With the invention of the Internet, the rise of technology and bring your own devices, it has revolutionized the human society forever in terms of creating a new environment to do existing activities in a more efficient way. Realising the importance of this, banks have also made their presence online, giving their clients’ the ability to monitor their assets and conduct transactions via mobile banking applications anywhere, anytime as long as the Internet is present. Almost every shop, every supermarket has a mobile payment system now, payment is simply done with a tap. This document will discuss why online payments are getting more and more popular, factors that are still holding people back from going online and rather stay with cash and finally, whether a cashless society can become a reality. The Internet have been changing everything the way people have been doing things. As of this date, if a person has access to the Internet, most likely he or she will get involved, more or less, in online banking. There is no deniability that it has brought comfortability and flexibility on managing finances, but concerns about security, malware infiltration and identity theft are what is holding some users from giving up on cash. However, as more banks are aware and investing more in cybersecurity and having insurance, they are confident in keeping up with the digital trend and provide their clients with the best services possible and making their experiences more convenient by the day.
With the rise of the Internet, computers and mobile devices, never before have mankind witnessed so much innovation and life-changing inventions for just over the past 40 years. This includes an increase in online banking and e-commerce, more and more people are doing shopping online or doing traditional shopping but making payment via mobile phones. To demonstrate how game changing online banking can be, here are some statistics as of 2019:
- There are 4.4 billion people, in the world have access to the Internet
- And within those 4.4 billion Internet users, 2.8 billion people (over 60%) use e-commerce as a mean to purchase goods (Kemp, S 2019)
This is an area filled with potentials and opportunities for financial institutions to improve and expand their services. However, it can also become a gold mine for looters to target. People are familiar with IT and cybersecurity, however not everyone can understand the importance of safety and how-to setup proper security protocols, this allows hackers and scammers to take advantage of the situation and rob away the users’ assets. This is the major roadblock to get people to fully get rid of cash and upgrade to a new mean of transaction. Any change but include security and insurance to protect those affected by it.
This literature review will gather its ideas and provide its analysis through the use of business journals, graphs and statistics from websites to support the opinions in the paper. All resources mentioned are all recent and not over four years old with the oldest articles were composed in 2015. This is due to technology is constantly changing and any digital trends are only relevant for only a few years before considered out-of-date.
This document will discuss why online payments are getting more and more popular, factors that are still holding people back from going online and rather holding on to their cash. And finally, whether a cashless society can become a reality.
Are online payments getting more popular?
The definition of online payment
To comprehend what is the success and influential factors behind online payment, firstly, it needs to be known what an online payment is. According to Kabir, Saidin and Ahmin (2015), an online payment is an act of transferring currency between two or more parties to purchase goods and services or to pay off a certain expense using the Internet and electronic devices, such as computers and mobile phones instead of cash and cheques. Bezhovski (2016) provided further details of the types of online payments, including:
- Bank cards that are managed online, such as debit card and credit card
- Mobile payment
Why is it replacing the traditional payment methods?
As the technology grows, the invention of smartphone and mobile applications has replaced traditional devices and already made them obsolete: alarm clocks, desk calendar, watches etc. Inevitably, online banking applications are gradually replacing cash and cheques in conducting payments for goods, services and expenses. To be able to influence billions of people, there are a few reasons behind that change:
Almost everyone on Earth today has a smartphone on their hands, with applications that allows them to do everything mentioned above that in the past would require them to own each item in order to accomplish a certain task (Humbani, M & Wiese, M 2017). Online banking applications work the same way. They allow users to:
- View data about their financial figures
- Transfer money to another party
- Set up automatic payments for recurring payments
- Tap on the reader to pay for goods and services when they physically make a transaction
- Link their bank details to other online shopping applications, such as: eBay, Amazon etc., to make payments when shopping online
All those activities stated above, in the past would need to be done separately in person and required some time and effort. But now they are all integrated into one single online platform, in one mobile devices, what is left for the users is just to use the application (Humbani, M & Wiese, M 2017). They can do it anywhere, anytime as long as there is a stable Internet connection, which is a part of their mobile service package anyway.
Swift access to information and expenses management
Mobile phone online banking platform keep a record of all transactions made by users and cash flow analysis, preferably in a monthly basis; from there users can be aware of what they have been spending on and make financial plans for the future. This brings financial management to a whole new level as it reduces the margin error to almost zero because once a payment is made, it is recorded into the system and user can be aware of it (Sharma, S 2016). Unlike in the past where most people would write down every single transaction that was made, this is where human errors tend to come into play because people can forget one a few minor to major transactions, leading to financial deficiency in the long term.
