How Safe are Online Financial Transactions?
Abstract
Taking ones goods or services to the internet definitely increases the potential of the business in all ways. But the utilization of
the e-commerce in business transactions requires commitment to safe and secure transactional details that include credit card
information and financial details from the customers. The rapid growth of e-commerce has also brought its own challenges on
security threats that are also growing at the same rate. Identity theft and data security breaches are common complaints among
online customers. The safety of online transaction is a major concern to all customers who shop and bank online. These research
paper looks at the safety of all online transactions.
Introduction
Online transactions provide ease of shopping and comparisons of products and prices. It’s an attractive option for shoppers who
don’t have to travel from place to place looking for the right product but just by a click one can purchase a range of products
from domestic appliances to complex art designs or movies. The safety of online transaction depends largely on the safety
measures that the online user takes to prevent identity theft (Obringer, n, d).
An online transaction popularly referred to as a pin-debit transaction which entails the use of a protected password to authorize
the transfer of funds through an electronic system known as the electronic funds transfer or EFT. When a vendor purchases or
sells goods via the internet, one has an option to pay using the credit card which means that the transaction would be paid via the
offline credit card processing network or via the online electronic funds transfer that requires a personal identification number
authorize the transfer of funds. Online transactions are involves the exchange of funds which are facilitated by EFT networks
popular ones are pulse, interlink or the star. Each bank has to register its own EFT network among the ones operating in the
market and which commonly charge an interchange fee of 1% per every transaction and it’s charged to vendor or merchant. In
the year 2010 the interchange fees amounted to over $20.5 billon.
To cushion the online users against financial losses some insurance companies have included in their policies identity theft
insurance. However some online transactions are relatively unsafe depending on the nature and medium used to transact them.
Transactions from a public network
These transactions are probably the most unsafe ones. To a common and ordinary internet user the transactions are seamless and
largely invisible as the online customers is led to believe but to fraudsters and hackers every time a customer uses a public
network all the information is there and several tricks re used to filter information to payment gateways. Free Wi-FI exposes
network data transfers to some sniffers who may be hanging on the belief that someone may transact valuable information using
the free internet services. However, modern desktop browsers have sophisticated systems that can detect fake replacement of
security certificates by middlemen who intercept data from one computer to other websites visited hence pay close attention on
all computer alerts especially when transacting sensitive businesses over the internet.
When connected to a private network that is relatively safe like in the office or home then the safety of your online transactions
are relatively safe only ensure that an active security solution is always on whenever you are transacting online that also
monitors the web browser. The constant warnings from your web browser should not be ignored as they may create loopholes for
fraudsters.
Transactions from a Smart Phone or Tablet
If you prefer to transact using a tablet or smart phone then avoid using the available mobile browser. Mobile browsers are not
sophisticated as the desktop browsers especially on security perspective. It’s safer to install and use banking applications that
have been supplied by your respective bank. These applications have standard encryptions that are much safer on mobile
applications. Make use of some mobile browser platforms that have improved security suites and which offer free trusted security
solution but consider installing even a free security solution instead of using none at all. When connected to some free public
network remember that your transactions are vulnerable to some one-ni-the middle especially if you are using your phone or
tablet it’s better to switch off the free Wi-Fi and instead use the 4G connection from your mobile provider your transactions
would be much safer (Adrian, 2012).
The Use of Passwords
All online transaction are also referred to as a pin-debit transaction which utilizes the use of a protected password to authorize the
transfer of funds through an electronic system known as the electronic funds transfer or EFT. No matter how safe a password is
or hard to crack avoid using the same password for email accounts as well as for other websites that are in operation. Having the
same password for e-mail account, PayPal or Amazon is a huge mistake. Consider all the places that you transact your
businesses and assess their online security arrangement and make the right choices.
Transactions from a public Computer
Some public computers have been specifically programmed to record most of the activities from the user including the keeping a
record of all the password used. The fraudsters keep track of their victim’s financial transactions and only strike at the right time.
Payment gateways
For online vendors to process their online payments, payment gateways must be established or set-up or he company’s e-
commerce website that would enable the clients to pay via debit or credit card. The choice of a payment gate determines the
safety of the online transaction for both the vendors and the clients. The gateway records the submitted vendors or customers
billing information from the vendors or customer’s computer via a secure server to the vendors or customers merchant account in
a respective processing bank. The payment gateway is seamless and largely invisible to most online customers but to fraudsters
all the information is there for the taking.
For safe online transactions, the payment gateway selected by vendors should maintain all their business transactions in advanced
datacenters that utilize the best and latest security methods. The payment gateways should be fully compliant with most credit
card providers control systems and their security initiatives. These security initiatives include cardholder information security
program, site data protection or the discover information security or compliance. The best payment gateways should be labeled as
PCI level one.
