8 Ways AI is Reinventing the Fintech Landscape

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/MicrosoftTeams-image-133-1.webp" alt="M2P Fintech" title="" width="100%" height="358">Did you know?52 million data breaches were recorded in the 2nd quarter of 2022 alone. And the average cost of a data breach hit an all-time high of $4.35 million this year.Since the pandemic, people’s social and financial lives have gone digital. More than 2.5 quintillion bytes of data are generated every second across categories and channels. Imagine this quantum of information falling into the wrong hands due to compromised login credentials, phishing attacks, and cloud misconfigurations. It could expose consumers and businesses to financial loss, reputational damage, operational disruptions, and legal repercussions.As data is one of the most valuable assets a financial organization can possess, securing the data environment from the risk of cyber threats, data breaches, and other attacks is critical.So how can financial companies secure their data environment?Using ISMS.<h2 class="heading-node" id="ljb3adzqe" style="text-align: justify">How ISMS enables a secure environment?</h2>Financial organizations need a robust Information Security Management System (ISMS) to avoid threats and secure sensitive data. ISO 27001 &amp; ISO 22301 certifications are imperative to ensure data environments are secure without data exfiltration and unauthorized data manipulation. ISMS compliance prevents financial penalties, reputation loss, and legal and regulatory non-compliance.<h2 class="heading-node" id="8nwndysxz" style="text-align: justify">What is ISMS?</h2>ISMS is a framework that improves data security by protecting all forms of information, viz., digital, paper-based, and other cloud devices. It establishes a systematic approach that maintains an organization’s confidentiality, integrity, and availability.<ul class="list-node" id="pogyjzt23"><li>Confidentiality- ensuring the right access control</li><li>Integrity -keeping data complete and accurate at all times</li><li>Availability -making sure data is accessible anytime as required</li></ul>The ISMS framework comprises policies, processes, and controls that protect organization data and increase attack resilience. Businesses can leverage their risk analysis approach to reduce costs associated with adding layers of defense technology that might not always work.<h2 class="heading-node" id="jmwuobn5t" style="text-align: justify">Avert security threats with ISO 27001&nbsp;standard</h2>Security threats apply not just to IT assets. Non-IT data sets are under significant threat too. Financial companies need to be proactive with ISO 27001 compliance to secure all data assets, manage data privacy and integrity and ensure customer confidence.ISO 27001 is a security management standard that helps an organization manage risk factors that may include procedures, policies, and staff training. The international standard ISO/IEC 27001 comprises guidelines jointly established by the International Electrotechnical Commission (IEC) and International Organization for Standardization (ISO).The ISO 27001 standard relies a lot on regular risk assessments. These assessments ensure that the organization is so prepared and secure, that when threats appear, all the appropriate measures are already laid out. The ISO 27001 standard encompasses deep risk assessment processes, information classification, organizational structuring, monitoring and reporting guidelines, information security policies, and access control mechanisms, among other procedures.<h2 class="heading-node" id="q2yipzw0r" style="text-align: justify">Combat disruptions with ISO 22301&nbsp;standard</h2>In case of untoward incidents and natural disasters, there is often little or no time for businesses to prepare a proper response. This leads to disruption between people, processes, networks, and infrastructure.Financial companies need to combat data attacks during unexpected times to stay out of financial loss, secure customer confidence, manage customer loyalty and operate their business smoothly. This is precisely what ISO 22301 solves for. ISO 22301 mitigates risks and helps an organization tide over vulnerabilities.ISO 22301 is a global standard published by the International Organization for Standardization (ISO) for Business Continuity Management Systems (BCMS). This business continuity management standard helps an organization identify threats, respond to them, and recover quickly with the least disruption to their business.<h2 class="heading-node" id="md4logi7j" style="text-align: justify">Top-notch data security, our priority</h2>Certified under ISO 27001 and ISO 22301 standards, we prioritize data environment security to defend against cyber-attacks, data breaches, and other risks. We are accredited to deliver products that are embedded with top-notch security and operational excellence.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Securing Data Environments with ISMS

