India Switching To Digital Mode Of Transaction; Is It Safe?

As per NITI Aayog’s evaluation, the volume of digital transaction surged by 55 per cent in 2016-17, but there is a need for public-private effort to overcome the vulnerabilities of cyber space.

Cash transactions and black money are directly linked since cash leaves no trail behind. According to a recent release by Federation of Indian Chambers of Commerce, National Institution for Transforming India (NITI) Aayog has found that Indians are fast acknowledging this fact and changing for better. As per NITI Aayog’s evaluation, the volume of digital payments saw a 55 per cent growth in 2016-17.

This growth rate is almost double of what we saw in 2015-16. According to NITI Aayog, the outstanding stock of currency in circulation dropped to 8.8 per cent in 2016-17 from around 12 per cent of the gross domestic product (GDP) during 2011-12 to 2015-16.

Pukhraj Singh who played a key role in the setting up of the cyber operations centre of the Indian Government after the 26/11 attacks and is the co-founder of a cyber-intelligence platforms company called Bhujang, told BW Businessworld, “As a technologist, I feel that digital transactions are the most potent catalyst for financial inclusion in an economy where large swathes of the population do not enjoy such access. Especially, with the lack of urban infrastructure in the hinterland, these information superhighways could serve well to those which are at the very bottom of the pyramid.”

Another release by National Payment Corporation of India revealed that the unified payments interface, which allows money transfer from one bank account to another, crossed 10 million mark in terms of transaction volume in June.

Hitesh Arora, Director Strategy and Customer Advocacy, CRMNEXT told BW Businessworld, “India has been largely a cash dependent economy; this leads the central bank to print cash, which results in incurring high cost and generation of black money. So, if we migrate to digital transactions, we can certainly save on the large part of that money. It would also lead to more accountability and less corruption.”

Electronic transactions are easy to audit and make the job of authorities curbing illegal transactions easier. The trend shows a very positive change for a country like India, which is massively cash dependent. Indian economy has a cash to GDP ratio of around 13 per cent as compared to the global average of 2.5 to 8 per cent.

“The biggest risk going forward is around the safety of digital transactions, however, there is a lot of work and innovations coming up to secure the transactions be it dual authentication, biometrics or digital KYC.  So, as of now the transactions largely are safe and secure, we do not see that much fraud on digital transactions and the technology/process would evolve further to strengthen the security in the coming days,” Arora added.

The incumbent government has been trying to push digital transactions with various initiatives. Even Pradhan Mantri Jan-Dhan Yojana, whose primary motive is to encircle more and more people under organized banking structure also helps in providing direct, cashless subsidies. The demonetisation scheme also helped in pushing millions of new users onto the country’s digital economic grid.

“I think the government has taken some bold steps to usher in the digital financial revolution. We are one of the most promising online retail markets in the world and the government has made sure that the financial systems are geared to keep up with its pace,” Singh added.

However, the safety of digital transaction is still an issue in the country. Parag Khurana, Managing Director, India and SAARC region for F5, a cyber-services provider company told BW Businessworld, “Digital transactions in India need to be secured further. We understand there is a huge gap of security experts in the country. We’re launching something called Security Incident Response Team (SIRT) in the country and it is available to every customer of ours, using our platform. They are a group of security professionals who are available to look at attacks. They can get on a call with customers to investigate, help and give recommendations for both short-term and the long term period.”

Singh explained the cyberspace vulnerabilities giving reference of previous cases saying, “Online financial networks lurk with wily state and non-state actors. While for some, the motivation is mere money – like in the case of a multi-million dollar cyber-heist in Bangladesh. But most alarming is the part where foreign agencies use it as a tool for covert intelligence gathering. With the recent revelations regarding the deep intrusions on the Middle East’s SWIFT and other financial networks, the larger fear was that whether this unhindered access was used to rig the economies at some level. That is really, really scary – with the possibility of it happening to be highly likely. This is where cyberspace becomes a conduit for next-gen economic warfare.”

Arora sees a constant upgrade to better technology as a way to out to bypass cyber threats. He said, “There has to be a constant effort and investment by organizations for leveraging innovation and timely updating existing platforms; however this could be the bone of contention with business priorities. The large impact of recent cyber-attacks was also mainly on old versions of OS/environments. So, the faster we migrate to newer / modern technology, the more we reduce the risk of unsafe digital transactions.”

Terming safe digital transactions the as most defining challenge of the information-driven 21st century, Singh said, “It requires a phased roadmap which blends in the policy, legal, geopolitical and technological aspects of cyber security – steered by a public-private initiative. Lessons can be learned from the enormous contributions of the Financial Services – Information Sharing & Analysis Center (FS-ISAC), which is credited with bringing revolutionary standards and legislation to the American financial ecosystem.”

In the wake of recent cyber-attacks like Petya and WannCry where ransom was demanded in form of crypto currency, the world realized the urgency to develop proper mechanisms for transactions in it. “Crypto currency will take time to become handy just like the plastic cards. It needs some standardization across industry platforms, just like plastic cards and other payment modes got from the likes of MasterCard, RuPay etc. In the absence of any standardisation or a regulator intervention, the larger potential risk remains of the currency being used for illegal purposes. The future is around less cash and alternate currency, however, how secure, authenticated and regulated it becomes is to see for larger adoption.”

Fewer cash transactions in an economy can help bring down transactions costs, instances of economic offenses and street crime but the government must ensure cyber security as well.