants, security systems.

Advantages: Convenient and works with devices that have microphones.

Disadvantages: Affected by background noise, illness, or aging of the voice.

DNA matching

DNA matching uses the personal physical sample of an individual with his/her consent and is employed as a
tool for personal identification to authenticate his/her identity. It is the only existing type of biometrics that is
capable of tracing family origin or bloodline. In this method, the personal samples collected include saliva, hair,
semen, and blood that contains which confirms the identity of a person after making a comparison between
other STRs in the database.

Applications: Criminal investigations, forensic analysis.

Advantages: Unmatched accuracy and permanence.
Disadvantages: Time-consuming and invasive; privacy concerns over genetic information.
 Behavioral biometrics

Behavioral biometrics studies and measures behavior patterns or body functions. Here are some of the
behavioral biometric forms:

Gait

Gait refers to a mix of cyclical and coordinated movements that cause a person to move. Human gait is
considered a unique feature to recognize a familiar person. Gate Biometrics maps patterns through computer-
based imaging and then converts the recorded data into an arithmetic problem. This type of biometric is the best
option for large-scale surveillance as it can easily recognize distant people.

Lip movement

Just as a deaf person tracks the movement of the lips to interpret what people are saying, biometric lip
movement authentication analyzes and maps the movements of the muscles around the lips precisely, to identify
if they are following the desired pattern. Such lip motion sensors often ask users to pronounce passwords and
record associated lip movement to facilitate access.

Signature recognition

Analyzes the way a person signs their name, including speed, pressure, and stroke order. This biometric
measures factors such as pressure exerted on the pen, spatial dimensions, and pen stroke in applications (offline
and online). The measurements are tracked by a digital tablet and generate a biometric profile automatically
using the data, for future authentication.

Keystroke

Keystroke Dynamics records the rhythm while entering a password. It measures the time taken to click each
key, the delay between keys, and the number of characters typed in minutes. Keystroke patterns improve
security and take basic passwords to another level.

Advantages of Biometrics

1. High Security and Accuracy- Difficult to forge or duplicate, offering robust protection against fraud.
2. Convenience-Quick and easy authentication, often without needing to remember passwords.
3. Non-Transferable-Biometric traits are unique to each individual, ensuring that access cannot be easily shared
or stolen.
4. Efficiency-Streamlines verification processes in high-security environments, banking, or smartphone access.

Disadvantages of Biometrics

1. Potential for Data Breaches-If biometric data is compromised, it cannot be reset like a password.
2. Cost and Infrastructure-Implementing biometric systems can be expensive, requiring specialized hardware
and software.
3. False Positives/Negatives-Biometric systems may produce errors, such as false rejections or false
acceptances, affecting reliability.
4. Physical Changes-Injuries, aging, or health conditions can alter biometric traits, affecting system
performance.