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Myth busting: Are contactless payments safe?

Yehia El Amine



contactless payments

The COVID-19 pandemic has made us more inclined toward digital payments, shying away from the exchange of hard currency due to our newfound hygiene awareness; it is here that contactless payments have quickly become the new norm.

In Europe, Germans are increasingly ditching cash for hygiene reasons, according to Initiative Deutsche Zahlungssysteme e.V, a payment industry organization. In the U.S., more than 50 percent of consumers say they want to stop using cash in favor of debit cards, according to data from California-based Travis Credit Union.

Payment firms are being pushed rapidly into transformation, even as they handle larger transaction volumes, face increased competition and heightened risk factors amplified by COVID-19, according to the World Payments Report 2020 published by Capgemini.

The report predicts that a compound annual growth rate (CAGR) of 12 percent is expected for global non-cash transactions for 2019 to 2023.

Global non-cash transactions surged nearly 14 percent from 2018 to 2019 to reach 708.5 billion transactions, the highest growth rate recorded in the past decade. Asia-Pacific surpassed Europe and North America to become the 2019 non-cash transactions volume leader at 243.6 billion.

The increase was driven by increasing smartphone usage, booming e-commerce, digital wallet adoption and mobile/QR-code payments innovations, led by China, India, and other SE Asian markets (31.1 percent growth).

Last year, nearly 48 percent of in-person Visa transactions were contactless, a figure that is more than likely to rise as an indirect result of the Coronavirus pandemic, Visa reported.

What is a contactless payment?

According to the Secure Technology Alliance (STA), a contactless payment is a payment transaction that does not require physical contact between a consumer’s payment device and a point-of-sale (POS) terminal. 

“The consumer holds a payment device (such as a contactless or dual-interface chip card or mobile device) in close proximity to the terminal (less than 1-2 in. away), and payment account information is transmitted wirelessly, over radio frequency (RF),” STA explained.

The consumer’s contactless payment device can assume a variety of form factors, including cards, Near Field Communication (NFC)-enabled smart phones, and wearables.  Contactless transactions generate a unique code for each transaction.

What are the risks?

However, with any technological advancement, comes a cybersecurity risk.

The main weakness coming out of contactless payments won’t happen in cyberspace but rather in person. Since the payment method doesn’t require a PIN, a lost credit card or stolen device would allow a criminal to have easy access to your account.

Thus, a smartphone without the necessary security features would easily allow hackers to ring up purchases without detection; and because many of these transactions happen without a receipt, it is difficult for the owner to prove the charges were fraudulent.

Contactless credit cards use radio frequency identification (RFID) to transmit the data, and hackers have been successful in making fake scanners or using card skimmers designed to steal data transmitted via RFID.

If a hacker gets the information from the card or wallet, they can create cloned cards. Mobile wallets, on the other hand, rely on near-field communication (NFC) that transmits data within a very close range. 

How are contactless payments safe?

Contactless payments remain one of the most secure ways to conduct financial transactions due to the use of RF technology to send payment account information to the merchant’s POS terminal, instead of requiring the payment card’s chip to be inserted or magnetic stripe to be swiped.

“Contactless payment devices are designed to operate at very short ranges – less than 1-2 inches – so that the consumer needs to make a deliberate effort to present the card or mobile device to the POS reader to initiate the payment transaction,” the report by STA further added.

In parallel, the financial payments industry has designed various layers of security throughout the traditional credit and debit payment systems to protect all parties involved in the payment transaction.

“Most of these protective measures are independent of the technology used to transfer the consumer payment account information from the payment card or device to the merchant POS terminal (i.e., swiping, inserting, or tapping) and are used for EMV chip, magnetic stripe, and contactless transactions,” the report highlighted.

The financial industry uses advanced security technologies both on the contactless device as well as in the processing network and system to prevent fraud. There are different ways financial companies can keep you safe according to the STA:

  • Industry standard encryption: Each contactless device must have its own unique secret key that uses standard encryption technology to generate a unique card verification value, cryptogram or authentication code that exclusively identifies each transaction. No two devices share the same key, and the key is never transmitted.
  • Dynamic data: Every contactless payment transaction includes dynamic data that is unique for that transaction. Stolen or intercepted transaction data can’t be used for other transactions.
  • Authentication: The issuers verify that the contactless payment transaction has a valid card verification value, authentication code or cryptogram before authorizing the transaction. Therefore, at the system level, issuers have the ability to automatically detect and reject any attempt to use the same transaction information more than once.
  • Confidentiality: The processing of contactless payments does not require the use of the actual cardholder name in the transaction. In fact, best practices being used within the industry do not include the cardholder name in the contactless chip.
  • Control: Cardholders control both the transaction and the contactless device throughout the transaction. Cardholders do not have to hand over either a device or their account information to a clerk during a contactless transaction.

