Council Post by Kalpesh Kapadia, Deserve CEO, on Forbes.com, May 12, 2023

The digital transformation of the credit card industry continues to roll out more and more enhancements. Although the migration from plastic cards to mobile devices is logical for credit card issuers and platforms, some consumers are wondering whether the industry prioritizes seamless user experiences over basic security.

Despite the greater functionality of digital payment methods, heightened concerns seem to outweigh the advantages of increased efficiency and convenience. According to a study conducted in 2022 by Paysafe, more than half of consumers surveyed said they were more worried “about becoming a victim of fraud” than in the previous year.

Although concerns around fraud may continue to hold back some consumer adoption of digital credit cards and digital payment methods, based on my work in this space, I’ve seen that the apprehension appears to stem less from inadequate security features and more from a lack of education of these features and how they work.

‍Digital Transformation is the Solution, Not the Problem

Recent innovations to the modern credit card stack have bolstered security just as much as they have increased speed of use and enhanced user experiences. New security features built into digital wallets and credit cards provide more protection against card fraud than consumers may know.

In other words, the digital transformation of the credit card industry should actually be considered the solution when it comes to combating fraud, not the problem.

It wasn’t uncommon for days, weeks or even months to pass before a cardholder discovered a fraudulent transaction on their card. As a result of recent technological advancements, things such as real-time transaction monitoring, card controls and mobile alerts allow consumers to quickly identify and report fraudulent purchases.

While many credit card issuers have already rolled out features such as purchase alerts and card controls, there are even more ways to reduce fraud. Mobile technology enables biometric authentication such as facial recognition and two-factor authentication, adding new security layers. Tokenization allows sensitive credit card numbers to be replaced with a unique identifier or token. As credit card platforms continue to focus on leveraging artificial intelligence and machine learning for digital security, innovative features will continue to evolve.

Instant notifications are only one emerging feature in a wide range of security innovations. Mobile technology can allow consumers to set spend limit notifications on purchases made outside their immediate location instead of receiving an alert after every transaction. By passively sharing mobile device location data with their credit card provider, consumers get the benefit of an additional layer of security and rest assured their funds will not be accessed from anywhere without their approval.

The Future of Digital Credit Cards and Security

Consumers appear to be warming up to digital wallets and digital payment solutions as they learn more about the new security features. In fact, a 2022 Pymnts report indicates that new payment options that once gave consumers pause, such as digital wallets, are now gaining more traction, with 42% of surveyed consumers saying they would try digital wallets.

As a result of rapid technological advancements across industries, consumers have come to desire both ease of use and the protection of their personal data. Processes such as data encryption and tokenization, alongside intuitive user interfaces, are all delivered by digital wallets.

While significant progress has been made, there is still work to be done in fighting credit card fraud. Refining and adapting to new emerging security threats in the coming years will continue to shape advancements. The overall takeaway: While growing concerns around fraud are legitimate, those concerns should be driving us toward digital transformation, not away from it.

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