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner1251-7.webp" alt="M2P Fintech" title="" id="47w9r0aue" width="100%" height="447">Over the past few years, we have been witnessing ongoing digital advancements, ranging from communication to the way we transact. Out of these advancements, cashless transactions are reigning supreme and are further fueled by this raging pandemic. They have taken over traditional payments and banking practices.Also, there is a multitude of payment options available today. Major players such as Google Pay, Apple Pay, PayPal have access to sensitive user data stored across international servers. These actions led to many raising their voice about user data security and privacy.Being a global concern, RBI brought forth the concept of Data Localization to protect user data from potential threats.<h2 class="heading-node" id="909f" style="text-align: justify">What is data localization?</h2>Data protection created a buzz way back in 1993 when Public Records Act ensures the data transfer is restricted outside India for security purposes from surveillance of other countries.<blockquote class="block-node" id="gvz0ve27e">Data localization is the act of storing citizens’ data within the country’s geographical boundaries to avoid any foreign accessibility.</blockquote>It also plays a crucial part in the government’s cloud computing policy.<h2 class="heading-node" id="a1d6" style="text-align: justify">RBI guidelines on the data localization Policy</h2>Reserve Bank of India (RBI) issued a circular dated April 6, 2018, stating that all authorized Payment System Operators (PSOs) in India to ensure that the data related to payment systems such as customer data, payment sensitive data, payment credentials, and transaction data should be mandatorily stored within India itself under the Payment and Settlement Systems Act, 2007.A deadline of six months was tagged along with the data localization policy. Since the payment ecosystem has ballooned in the last few years, RBI was pushed to undertake this crucial step in protecting consumers’ data.All payment firms, including American Express, Master Card/Visa, PayPal, Google Pay, WhatsApp Pay, Paytm, and Phone Pe, should adhere to the RBI’s data localization rule. Subsequently, RBI insisted system providers for unfettered access to all data on complete end-to-end transaction details/information collected/carried/processed as part of the message/payment instruction by submitting Audit Report (SAR) conducted by CERT-IN.<h2 class="heading-node" id="b109" style="text-align: justify">As per RBI’s data localization policy...</h2><ol class="list-node" id="2v2w7zt70"><li>There is no bar on payment processing outside the country, but post-processing, the data should be deleted from the foreign systems and brought back to India not later than the one business day or 24 hours from payment processing, whichever is earlier. The same should be stored only in India.</li><li>However, any subsequent activity such as settlement processing after payment processing, if done outside India, shall also be undertaken/performed on a near real-time basis by storing it only in India.</li><li>In case of any other related processing activity, such as chargeback, etc., the data can be accessed, at any time, from India, where it is stored.</li><li>RBI’s prior approval is necessary for sharing the payment system data with overseas regulators.</li><li>The banks operating in India must strictly adhere to the storage norms.</li><li>Exceptionally, a foreign leg of a transaction is permitted to store their banking data abroad. However, the domestic payment transactions should be stored only in India along with the details which include end-to-end transaction, payment, and settlement transactions — customer name, mobile number, e-mail address, Aadhar card number or PAN, beneficiary details, and payment credentials like One Time Password (OTP), PIN and passwords.</li><li>For cross-border transactions that include data with a foreign and domestic component, a copy of the domestic component may be stored abroad, if required.</li><li>System providers were given six months to ensure the directive’s compliance and report the same to RBI.</li></ol><img src="https://miro.medium.com/max/700/1*UWIdZTi2f31G70qkfQJqLw.png" alt="An image representing the RBI Data Localisation Policy" title="" width="100%" height="349">The RBI guidelines on storing payments data provoked a noteworthy impact on Payment System Operators. Indian payment firms, viz. Paytm, PhonePe, and MobiKwik backed the RBI regulations on data localization policy in protecting citizens’ data and restricting any foreign accessibility.But the representatives of top leading companies such as Amazon, Flipkart, Google, Microsoft, Facebook, and American Express met with government and RBI officials to raise concerns regarding the stringent nature of this policy (2019).Later the Indian government took the responsibility to determine the category of data to be stored locally. This categorization ensured that the data is not misused by various companies, which involves transferring it to third-party providers.<h2 class="heading-node" id="f733" style="text-align: justify">Personal data protection bill</h2>The Personal Data Protection Bill (PDP Bill) applies to the processing of personal data by the companies registered in India, foreign companies dealing with personal data of individuals in India, and the Indian Government. The PDP bill categorizes the collected data into three categories:<ul class="list-node" id="0gtvgf1gh"><li>Personal data,</li><li>Sensitive personal data and</li><li>Critical personal data.</li></ul>The PDP bill is not applicable for the processing of anonymous data.The PDP bill proposed to store sensitive personal data and critical personal data in India. However, it permits the processing of sensitive personal data by transferring it to outside of India in certain cases provided that at least a copy of that data continues to be stored in India and explicit consent is needed for the same. Whereas critical personal data can only be stored and processed within India.<h2 class="heading-node" id="e7e0" style="text-align: justify">The impact on payment industries</h2>Multinational payment systems located in India faced a major impact after the RBI’s intervention on Data Localization. Popular foreign credit card companies such as Visa and Mastercard missed the strict six-month deadline set by the RBI (2019). Usually, International payment companies store their data on global servers, but this rule made them store data locally with an additional investment.India is the fastest-growing market for mobile apps and digital banking. The Indian start-up companies in the FinTech sector often go through the toughest challenge of outsourcing technical support and shifting from cloud services to cheaper and cost-effective services.Data Localization Policy will prohibit these start-ups from opting for cost-effective cloud service providers globally and choose localized alternatives, which ends in high operational costs. But this will be a fruitful drift that leads to shielding of payments data from identity fraud and other digital breaches associated with it.<h2 class="heading-node" id="3200" style="text-align: justify">The current scenario</h2>RBI reiterated its stand on data privacy by issuing a circular stating that from April 1, 2021, all Payment system operators to submit a compliance certificate duly signed by their CEOs or Managing Directors on a half-yearly basis adhering to the RBI’s regulations on securing payments data.This again triggered an active interest in RBI’s continuous intervention on securing and continuously monitoring the data to avoid any future risks to the country. With the advancements in the digital economy, financial data security is a must for the country’s economic growth and development.Want to know more about data localization? Write to us at business@m2pfintech.com<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Decrypting RBI Data Localization Policy for Payment Companies

