When Digital Payments FAIL: Breaking Points | The Struggles of Trust and Infrastructure | PART 4

Embarking on a once-in-a-lifetime road trip through the vast expanse of Death Valley, you're filled with excitement and a sense of adventure. As you drive along the deserted stretches, a sign ominously declares, "NO GASOLINE STATION FOR THE NEXT 250 MILES.". You're now a little nervous about being so far from civilization. After all, there's no cell service in Death Valley.

Realizing the gravity of the situation, you pull into a solitary store, determined to fill up your tank and grab some essentials. However, as you approach the cashier to complete your purchase, you don’t understand what is more crappier - the cashier with weird smile or the age old swipe machine? In this desolate landscape where the risk of credit or debit card information theft looms large, the decision to rely on cash suddenly becomes a matter of necessity and peace of mind.

1. Trust: The Cornerstone of Digital Payments: Trust is the bedrock of any financial transaction, and digital payments are no exception. Users must have confidence in the security, privacy, and reliability of the systems they entrust with their financial information. However, trust can be easily shattered when incidents such as data breaches occur, leading to financial losses and identity theft.

• Equifax data breach: In 2017, Equifax, a major credit reporting agency, suffered a data breach that exposed the personal information of over 145 million Americans. This breach included Social Security numbers, birthdates, and addresses. As a result of the breach, many people had their identities stolen, and they suffered financial losses as a result.
• Target data breach: In 2013, Target, a major retailer, suffered a data breach that exposed the personal information of over 40 million customers. This breach included credit card numbers, names, and addresses. As a result of the breach, many people had their credit cards used fraudulently, and they suffered financial losses as a result.

 2. The Fragility of Digital Infrastructure: Digital payments are built upon a complex network of interconnected systems that require flawless coordination. However, even the most advanced infrastructures are susceptible to vulnerabilities. Recent data breaches, system glitches, and cyberattacks have exposed the fragility of digital payment platforms. In 2022 alone, global losses due to cybercrime exceeded a staggering $1.5 trillion, emphasizing the dire need for secure and resilient digital payment systems.

3. Infrastructure Gaps and Accessibility Challenges: While developed regions may boast robust digital payment infrastructures, many parts of the world still face significant infrastructure gaps and accessibility challenges. Limited internet connectivity, outdated payment systems, and inadequate technological infrastructure impede the adoption and seamless operation of digital payment services.

• Limited internet connectivity: In many parts of the world, internet connectivity is limited or unreliable. This makes it difficult for people to access digital payment services, such as online banking and mobile payments. According to the World Bank, in 2022, only 59% of the world's population had internet access. This means that over 4.5 billion people do not have access to the internet, which limits their ability to use digital payment services.
• Outdated payment systems: In many parts of the world, payment systems are outdated and inefficient. This makes it difficult and expensive to process payments, which can discourage businesses from offering digital payment options. For example, in Africa, the average cost of processing a credit card payment is 2.6% of the transaction value. This is significantly higher than the average cost of processing a credit card payment in the United States, which is 1.5% of the transaction value.

4. The Human Element: Educating and Empowering Users: Beyond infrastructure concerns, user behavior and awareness play a vital role in ensuring the success of digital payments. Lack of digital literacy, reluctance to adopt new technologies, and unfamiliarity with security practices often lead to user errors and compromised transactions.

• Lack of digital literacy: A 2019 survey by the Pew Research Center found that only 64% of Americans are confident in their ability to use digital payment methods. This lack of confidence can lead to users making errors, such as entering incorrect information or clicking on phishing links. In 2020, the Federal Trade Commission (FTC) received over 5.8 million reports of fraud and identity theft, with losses totaling over $2.8 billion. Of these reports, 20% involved digital payments.
• Reluctance to adopt new technologies: Some people are reluctant to adopt new technologies, such as digital payments. This reluctance can be due to a number of factors, such as fear of the unknown, concerns about security, or simply a preference for traditional methods of payment. A 2021 survey by the National Retail Federation found that 17% of consumers still prefer to pay with cash or checks. This reluctance can lead to users missing out on the convenience and security benefits of digital payments.

When Digital Payments FAIL : Over-Reliance and Real-World Examples | PART 1

When Digital Payments FAIL : Disconnected World | Power Failure and Internet Outage | PART 2

When Digital Payments FAIL: The Trojanization of the Digital Payment Ecosystem | PART 3