What is a Digital Wallet?| DROP Organization
In the digital era, digital wallets have become a popular means of convenient and secure way to make payments. However, with this increased popularity, digital wallet fraud has also become a growing issue. This paves way for the need for individuals and organizations to understand the risks involved and take relevant steps to protect personal and financial information from being compromised. The integration of digital wallets with our daily lives has brought a great change into our lives. The immense benefits such as its use, along with enhanced security features has ushered in a new era of financial convenience. However, digital wallets like Apple Pay, Google Pay and PayPal can be used to conduct transactions using stolen and cancelled payment cards. What is a Digital Wallet? A digital wallet, also known as an e-wallet or mobile wallet, is an advanced and user-friendly application that has a digital storage space for various payment methods, assisting in seamless financial transactions through mobile devices. It stores payment information like credit and debit card details in safe custody. Digital wallet creates a central hub for managing financial interactions where users can add, edit or remove payment sources. Risks of Digital Wallet There are several risks associated with digital wallet that manifest at both the organizational and individual levels. This has brought the need for more awareness and proactive measures to efficiently counter potential threats that aroused due to the following risks: Organizational Risks Individual Risks Digital Wallet Frauds Digital Wallets like Apple Pay, Google Pay and PayPal can be used to conduct transactions using stolen and cancelled payment cards. The attacker having limited financial information can add an active stolen payment card number to a digital wallet and make purchases, even if the card is cancelled or replaced. This highlights serious flaws in the authentication, authorization and access control mechanisms of major digital wallet apps and US banks. A probable attack scenario goes like, where an attacker steals a credit card from a person. The attacker determines the address of the victim using online databases. Now the attacker tries to add the card in different digital wallets. Any wallet that requires an address or ZIP code for authentication is the suitable one for the attack to proceed. Once the attacker adds the card to their wallet, the cardholder may lock the card or ask the bank to send a replacement. But, this will bring no effect on the attacker’s wallet, and will continue to enjoy access to the card for further transactions. How does Digital Wallet Frauds Occur? How can you stop Digital Wallet Frauds? To stop or prevent digital wallet frauds involves overcoming the obstacles of obscuring the user’s payment credentials. As a merchant, you can ideally identify the individual cards in the wallet and ensure that a user is real. But, outside your own platform, you surely have no control over a wallet and its verification. Below are few option you could consider: From Cash to Code: How AI Powers Digital Wallet Evolution? Digital wallets have transformed the way we handle financial transactions, evolving from simple cash replacements to sophisticated AI-driven financial tools. With artificial intelligence (AI) at the forefront, digital wallets are becoming smarter, more secure, and more user-friendly. The Future of Payments is Hybrid There is a need to maintain a balance between the traditional and digital approach of the payment system. Digital wallets are here to stay, but that does not mean credit cards are obsolete. There must be a mixture of both the methods, such that your credit union can meet the needs of all members. Adopting robust prevention measures is essential. This can ensure secure financial transactions in this fast evolving landscape. Want to start your learning journey on Cyber Security and Ethical Hacking field?