Are smartphones compromising the security of mobile payments?

As the new iPhone 8 hits the shores of Singapore on 22 September, tech and smartphone enthusiasts are gushing about the new features that the iPhone 8 is said to incorporate. However, much of the discussion is also centered on the new facial recognition system that has been developed for the upcoming iPhone X. Through a combination of light projectors and sensors that take several images of an individual’s facial features, the new system is said to be able to recognize the rightful owner thus unlocking the phone in an instant.

With every new technology that hits mainstream consciousness, there will always be fears that such technologies are too pervasive, or would simply fail. Given that facial recognition would unlock all the functions in the smartphone including Apple Pay, there have been worries that it would compromise the security of mobile payments.

Apple is not alone in the recent technological foray into facial recognition systems. Back in March 2015, Alibaba and Alipay founder Jack Ma demonstrated face recognition enabled payments for Alipay. More recently, Alipay in conjunction with KFC are testing out booths in an outlet in Hangzhou, China, which would allow customers to pay through smiling at a scanning system. Needless to say, questions were raised about the accuracy and security of such payment modes.

To better understand the risks of smartphone-enabled payment methods, it would be good to compare them with the risks inherent in traditional and trusted modes of cashless payments, such as Visa and Master credit cards. In 2016, a survey conducted by electronic banking and payment solutions firm ACI found that Singapore has the sixth highest rate of card fraud globally, with a staggering one in three consumers here falling prey to crime. On the other hand, reports show that Alipay has a fraud rate of just 0.001%.

The reason why mobile payment systems such as WeChat Pay have been relatively successful in preventing fraud cases is due to multiple layers of security embedded within its WeChat payment app. Firstly, in order to pay by WeChat, the user has to enter a personal 6-digit payment passcode. Secondly, when a user loses his phone or suspects that someone has gained access to his WeChat account, the account can be frozen through 3 self-help methods (via phone, desktop or WeChat itself). Thirdly, WeChat claims to employ Big Data behavior analysis to protect its users. When a user confirms a payment, WeChat compares the transaction to previous transaction behavior to detect any suspicious transactions. This real-time security monitoring enables WeChat to block such transactions immediately upon discovery. Lastly and unbeknownst to many people, WeChat Pay has introduced an additional pattern password that can be easily set up by users through using the WeChat payment app.

The lesson here is not that mobile payments through smartphones are totally invincible to fraud. However, when compared to other forms of payments such as credit card, where fraud is easily perpetrated through simply forging a signature, it is clear that mobile payment modes such as WeChat Pay offer much better protection, and the results prove it. As smartphones transition into the era of facial recognition, the technology would have to ensure absolute accuracy. Only then can fears over the security of mobile payments be finally put to rest.

To read more, Your face is your password in China, Straits Time.

To read more, China steps up cellphone security as it becomes world leader in mobile payments, Straits Time.

About FOMO Pay Pte. Ltd

FOMO Pay is an authorized partner of WeChat Pay, Alipay, UnionPay, Baidu Wallet & BestPay in Southeast Asia, and was selected as one of the Top 100 Asian Companies by e27, Top 100 Startups by Red Herring Asia, and Top 8 by DBS’ FinTech Accelerator Program, Top Fintech Startups in Singapore by Fintech Asia. FOMO Pay provides a one-stop solution for local merchants by facilitating payment collection from China market, including Chinese tourists. This comprises of online payment and in-store payment modes. FOMO Pay’s business solution serves clients from a wide range of industries, including the telecom, publishing, tourism and hospitality, F&B, education and retail industries.