Government Regulations
The government of the United States of America has made some efforts to ensure that online transactions are relatively safe.
Through the Federal Trade Commission or the FTC, the US government regulates the electronic commerce activities. These
activities include commercial e-mails, consumer privacy and online advertising networks. The FTC Act in the US regulates all
forms of internet advertising that includes online advertising which have to be truthful, non deceptive and not misleading. The
CAN-SPAM Act if the year 2003 regulates the standards of direct e-mail marketing. The FTC Act expressively prohibits
deceptive and unfair business practices hence all corporate private policies that relate to –commerce are subjected to the FTC
enforcement. The other specialized Acts that deal with specific specialized fields like the Ryan Haight Online Pharmacy and
Consumer Protection Act of the year 2008 that was amended to include controlled substances and online pharmacies. The
UNCITRAL model international law on all electronic commerce was adopted in 1996 to address different contradicting laws
globally relating to e-commerce and which was mandated to harmonize and provide uniformity e-commerce laws globally. The
International Consumer Protection and Enforcement Network (ICPEN) that was established in 1991 to tackle consumer problems
across international borders while ICPEN initiative was also established in 2001 to report specifically all online complaints
globally.
Global Online Trends
The United Kingdom had the highest e-commerce market as compared by the amounts spent per capita (Robinson,
2010). China’s e-commerce increased by over 384 million online internet users in 2010 generating a total of $36.6 billion in 2009
(Olsen, 2010). The level of trust among the vendors played a key role in the expansion among the vendors as well as the
customers. The transactions between China and other foreign countries also grew by 32% up to $375.8 billion in 2012 accounting
for about 9.6% of the total international trade in China (Tong, 2013). Online companies have also had improvement their market
share. Global online company Alibaba controlled over 80% of the Chinese market in the year 2013 (Millward, 2014). The total e-
commerce sales in the year 2012 amounted to over $1 trillion (Millward, 2014).
Deterring Fraud
The payment gateway selected should be able to support minimum fraud detection plus the implementation of the required
authentication procedures necessary to prevent identity theft. Credit card theft can only be perpetuated by someone who
possesses the card number and not the physical card itself. The payment gateway must have these two required authentication
measures;
- The AVS Code (Address Verification System) that authenticates the purchases made by the credit card and the billing
address. When transacting the customers are frequently required to provide a billing address that should match the one
on the credit card. The major shortcoming is that most customers have numerous cards and matching their accuracy of
information like updated addresses or mistyped addresses makes the authentication vulnerable to future fraudsters. - CVV (Card verification Value) also referred to as Card Security Code is a standard authentication system that is based
on a 4 or 3 digit number that appears on the back of Visa, master or Discover cards or the front part of the American
Express card. The number referred to as CSC is the one used by merchants to secure transactions and the last 4 digits
are to confirm that the customers really have the card physically.
To ensure adequate security, choose a secure payment gateway that has a provider who ensures that all the security facets of
all the financial transaction are addressed and secured possibly through a 128-bit digital certificate that also has physical
together with information security. The payment gateway provider should also have a firewall and other intrusion detection
systems among the operating system and its application layers.
References
Adrian, R.C. (2012) How to make safe banking & financial Transactions online, Digital Citizen,
Obringer, L.A. (n, d) How Identity Theft Works, DataBank – Cloud Backup,
Aldrich, M. (2011) ‘Online Shopping in the 1980s’ IEEE ‘Annals of the History of Computing’ Vol 33 No4 pp57-61
October–December 2011
Forrester Research, Understanding Online Shopper Behaviors, US 2011, May 17, 2011
Geena, R. (2010). “Mopay Now Allows You To Bill Mobile Payments To A Landline Account” . TechCrunch.com. Retrieved 23
November 2010.
Zezoni, S. (2012) ATSs Makes Online Bank Tranasactions Unsafe, Unsafe
Laudon, K. C., & Guercio, T.C. (2014). E-commerce. business. technology. society. 10th edition. Pearson.
Robinson, J. (2010). “UK’s internet industry worth £100bn” . The Guardian (report) (London). Retrieved 10 December 2015.
Olsen, R. (2010). “China’s migration to e-Commerce” . Forbes.
Tong, F. (2013). “China’s cross-border e-commerce tops $375 billion in 2012” . Internet Retailer.
Millward, S. (2014). “Here are all the must-see numbers on Alibaba ahead of record-breaking IPO” . Tech In Asia. Retrieved 10
December 2015.