As the money is being held at the bank, there would be no cash for any criminals to target. Because of that, criminals nowadays change their targets to mobile phones as it had replaced everything else that a person may own. Supposably, the illegal possession of the phone was a success, the thieves will need to bypass the following:
- The device’s multiple layers of identity verification like passcode and biometric authentication that would lock the phone and erase all data after failed attempts.
- The same level of authentication within the app
But until they made it through all those roadblocks, users could have changed their passwords, quarantine that device and notify the bank.
For card users, a PIN number will keep anyone at bay for a while. However, before that, the victim can cancel the card or notify the bank, making it unusable and protect their resources.
To sum up, users have more control over their assets, and they should be safe as long as there are user awareness and proper security measures have been setup.
What is holding some people back from embracing online payments and continue with cash
Security breach from the external
Similar to computers, mobile banking applications are not excluded to any exposition to malware infection and targeting from cyber criminals (He, W, Tian, X & Shen, J 2015). Below are some of the most common schemes use by the attackers to exploit vulnerability, breach the security perimeters, gaining access to bank accounts and personal information of the banks’ clients:
- Malware: “Zitmo, Banker, Perkel/Hesperbot, Wrob, bankum, ZertSecurity, DroidDream and Keyloggers” (He, W, Tian, X & Shen, J 2015)
- Trojan virus and rootkits: create a backdoor for the attackers to infiltrate and gain control
- Phasing emails and text messages: the content tends to have a URL that redirects to the hacker’s page and tricking the user to send details to the hacker. (He, W, Tian, X & Shen, J 2015)
- Unsecure public Wi-Fi networks: often the connections are not encrypted, allowing hackers to penetrate (He, W, Tian, X & Shen, J 2015)
- Obsolete mobile app version or mobile operating system: this leads to the lack of latest patches; leaving the device exposed to newer levels of infection
Security breach from the internal
Yaseen (2016) stated that in 2011, based on Cyber Security Watch Survey, of all the cyber-attacks launched on banks, only 21% attacks were coming from people inside the banks comparing to 58% outside the bank. Although there is a huge difference between inside attacks versus outside attacks in terms of frequency, the damage done by insiders can be equally costly or even greater because outsiders can only get their hands on what they can get while insiders basically have access to everything. For example, in a Verizon Business report (Yaseen, Q 2016) stated that “outsiders exposed about 30,000 records, whereas insiders exposed about 375,000 records”. In that case alone, the fallout from insider threat is ten times more serious than outside threats.
The reason behind this is that the people behind it, they already have permission to access user data and information systems as part of their daily tasks. Due to constant exposure, they will be familiar with the system’s strengths and weakness, where and when to target and how to hide any evidence of any breach. The fallout mostly involves money of the bank, its clients and customer information being used for fraudulent purposes. It proves to be much more challenging to setup a proper security perimeter to prevent insiders since comparing to outsiders, it is relatively easy to put up a firewall that detects and block any external traffic. Whereas the people within, they need access to the required to do their jobs, sometimes it can be muddled, and this is one of the exploits where they can snoop around areas where they should not be. Therefore, another defence mechanism needs to be developed to suit this need and not just relying on the already existing but incompatible firewall and corporate policy to keep inside attackers at bay (Yaseen, Q 2016).
There are two major components to make online payment services operational:
- Back end: servers to host the banking platform
- Front end: internet connection from the end users to reach that platform.
Both has to be up and running at all times if users are to access and use their services 24/7. However, nothing is definite and there are times when servers are down due to technical reason such as: a power outage, a cyber-attack, hardware component malfunction, system overload etc. or users’ internet connection are having problems. If either one major component is unavailable, the entire online banking platform will be unavailable. This can affect a lot of users that requires to make transactions or monitoring their assets and investments on that period, creating discontent and a huge loss in customer satisfaction. Although the probability of services being unavailable is very minimal and any maintenance schedules are informed to the customers, mishaps can happen and once is enough. It takes years to build up trust and confidence of a client in a service but only one incident to topple it all.
Can a cashless society become a reality?
Undoubtedly, there are discussion in favour and against of a cashless society, which is shown through the analysis above, however they are in terms of usability and from a user perspective. It needs to be looked further in an economic and social perspective.
