India’s New Cashless Economy Drives Digitization and Security Concerns
India ranks second only to Japan when it comes to reliance on cash transactions. For the Indian government, cash dependence has come at a cost — making it difficult to collect taxes on income and business revenues.
In November 2016, India’s government removed the 500 and 1,000 rupee notes (about $7.30 and $14.70) from circulation. According to NPR, they also capped the amount that can be withdrawn from bank accounts — creating a rapid push for banking and finance digitization.
NPR also notes business owners in mobile-friendly cities experience varying levels of success when switching to mobile payments. Shushil Kumar Verma, a jewelry vendor in Delhi’s Old City, doesn’t have many complaints but attributes his painless experience to his location near the main road. But for Asim Hussain, a hand-stitched purse vendor in the same city, poor connectivity and limited customer cash has meant a precipitous drop in business. This gap in connectivity even within urban areas is cause for concern.
The Challenges of Digitization
According to Pew Research, only about one-fifth of India’s population has internet access. In addition, the World Bank’s Global Financial Inclusion Database reports credit and debit cards account for less than 5 percent of all transactions in the country. Going cashless is an economic jolt to create fast and furious broadband investments throughout India.
However, broadband expansion brings with it a new wave of cybersecurity threats. A group called Legion attacked the Twitter and email accounts of a prominent Indian politician in December, claiming to have a foothold in certain financial institutions, The Economic Times reported. Digitization has revolutionized banking in many developing economies, but as India expands its vision, a strong cybersecurity strategy will be essential.
According to SophosLabs, India is one of the top five countries most vulnerable to malware attacks, with 16.9 percent of all existing end points featuring insufficient malware defenses. NPR reports only 17 percent of India’s population currently owns a smartphone — but a cashless economy could boost the mobile-device market. That’s good news for some, like Vijay Shekhar Sharma, who founded a mobile payment app called Pay Thru Mobile (PayTM). He predicts half a billion people will use his platform in the next few years, according to the source.
Still, Sophos warns that there is a rise in “designer cyberthreats.” Attackers craft emails to impersonate local post offices, tax agencies, law enforcement offices and utility firms. Then, when recipients click the links within, they download ransomware that encrypts all data on their devices. Cybercriminals are also creating localized Trojans to attack banks in particular areas by using specific languages to avoid end points, thus ensuring the malware hits the intended target.
Learning From Other Countries
Kenya’s M-Pesa mobile payment system provides a digitization model for countries aspiring to go cashless. It provides a range of mobile banking services, including deposits, withdrawals, microcredit and bill payment. According to Forbes, 43 percent of Kenya’s gross domestic product flowed through M-Pesa in recent years. This service launched thousands of small businesses and extended financial inclusion to 20 million Kenyans, including 72 percent of those living on less than $1.25 per day.
M-Pesa launched from a partnership between Vodafone and the U.K. Department for International Development. In Pakistan, EasyPaisa (another mobile payment service) developed from work between Telenor Pakistan and Tameer Bank and grew to become the third largest mobile payment service in the world. For India, a successful cashless future could sprout from mobile payments solutions developed by its top carriers.
Making Transactions Secure
India could seek assistance from global security groups such as the Information Security Audits and Control Association (ISACA). Africa News reports that ISACA signed a memorandum of understanding with the Kenyan government to conduct information and communications technology audits, train law enforcement officers about information security and share threat intelligence with private sector companies.
Widespread user education is a critical component of any national cyberdefense, as people, businesses and officials cope with nationwide trends in mobile usage. This knowledge is key to keep entrepreneurs like Shushil Kumar Verma, Asim Hussain and Vijay Shekhar Sharma in business and India’s economy growing.