The impact of 5G

There is no doubt that the fifth generation of mobile networks will heavily impact the digital payments industry, from faster confirmation speeds, to being able to make larger payments online.

There are four main ways that 5G will impact digital payments according to U.S.-based ISP, Fastmetrics:

  • One-to-one payments: Mobile payments and mobile banking are expected to grow rapidly across the world thanks to the easy access they provide to regions which are out of reach for traditional banking methods.

    With 5G speeding up data up to 3 times as compared to the current 4G network, the overall consumer transaction experience will be improved leading to more and more people relying on mobile payments.

    Even the exchange of a minor sum of money between friends, will take place via mobiles.
  • Contactless and Retail Payments: Facilitated by digital technology, retailers would be able to provide a smarter and more customized payment process to its consumers both online and in-person.

    Due to the high speed connections, consumers would be able to browse through online catalogues. Then apply filters, select, and even try their purchases virtually, before paying for them. All within a matter of minutes. This would lead to a further growth in retail and online payments.
  • Big-Ticket purchases: Purchasing big-ticket items like cars or homes, often require lengthy processes. This can take loan application processing, to credit check and finally loan activation and disbursement.

    5G would help banks combine user data and artificial intelligence in real time to speed-up the end-to-end experience. High resolution streaming capabilities will enable customers to interact with financial consultants giving them more confidence before making any decisions.
  • Transaction Security: 5G will enable the use of multi-modal bio-metric authentication features that rely on different characteristics of a person’s physiology and/or behavior.
    Large amounts of bio-metric data are usually required for authentication. This data then needs to be sent to matching engines which analyze patterns in this data.

With the many technological advancements being developed, it is almost certain that the fourth industrial revolution will change how we make our payments, removing the need for hard currencies as all monetary transactions will switch to numbers on a screen.


Yehia is an investigative journalist and editor with extensive experience in the news industry as well as digital content creation across the board. He strives to bring the human element to his writing.


Are CBDCs the future of monetary systems?

Yehia El Amine




The world is becoming more and more digital as time passes, with finance services championing this transformation, especially with the increasing demand of contactless digital payments swooping in, as the global Covid-19 pandemic magnifies our need for them.

Many central banks around the world are looking to create their own digital currencies (CBDC) to spearhead the changing tides of the financial world.

The initial debate over this topic was sparked when social networking titan Facebook announced that they would be launching their very own Libra cryptocurrency last year.

As many have mistaken CBDCs for cryptocurrencies, they are fundamentally two different things.

According to U.S.-based think tank, Brookings Institution, CBDCs are traditional money, but in digital form; issued and governed by a country’s central bank. By contrast, cryptocurrencies like bitcoin are produced by solving complex math puzzles and governed by disparate online communities instead of a centralized body.

What’s common between both digital currencies, to a varying degree, is that both of them are reliant and based on blockchain technology; blockchain is a distributed ledger technology (DLT) that allows information to be stored globally on thousands of servers.

When two companies are in business together and use cryptocurrency as payment, the agreement forms the “block” in the chain. However, while some brick-and-mortar stores and many businesses do accept Bitcoin as a form of payment, cryptocurrencies are not considered to be legal – CBDCs, on the other hand, would be.

“Unlike central bank money, both traditional and digital, the value of cryptocurrencies is determined entirely by the market, and not influenced by factors such as monetary policy or trade surpluses,” the report by Brookings highlighted.

According to the Bank of International Settlements (BIS), electronic cash is more often than not held and supported by banks or on pre-paid cards paid for in hard currency to represent the numbers on a screen.

In this case, however, CBDCs act as a complete replacement for bank notes and coins all together, shedding away its representation in physical funds.

Many central banks around the world view CBDCs as a more cost-effective and efficient replacement for the traditional payment systems that have been around for decades, in the hopes of reducing transfer and settlement times, which would subsequently spur economic growth on a massive scale.

In parallel, CBDCs are seen as the natural champion that would face off against the rise of private sector issued cryptocurrencies such as Facebook’s Libra.

The fear among central bankers is not targeted toward the highly volatile and inconsistent state of cryptocurrencies, but mainly deals with the private sector’s effect on the financial system that would quickly erode sovereignty over monetary policies.