Firstly, let’s look at the advantages:
1. Decline in illegal activities: As cash cannot be traced whatsoever, criminals always use cash in transactions, such as:
- Dealing with drugs and weapons
- Money laundering
- Money counterfeiting
- Bank heist
With a cashless society, the listed activities will come to a halt as the end goal: cash, is not there anymore so there is no reason for illegal activities to take place. In addition, online transaction will make sure that all transactions are legal and subjected to public budget through taxation. The possession of cash can lead to fraudulent in income reporting and exploiting government welfare and support services. (Fabris, N 2018)
2. Technological advancement: More banks are applying digital payments and mobile applications as part of their services, plus almost everybody has a smartphone these days to do all bank-related activities in that device. Technology can also help bank organizations to reduce cost by cutting down the number of physical branches, ATMs and employees. (Fabris, N 2018)
The digital trend seems to be unstoppable, nevertheless, there are still strong arguments against it:
1. Tradition: conservatism and unwilling to change has been around for generations. Not to mention, there are still areas not having access to the Internet due to its rural location and lack of infrastructure. (Fabris, N 2018)
2. Cybercrime: With burglars and robbers targeting cash dropping, hackers are taking their places by targeting online vaults through various techniques. This has resulted the loss of currency and customer information, which is deemed to be even more valuable than the money itself. (Fabris, N 2018)
Both sides, for and against, have provided very convincing points to defend their beliefs and disavowing the others as whether we can shift into a cashless society in the near future. However, judging from the past, when money was first invented as a general defining value for goods, it was invented to make transactions more comfortable and transform trade into a more flexible state up until today. In my opinion, as more bank institutes are realizing the importance of cyber security, upgrading their security infrastructures and the undeniable convenience, people will fully shift to online banking at some point. And with the people, as soon as the technical aspects are taken care of and more infrastructures are built to support such services, they will accept the reality of a cashless society, as innovation has been doing its job throughout human history.
- Bezhovski, Z 2016, “The Future of the Mobile Payment as Electronic Payment System”, European Journal of Business and Management, Vol.8, No.8, pp. 127-132, < http://eprints.ugd.edu.mk/15691/1/The%20Future%20of%20the%20Mobile%20Payment%20as%20Electronic%20Payment%20System.pdf >
- Csiszar, J 2017, “Advantages and Disadvantages of Online Banking”, GoBankingRates, 18 November, viewed 18 August 2019, < https://www.gobankingrates.com/banking/banks/disadvantages-advantages-of-online-banking/ >
- He, W, Tian, X & Shen, J 2015, “Examining Security Risks of Mobile Banking Applications through Blog Mining”, MAICS, viewed 18 August 2019, < https://www.researchgate.net/profile/Xin_Tian17/publication/282376655_Examining_security_risks_of_mobile_banking_applications_through_blog_mining/links/5718501508ae986b8b79eaf2/Examining-security-risks-of-mobile-banking-applications-through-blog-mining.pdf >
- Humbani, M & Wiese, M 2017, “A Cashless Society for All: Determining Consumers’ Readiness to Adopt Mobile Payment Services”, Journal of African Business, vol. 19, no.3, pp. 409-429, < https://www.researchgate.net/profile/Michael_Humbani/publication/320918945_A_Cashless_Society_for_All_Determining_Consumers%27_Readiness_to_Adopt_Mobile_Payment_Services/links/5b31da994585150d23d45f32/A-Cashless-Society-for-All-Determining-Consumers-Readiness-to-Adopt-Mobile-Payment-Services.pdf >
- Kabir, M, Saidin, S & Ahmi, A 2015, “Adoption of e-Payment Systems: A Review of Literature”, International Conference on E-Commerce, ICoEC, Sarawak Malaysia, pp. 113 – 120, < https://www.researchgate.net/publication/303329794_Adoption_of_e-Payment_Systems_A_Review_of_Literature >
- Kemp, S 2019, “DIGITAL 2019: GLOBAL INTERNET USE ACCELERATES”, We Are Social, 30 January, viewed 12 August 2019, < https://wearesocial.com/blog/2019/01/digital-2019-global-internet-use-accelerates >
- Sharma, S 2016, “A detail comparative study on e- banking VS traditional banking”, International Journal of Applied Research, pp. 302-307, < http://www.allresearchjournal.com/archives/2016/vol2issue7/PartE/2-6-146-742.pdf >
- Yaseen, Q 2016, “Insider Threat in Banking Systems”, ResearchGate, pp. 222-236, < https://www.researchgate.net/profile/Qussai_Yaseen/publication/316665272_Insider_threat_in_banking_systems/links/5bcb7f53a6fdcc03c797d19d/Insider-threat-in-banking-systems.pdf >
- Fabris, N 2018, ‘Cashless Society – The Future ofMoney or a Utopia?’, Journal of Central Banking Theory and Practice, pp. 53-66, < https://content.sciendo.com/abstract/journals/jcbtp/8/1/article-p53.xml >