Online payment and offline payment, who is more secure?

In an article published today in Wired magazine, it has long been argued that offline trading is safer than online trading when talking about credit card security. Now, the truth has proved that this view is wrong.

Online trading is more popular and safer than ever, thanks to advances in digital payment technology, demographic changes, and a growing network security environment. At the same time, offline payments seem to be less secure than ever. Recently, major foreign retailers have erupted in a series of security incidents, suggesting that offline trading is more vulnerable to attack.

These trends have led people to consider important questions that affect every consumer and retailer: is online trading safer than offline trading, and does this fact drive e-commerce into the next stage of growth?

Offline Security Incident Frequency

The reality is, whether online, offline or on mobile devices, whether it is credit cards, debit cards and even cash, there are security issues. One common misconception is that offline is safer than online. But this view is changing over the past year as foreign retailers have suffered massive hacking and have repeatedly become headlines.

Target, the US retail giant, announced that hackers had stolen 70 million of customers ' personal information between November 27, 2013 and December 15. The big home chain, Home Depot, announced that its payment system had been hacked for 5 months, leading to the theft of 56 million payment card information from customers. Neiman Marcus, a high-end chain store retailer in the United States, was attacked by hackers for 3 months, causing 1.1 million credit card information to leak. Hackers have also repeatedly invaded the US grocery retail giant Supervaluinc, which has thousands of stores. Meanwhile, customer credit card data were stolen from 8 stores in P.f.chang, America's largest Chinese restaurant chain. According to CyberSource, the E-commerce Payment Management service provider, these retailers could lose about 3.5 billion dollars a year in sales of E-commerce, even before these serious hacking attacks, due to credit card fraud.

This long series of major hacking events is enough to convince consumers that offline payments are as risky or even more risky than online payments.

When a consumer is paid through a credit card at a retail store, the merchant still stores the credit card data on the computer, which typically uses Windows, which runs the old-fashioned POS register software, and the environment in which the data is stored is inherently unsafe and inadequate. To handle a transaction, payment applications must communicate with payment terminals, POS registers, and payment processors, which means that sensitive data is continuously transmitted. All this makes the payment system vulnerable to attack.

Jason Oxman, chief executive of the Oxman, said: "When you get out of a retail store, the deal you just made will continue to take place nationwide and use the technology of the late 70." ”

"What the United States needs to do is to take advantage of new technologies to fully replace the technology architecture deployed over the past 40 years," he said. At present, the magnetic stripe card in the market time has been too long. ”

U.S. credit card Industry data security standard requirements, collect data and don't move it. Today, these standards do not guarantee that retailers can effectively protect consumer data. These standards do not require the collection of credit card information to be encrypted when transmitted over a private computer network, so hackers can steal it during these data transfers. The U.S. credit card Industry data security standards have lagged behind the requirements of the Times.

Safer on line?

In general, large retailers are not as committed to security as online retailers. Overhauling the entire system and taking additional safety precautions is an expensive and time-consuming task, so large retailers tend to overlook the extra measures. This contrasts sharply with online retailers, who have a strict sense of security from the start, as a hacking attack could ruin their business.

Online retailers also have a host of powerful security tools that are created for today's world. For example, the mobile payment resolution company Square encrypts credit card data stored on its device. The online payment service provider stripe the credit card data stored on the disk for AES-256-bit encryption and password protection, and stores the decryption key on different machines. PayPal's security key uses a dual-factor authentication mechanism, which gives users an additional security protection. Any online transactions of reputable vendors are protected by SSL certificates (data in transit), firewalls, and periodic system scans. In addition, consumers have the right to add additional security protection to their online transactions. They can create powerful passwords, register identity theft protection services, and keep their antivirus software up to date.

Perhaps one of the most exciting advances in information security technology is symbolism (tokenization), the managing director of Bain Capital Venture Capital Ventures Bain, Matt Harris (Matt Harris), described it as: " The system allows you to replace real payment card data with a set of identifying information, so businesses do not need to deal with sensitive and controlled data so that they do not need to expose unnecessary information. "Symbolism not only restricts exposure, but it also allows for stricter identification features such as fingertip or facial images (relative to passwords or signatures). It plays a pivotal role in eliminating consumer fears of digital payments.

The rise of electronic commerce

To sum up, online transactions can be more secure than offline trading, this change will affect the entire e-commerce industry.

E-commerce has undergone significant growth. Simply put, more and more people are buying more online than ever before. Today, the United States has 190 million online buyers, accounting for 80% of its internet population. Sales of E-commerce in the US are growing at around 9.5% a year and are expected to overtake sales growth in physical stores over the next 5 years. U.S. market research firm emarketer estimates that E-commerce sales in the US retail sector will grow by 15.5% in 2014 to $304.1 billion trillion, up from $263.3 billion in 2013. This growth means that 20% of the $199.4 billion trillion in total retail sales of consumer goods in the United States this year comes from E-commerce. Forrester, a market research firm, predicts that by 2018, 11% of the total retail sales of consumer goods in the US will come from e-commerce, meaning that 89% still occurs online. Despite these increases, we are still at the beginning of a shift to online trading.

The growth of E-commerce is driven by many factors, the first of which is the growing popularity of the Internet. More people have access to the Internet, which means that the online shopper population is growing. Second, the electronic commerce way innovates unceasingly. Many companies have launched an exciting, innovative and convenient online shopping experience. Amazon gives users just a few clicks to receive the goods they need, and the price is very favorable. American Craft Electric dealer Etsy makes it easy for users to browse and buy handicraft products from millions of of talented craftsmen who could not have met them before. Wanelo makes online shopping social. Such examples abound, there is always an e-commerce experience to adapt to the user's preferences.

Thirdly, the change of population structure is also promoting the development of electronic commerce. The development of the millennials is the rise of online shopping, which is an important part of the demographic structure. America's millennial generation has 80 million people who spend more money online than any other age group. In the millennial generation, members of the "Z Generation" (18-24 years) spend almost one-tenth of their money on online shopping, which accounts for a higher proportion of their income. As the millennium grows and the earning power rises, their spending on online shopping will increase further.

The growth of E-commerce is not limited to the United States. Emarketers expects global e-commerce sales to reach $1.5 trillion trillion this year, driven by emerging market growth. This growth will accelerate, given that people in emerging markets are migrating to the Internet at an alarming rate. Meanwhile, cash deals around the world are shrinking.

Online payments are clearly the direction of the future, but security is still a factor impeding their growth. The first reason people do not go online to shop or reduce the number of online shopping is still a security issue. Kaspersky Lab, a security services firm, found that 49% of people who shopped online or traded online were insecure, while 62% feared cyber-finance scams. On mobile devices, these concerns have increased in varying degrees.

But the millennial generation is less concerned about cybersecurity, and prefers online shopping than older consumers. In addition, the media's extensive coverage of online trading security incidents has made people more aware of the threat of offline trading. Shortly after the retailer's hacking, a survey by the Associated Press found that more than one-third of Americans preferred to use cash rather than credit or debit cards.

Clearly, cash payments are not a long-term solution. Consumers have become accustomed to the use of credit and debit cards, and the convenience they bring, changes in their payment behavior will only be temporary. Even chip technology, which makes credit cards more secure, is by no means a panacea for the resurgence of offline trading.

What ultimately changes is the attitude of people to pay online. More and more people are choosing online transactions and online payments, and it is expected that the hacking event will accelerate the process. Earlier, older consumers were cautious about paying online, and now they have changed. At the same time, the spending power of the millennial generation is increasing. In short, these trends will fundamentally change the balance between online payments and offline payments.

(Responsible editor: Mengyishan)