Many consider that CBDCs could address problems like inefficient payments that cryptocurrencies seek to solve, while maintaining state control over money.

The beauty of CBDCs is their ability to fully digitize the entire monetary system, allowing it to become more efficient with easier access to funds all while being transparent, due to the use of blockchain technology.

The theory goes that due to the CBDCs being centrally controlled, regulated, and backed by local governments, then it would grant them legitimacy, trust, and stability in the eyes of citizens and consumers.

This would also pave the way for better monetary policies to be enacted, allowing them to flow more directly and seamlessly while not being hampered by third parties, which would fuel cashless economies and systems.

CBDCs would allow citizens direct access to their funds via the central bank, or via commercial bank partnerships which would subsequently explode financial inclusion to another level; this is a radical change to the financial system, as people would enjoy secure access to their money merely through a smartphone and an Internet connection.

As the notion of CBDCs is still in its infancy, African countries such as Ghana and Rwanda are spearheading research and investigation into the potential use and investment into digital currencies in an attempt to provide financial support to its huge unbanked population.

While most countries are still in the research stages, France has already piloted a CBDC transaction, and Sweden is currently carrying out a one-year trial of the new e-krona, built on the Corda DLT platform.

Be that as it may, central bank digital currencies still need years of development to reach the mainstream, but the sooner banks and financial services can anticipate and prepare for the move, the sooner a seamless transition can be made.

However, one need not forget the barriers that come along with any digital transformation, from policy and regulations to the greater risk of cybersecurity.

If the central banks of the world are able to quickly adapt to the changing tides and fully support this transition, then humanity would be heading toward a new dawn of a more democratized monetary system all together.

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Is Blockchain-powered FinTech the future of finance?

Yehia El Amine



Blockchain and Fintech

Imagine yourself as a bank executive, competing against a global, multi-service, low-cost, digital bank; customers checking their accounts via smartphones, paying bills or transferring money with a swipe of finger.

An AI-powered engine allows them to play around with their ETF portfolios with absolutely no fees, or cross-border payments.

Take a moment to consider facing a competitor with a nimble footprint, prototyping new services quickly, managing regulatory compliance transparently, using an AI system to limit fraud losses, and hedging currency risk using cryptocurrencies.

While this competitor does not actually exist today, the financial services industry is well on its way to transforming this not-so distant dream into reality, due to the disruptive technologies that have changed the playing field.

While many banks lean on their IT departments to spearhead efforts of innovation, and support legacy systems in parallel, the FinTech sector are leading the innovative line with user-friendly solutions developed from the ground up.

The pace of change shows no signs of slowing down; and the main driving force of this hike is blockchain.

According to a report by Market Data Forecast, the global FinTech market is foreseen to expand from $1.23 billion in 2020 to $9.2 billion in 2025, with a stunning growth rate (CAGR) of 75.9 percent.

“The recent Covid-19 outbreak has highlighted the demand for digital transformation in the banking sector as people are forced to use online services and limit their visits to the bank,” the report said, adding that “for this reason, most of the banking companies are collaborating with financial tech providers to offer differentiated and competitive services, since the digital customer experience will be the main competitive advantage and is expected to drive the market.”

But before we delve deeper into the effects of blockchain on FinTech, we must first define the technology itself.

What is blockchain?

Blockchain is a distributed ledger technology (DLT) that allows information to be stored globally on thousands of servers. When two companies are in business together and use cryptocurrency as payment, the agreement forms the “block” in the chain.

Blockchain links and secures these blocks using cryptography.

The most vital features of the technologies are three-fold:

  • Decentralized – a blockchain-powered network excludes the risks of data being kept centrally by storing it across the network.
  • Distributed ledger is a synchronized database and accessible across various locations and geographies by multiple participants. Each of the computers in the distributed network holds a copy of the ledger to guarantee transparency and prevent a single point of failure (SPOF).
  • Immutable record – all blockchain networks follow a particular protocol for validating new blocks. Once registered, the data in any block can’t be changed without altering all the following blocks, which requires the network’s consent.

These attributes extend far beyond economics but are ideal for what FinTech hopes to achieve and accomplish within the financial services industry. In parallel to that, blockchain-powered FinTech applications can resolve the issue of trust between two transacting parties operating on equal term.

Between bulletproof identity authentication protocols and smart contracts, blockchain is considered one of the most secure environments on the market.

Blockchain in the FinTech landscape

Blockchain offers a more seamless, effective, and transparent alternative to the legacy systems currently in place, mainly catered around the concept of fairness and decentralization, which likely creates the perfect financial storm to revamp the financial industry as a whole.

