Understand Your Finances
Digital purchases take cue from cash security
The following article is part of "The Future of Money," a new series presented by Chase Pay® that explores how our relationship with money is evolving.
When Bob Shoyhet dines out, he dreads receiving the check—but not because he minds paying. He simply dislikes the amount of time it takes to wave down his server, wait for the bill, pay, and sign the receipt.
"That's at least five steps for what should be a one-step checkout process," says Shoyhet, the busy chief financial officer of Melillo Consulting.
As digital payments grow ever more ubiquitous, Shoyhet increasingly prefers restaurants that allow him to pay with a few clicks, or thumbprint scan, via his smartphone. And he's not alone: More people than ever are choosing to log into an online app rather than open their wallets to pay with cash.
Intriguingly, it may be the old-school paper currency in those wallets that helps provide a road map for evolving security in the coming cashless age. After all, since the US Congress passed the Coinage Act in 1792, "establishing a mint, and regulating the coins of the United States," the government has worked to develop new techniques to stay one step ahead of would-be thieves and counterfeiters. The early parallels between those efforts and the race to make today's digital payments secure are fascinating.
The touch of a finger
Since the introduction of Federal Reserve Notes in 1914, raised printing has been a distinctive security feature used in all cash production. It gives dollar bills a texture immediately discernible as you run your finger over a bill—an authenticating facet not all that far removed from the unique fingerprint or password required to access all the financial data and resources held on your smartphone.
Not seeing is believing
Pull out a magnifying glass and examine the outer edge of the oval frame of President Lincoln's portrait on the $5 bill. Do you see the words "The United States of America" in micro-print? That's a security measure in place since the mid-1990s, employing intricate, minute detail to thwart counterfeiting efforts. Modern data encryption works on a similar plane, transforming your precious personal and financial information into a complex cloud of digital bytes only you possess the key to decipher.
The color of security
Since 1998, if you tip a $20 bill to its side, the numeral 20 on the right corner of the bill morphs from copper to green. Color-shifting ink prevents the creation of passable imitation—cash counterfeiters may be able to capture the copper or green tones, but not both simultaneously. Digital transactions also use multiple layers and separation to provide security. For example, Jennifer Kent, research director for consultancy Parks Associates, says that a tamper-resistant chip keeps financial information such as PIN numbers separate from the rest of the operating system and then authenticates applications that request that information.
Both sides now
Modern banknotes contain two watermarks visible from either side when the bill is held up to light—the two images of President Grant on the $50, for example—which offers merchants a quick and easy way to verify the cash they accept is legitimate. This ease of validation is mirrored in the digital payment realm by location-based security checks. "This ensures the phone is at the same location that the transaction is taking place," Kent says. If the phone and transaction locations aren't in sync, that triggers a warning to the payment processor—not unlike a merchant finding a watermark on one side of a bill but not the other.
In the early-2000s, 3-D security ribbons were added to bills. In the case of the $100 bill, the liberty bell on the front changes visually to a 100 when tilted. The ribbon is woven into the bill, not printed on it, which is a critical element and differentiator. Security is also woven into the makeup of secure payment ecosystems. For example, many systems are integrated so you don't have to remember log-ins or update information manually. Chase Pay, a digital payment product, uses tokenization technology to mask sensitive credit card information so that it's never passed on to merchants when you shop online or with the app. This adds an extra layer of security to prevent fraud.
Ultimately, it should be reassuring to know that digital transactions, like the folding money in your pocket, have a lot of safeguards you might not realize exist.
Joe Mullich is a Chase News contributor . His work has appeared in The Wall Street Journal, Harvard Business Review, Forbes, and Men's Health.