This is Part 2 of the “Payments Pain Points” blog series. This installment is in partnership with AeroPay, a mobile payments company based in Chicago, and Plaid, a financial technology company based in San Francisco.
by Alex Lipnik, Sales and Partnerships @ AeroPay
While payment methods have changed over time—from bartering to metal coins to the current landscape of paper money and credit cards—one aspect has remained constant: regard for security. There are certain risks associated with every available form of payment and this holds true for both merchants and consumers.
Technological advances have rapidly advanced the innovation around payments security, but never enough to eliminate all concerns related to payment security.
Nonetheless, fintech startups, and more specifically mobile payments companies, are working tirelessly to address these concerns and build confidence around the future of payments.
Lost and (Not) Found
One of the most obvious security risks that exists in the world of payments relates to cash. The ability for cash to be lost or stolen proves to be a real liability for businesses and consumers alike.
For consumers, this may present only an occasional inconvenience. But for merchants, this is an enormous issue—amounting to nearly $40 billion in annual losses. This type of impact can be especially detrimental on local businesses. Small restaurants and independent retailers already operate with razor-thin margins and constantly fight to maintain and even increase their business’ profits.
Don’t Be a Fraud
A more prevalent problem in payments revolves around card infrastructure. Much like cash, consumers’ cards (either the physical card itself or simply the card number) can be lost or stolen. Unlike cash, cards can also be hacked leading to many additional problems such as:
- Credit Card Fraud
- Identity Theft
- Unauthorized Charges
On the merchant side of the equation, all of these issues continue to persist–in addition to chargebacks–despite the great strides that have been made to ensure a more secure transaction. Chargebacks, a reversal of funds back from a merchant to a consumer, can oftentimes be improperly disputed by the consumer. This causes the merchants to eat the cost of the sale for which the funds are being sent back and to be charged an additional fee by the credit card companies for this transaction. Chargebacks can come at a significant cost to merchants—close to $4 billion annually for small businesses.
Mobilizing a Future for Safer Payments
As security concerns have become clearer with traditional payment methods, the door has opened for innovative companies in the payments space to emerge. What is particularly unique within the fintech community is the ability for companies to work together to find better solutions to these problems. Such is the case with the partnership between AeroPay, Dwolla and Plaid, and the approach to payments security.
Before consumers or merchants can use AeroPay to make or accept payments, the platform runs a series of initial security checks leveraging the partnerships with Dwolla and Plaid.
On the consumer side, AeroPay leverages Plaid for instant bank account verification when a new user creates an account. Plaid uses globally accepted security controls like strong encryption and multi-factor authentication to protect consumer data. All interactions between the user, Plaid and AeroPay happen over encrypted HTTPS tunnels.
For merchants, AeroPay has partnered with Dwolla to ensure businesses are in good standing at the time of account creation. This includes running Know Your Customer (KYC) and Anti Money Laundering (AML) checks. Sensitive data actively moving between the Dwolla platform and applications initiating payments use Transport Layer Security (TLS). Dwolla prides itself on practicing iterative security–constantly evolving its security solutions to protect its systems and data.
With all the threats and new apps out there, security is a top priority for AeroPay. Beyond the measures taken during account setup for both consumers and merchants, AeroPay has built in countless additional security features.
For starters, AeroPay enables the latest techniques in mobile application authentication with biometric scanning and PIN codes to provide an up-front layer of security for both consumer and merchant accounts at login.
During the payment experience, merchants are given control to request the payment amount. Consumers are then able to see that amount and verify it is correct before completing the payment. This feature was built to make the confirmation of the payment amount front and center to help eliminate the incorrect or inaccurate charges that frequently lead to chargebacks.
As for the payments themselves, AeroPay keeps payments safe with a patent-pending security model, which uses a series of unique variables to encrypt every transaction by time and place. These encrypted transactions are unique in the sense that they expire quickly, only allowing them to be transmitted within a specific time frame before expiring.
The AeroPay platform was designed exclusively to facilitate payments between a business and a consumer–nothing more. After payments are completed between the two users, the application doesn’t allow for money to be sent out of an account for the benefit of the consumer or the merchant. This helps build trust around the payment experience that has been built for users and confidence that AeroPay is being thoughtful with our approach to these types of payments.
Security in payments should be considered at every aspect of the user’s journey. AeroPay, along with its partners, is committed to that consideration.