  • Eliminating the middleman

 What usually takes regular banks three to five business days to process fund transfers due to all the necessary hoops and protocols needed, would take blockchain-powered FinTech apps minutes to complete.

Not only that, but these applications can grant users real-time data updating features that paints a clear and error-free picture of the transactions being made.

  • Smart contracts

According to StartUs Insights, Smart contracts that are embedded into a blockchain does not rely on a centralized stakeholder for hosting and controlling, which eliminates chances of data manipulation and/or conflicts of interests.

“Any attempts to modify the contract or its contacts will be automatically corrected by other blockchain nodes, making it too expensive and nearly impossible to tamper with the agreement,” the report by StartUs Insights highlighted.

An example of this can be seen through a collaboration between Credit Suisse and a startup called Synaps a joint initiative by Symbiont and Ipreo, which focuses on automating and improving the global loan syndicate market using blockchain-based smart contracts.

The collaboration is developing a solution for easing the process of arranging, signing, and executing syndicated loan agreements.

  • Lowering transaction costs

It comes as no surprise that banks are making fortunes through transactional fees, as financial regulators are still cashing in by essentially permitting customers to use their own money.

When blockchain firmly steps into the mix, this cost will drastically plummet, due to their ability to grant users direct, peer-to-peer transactions, unshackling customers from all intermediaries.

An example of this can be seen through a startup called Request Network, which has developed a solution for not only directly sending and receiving money but also for paying and issuing invoices, for businesses to accept money for online payments, as well as for cities and governments to be more transparent and allowing citizens to monitor their transactions.

  • Finance beyond borders

The beauty of blockchain is that it’s entirely based on the Internet; shedding away the need for any operational setup and the need to tie into any local regulation or entity. One only needs a private account to begin using it.

This frees customers from the parameters set forth by banks to make transactions, paving the way for more decentralized systems that would allow global transactions to happen while only needing Internet access.

  • Fair and transparent regulations & auditing

The mainstream use of blockchain within the FinTech sector would enable developers to create the most concise auditing protocols.

According to U.S.-based software company TheBlockBox, a blockchain functions as a storage of linear blocks that adds a new entry for every new action, but it never tampers with old blocks no matter how big the system gets.

“This can provide all the data needed to conduct a quick and secure audit of transactions, which is precisely why transparency is something experts hail as the main upside of blockchain networks,” the TheBlockBox report explained.

While the hype behind blockchain-powered FinTech is alive and well, the industry is still relatively nascent especially for decentralized networks to become a mainstream financial model.

The model goes completely against the tide of the financial industry today, thus making it a more radical approach to an already hyper competitive industry.

However, with the current technological advancements making strides every day, we should see the technology starting to attract the ears and eyes of the many in no time.

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KSA among top 20 FinTech ecosystems worldwide

Inside Telecom Staff



KSA among top 20 FinTech ecosystems worldwide

Saudi Arabia’s capital city, Riyadh, has been named one of the top 20 cities to watch for its high achievement and development within the FinTech space worldwide, according to a report by research organization Startup Genome.

Bahrain and Riyadh were the only GCC-based countries that were mentioned in the report, with Silicone Valley, New York, London, Singapore, and Beijing topping the charts.

Startup Genome analyzed dozens of countries across the globe based on factors including funding, exits, talent and focus, as well as the impact of ecosystem players such as policymakers and founders.

According to the report, the Kingdom enjoyed heavy support from Saudi-based logistics firms, which subsequently received 65 percent of all startup funding during 2020.

In parallel, EdTech was also a growing sector within the country, accounting for 11 percent of total funding mainly due to the COVID-19 pandemic’s heavy emphasis on the need for distance learning applications and platforms.

“Since 2019, there has been a 352 percent increase in smartphone payment transactions and a threefold increase in the number of fintech startups setting up in the Kingdom,” the report highlighted regarding the Saudi FinTech ecosystem.

In addition, Saudi Arabia’s government played a big role within the startup scene, as the report noted that international entrepreneurs can obtain an entrepreneurship license, with 100 percent ownership of their company, in under three hours.

Venture capitalists have found a home within the Kingdom, as the Ministry of Investments granted 15 licenses for VCs to setup shop within the country, receiving help from Saudi Arabia’s Venture Capital and Private Equity Association and the General Authority for Small and Medium Enterprises “Monshaat.”

Saudi Arabia’s technological rise is indicative of a growing and flexible economy that aims to cement itself as a global startup hub, reflecting the goal of the Kingdom’s Vision 2030 strategy.

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