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner-1-1.webp" alt="M2P Fintech" title="" width="100%" height="358">Payment Tokenization — One technology to make all the stakeholders of digital transactions happy!<blockquote class="block-node" id="pcv6p2tv7">“Tokenization market worth is estimated to be $4.8 Billion by 2025.”-&nbsp;Markets and Markets</blockquote>Simply put, the word “Tokenize” means substituting, and it is an ingenious concept introduced in 2005 by Shift4payments to protect cardholder data. It factored in data security at its core and is now a popular term due to the surge in online transactions.In fact, a token is a concept that has been long around; for example, the coins that we buy in the gaming arcade or a casino have no value outside the premises. But inside the building, you get to buy your stakes or favorite superhero toy. Likewise, tokens replace or mask the sensitive data in the online transaction by replacing it with random alphanumeric characters.By enabling payment tokenization, the merchants and networks can move data without the hovering threat of payments fraud or identity theft. Tokenization helps in finding a perfect balance between “data security” and “user experience.”<h2 class="heading-node" id="5806" style="text-align: justify">What is ‘Tokenization’ in payments?</h2>In the world of payments, the card account number is masked by a single-use randomized alphanumeric character of the same length. This camouflage is called tokenization in payments. Meaning, each account number is now a ‘Token’ representing the original confidential information. In contrast, the actual data is stored safely in a digital token vault.It is also referred to as ‘Credit Card tokenization’&nbsp;interchangeably. It helps in removing the credit card information from the internal network or database. The concept is more popular with <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit cards</a> as it involves a higher magnitude of the fraud.<h2 class="heading-node" id="8f6f" style="text-align: justify">Why do we need Payment tokenization?</h2>Pandemic fostered digital transactions at a faster pace than ever before indeed. As there is an increase in digital commerce, businesses came up with enhanced solutions that facilitated online transactions to confront consumer preferences.Improved digital transactions put security under question. While the consumers are worried about their sensitive data being visible to many online platforms, the merchants fret about losing loyal customers.‘Tokens — the trustworthy representatives,’ alleviates these roadblocks effectively as the original data (ex: credit card number) never reaches the merchant’s server. The merchants enjoy retaining the customers without compromising the reputation while staying <a class="link" href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/">PCI-DSS</a> (Payment Card Industry Data Security Standard) compliant.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/int.webp" alt="M2P Fintech" title="" id="92tjhlk3p" width="100%" height="358"><h2 class="heading-node" id="aa74" style="text-align: justify">How does Payment Tokenization/Credit Card tokenization work in action?</h2>Tokenization is not a costlier technology as it sounds. Any organization can adopt it irrespective of the structure and size. It is ideal for organizations that cannot afford to spend more on sophisticated encryption algorithms or infrastructure to secure the data.Let’s see an example,<ul class="list-node" id="a9ehiej48"><li>Sara orders a pair of sports shoes on Amazon. After choosing all her preferences, she reaches the payment section.</li><li>She enters the sensitive data on the portal (credit card number, cardholder name, etc.)</li><li>This goes straight to the tokenization server without storing any data in the amazon application’s server</li><li>There are many tokenization providers in the market like Fiserv, Mastercard, American Express, TokenEx, 3D Delta Systems, Meawallet, etc.</li><li>Then it reaches the token vault, where the original data is secure. It, in turn, returns a&nbsp;token&nbsp;of randomized alphanumeric representation of the same length.</li><li>This has no relation to the original data, like in the typical&nbsp;‘data encryption&nbsp;process. The actual data is contained within the ciphered text. Tokens are, in general, generated by mathematical algorithms.</li><li>This token is now passed to the merchant’s acquirer bank, and this bank passes the token to the credit card network.</li><li>Then the card network processes the token and maps it to the customer’s account number, authorizes and passes it to the issuing bank.</li><li>The issuer bank now authorizes or denies the transaction based on the fund balance.</li><li>After the successful transaction, a unique token returns to the merchant.</li><li>Amazon now has no record of Sara’s sensitive original information but her tokens. In this way, Amazon can enable Sara to make one-click payments the next time she shops.</li></ul>It is evident that&nbsp;tokenization checks all the mandates of refined digital transactions. Sara is now happy with her brand-new sports shoes while securing her data in the vault. Getting the data from the vault is not an easy piece of cake. It requires multiple authentication levels, service charges, etc., to verify if a trusted party raised it.<h2 class="heading-node" id="4357" style="text-align: justify">Then it also brings forth the question is Tokenization and Encryption one and the same?</h2>The answer is definitely no.The tokenized data cannot be reversed to reveal the original card number. In contrast, encryption takes a card number, transforms it into ciphertext by running it through an algorithm. To unlock the ciphertext, it has to be decrypted using an encryption key.On the other hand, tokenization uses no algorithm or requires a key to unlock the original data.<h2 class="heading-node" id="b70f" style="text-align: justify">Does Credit Card Tokenization impact a change in the payment process?</h2>No.The end-user will not find any difference in their transactions even after the implementation of tokenization. The entire process happens at the backend without intervening in the user experience. Tokens are generated online and eliminate the need to wait.<h2 class="heading-node" id="744e" style="text-align: justify">Why is Payment Tokenization a ‘Fintech Asset’?</h2>The boom of technology in the Financial services domain has been rapid in the past decade. Card-less transactions, <a class="link" href="https://m2pfintech.com/blog/remittance-with-upi-a-giant-leap-for-cross-border-payments/">UPI payments</a>, <a class="link" href="https://m2pfintech.com/blog/what-is-a-payment-gateway-and-payment-switch-understanding-the-basics-of-payments-architecture/">Payment Gateways</a>, etc., increases online consumers each day. As we enjoy the perks of digital banking with one-click transactions, we cannot deny the fact that our data is vulnerable to “Social Engineering.”Social Engineering is everywhere. We may fall into the trap of hackers and leave a lot of confidential information during digital transactions. There are multiple intrusion points for the hackers to lure in when the transactions float over the network and wipe away our savings.Given this scenario, tokenization is indeed an asset to Fintech. Because even if a hacker tries to sneak into the network, all he can find is randomized alphanumeric and characters with no relation to the original data (PAN number, credit card number, etc.)It is expensive for merchants to become <a class="link" href="https://m2pfintech.com/blog/pci-dss-a-quick-guide-to-its-levels/">PCI DSS</a> compliant and qualify themselves as a trustworthy eCommerce merchant for the consumers. They have to undergo a lengthy auditing process, and it is an ongoing process. With the help of&nbsp;‘Tokenization,’&nbsp;merchants can save a hefty amount of money as the scope of <a class="link" href="https://m2pfintech.com/blog/pci-dss-the-payments-armour/">PCI DSS</a> compliance is reduced in storing the user’s confidential information.Apart from banking,&nbsp;‘credit card tokenization’&nbsp;builds confidence among the investors as it secures the money with ease. We could see the boom of Blockchain technology-based fintech solutions gaining momentum across the nations.&nbsp;“Tokenization”&nbsp;is also seen as the key to drive blockchain implementation in the future by accompanying cryptocurrency transactions.Finally, it also offers substantial benefits to all stakeholders involved in the transaction:<ul class="list-node" id="nexhxh9e5"><li>Issuers witness a notable decrease in payment fraud in both channels of online and mobile transactions.</li><li>Acquirers, merchants, and processors experience a lower risk of accessible, sensitive cardholder data if compromised by cyber attacks.</li><li>Merchants will wield a powerful mechanism that lets them innovate better retail experiences minus the responsibility of storing and handling sensitive data.</li><li>Customers need not enter their details every time they make an online purchase from smartphones, tablets, or PCs.</li></ul>Payments tokenization makes all the parties — consumers; merchants; payment gateway providers, banking institutions, regulatory bodies feel safe, secure, and happy with their buying and selling processes.Tokenizing confidential data makes way for turbulence-free secure digital transactions!<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

M2P Blog

Tag: "Data (4)"

8 Ways AI is Reinventing the Fintech Landscape

Securing Data Environments with ISMS

Decrypting RBI Data Localization Policy for Payment Companies

How Does Payment Tokenization Work?

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