The rise in digitization means online money transfers are used more and more, but what do we understand about the technologies behind them? Probably not much unless you work in the sector.
Our increased reliance on these payments for all activities, including shopping, investing and gambling, means we should, to a certain extent, have an appreciation for the technology behind the scenes. In this article, we’ll explore the key technologies behind secure online money transfers and how they work to ensure safe and secure transactions.
When Are Secure Online Money Transfers Used?
Knowing when and where online money transfers are used gives us an appreciation of just how big the scale of things is. It’s easy to take online payments for granted. Whether you’re making an everyday purchase or managing huge international transfers, none of it is possible without the technology behind online money transfers.
Here are just some of the areas in which this technology is used:
Everyday Transactions
From buying goods at your favorite store and purchasing services from e-commerce sites to paying bills online, online money transfers are used everywhere and every day.
High-Value Transactions
Online money transfers are used when large sums are involved too. For example, in real estate transactions and investments like stocks, bonds and other assets.
Online Gambling
Online gambling has taken off in recent years and is a billion-dollar industry. Online money transfers and the technology behind them mean players can protect their money when making deposits and withdrawals from online gambling platforms.
However, these sites are often more vulnerable to fraud than other places where online money transfers are used, so it’s crucial to choose iGaming platforms that have a good reputation. As well as using a trusted platform, an alternative payment method like CASHlib, a prepaid voucher system, can also provide a layer of extra security. Thankfully, websites like www.newcasinos.com/ help players find secure online casinos that provide safer gambling transactions.
International Transfers
Cross-border payments aren’t always easy to perform, and this adds a whole new layer of security to preventing fraud and data breaches. This also includes currency exchanges.
Encryption Technologies
Now that we understand the most common uses for online money transfers, it’s time to look at the technology behind them.
Arguably the most common technology is encryption. This is the process of converting information into a secure format that can only be ‘read’ by someone with the correct key. Encryption protects sensitive data during transmission and storage so that unauthorized access isn’t possible.
Strong encryption reduces the risk of sensitive data being exposed both accidentally and in the event of a data breach. It maintains the privacy of personal and financial information when data, such as a credit card number, is being transferred.
Types Of Encryption Used
There are two main types of encryption:
- SSL/TLS: This encrypts data between a user’s browser and a web server. You can tell if a website is using this by the presence of a locked padlock symbol in the browser and the use of ‘https://’ in the URL.
- End-to-end: This encrypts data from the device sending it to the device receiving it. It means that only the intended recipient can decrypt it and read it. This is commonly used in messaging apps such as WhatsApp.
Authentication And Authorization
Another key technology behind secure online money transfers is authentication and authorization. Again, there are several types, including:
Multi-Factor Authentication (Mfa)
When MFA is used in online financial transactions, it requires the user to provide two or more verification factors to complete transactions.
Online banking platforms use this a lot as you’ll usually need to enter a password and use a security token and biometric data, for example. This adds an extra layer of security to make unauthorized access more difficult, though not impossible.
Two-Factor Authentication (2fa)
2FA is a subset of MFA and it requires two types of verification. Usually, this is a password that you already have, and a one-time passcode sent to your phone or made visible in an app. It’s also commonly used within online banking.
Secure Payment Gateways
Payment gateways facilitate the secure processing of online transactions between customers and merchants. They encrypt and transmit payment information with tokenization. This replaces the real data with a unique identifier that can only be used in the specified transaction, protecting actual payment data from exposure.
In addition to these encryption methods, cutting-edge technologies like Retrieval Augmented Generation (RAG) in financial services are facilitating real-time data retrieval and generation, enhancing the security and accuracy of transactions. RAG combines machine learning with information retrieval, which makes it easier to analyze data.
RAG algorithms are useful for the identification of suspicious transactions, which means they can be used to prevent financial crimes like fraud and money laundering.
Open banking and APIs
Open banking means that banks and third parties can share data securely. They do this through application programming interfaces or APIs. The potential of open banking APIs in modern finance is huge. It provides solutions for quicker and more secure access to banking services and eliminates the need for intermediaries.
Blockchain Technology
One of the most innovative pieces of technology behind secure online money transfers is blockchain technology. Blockchain technology operates as a decentralized system, meaning that transactions are recorded across multiple nodes, which reduces the risk of tampering and fraud.
Transactions on a blockchain are linked in a chain of blocks, which makes it almost impossible to alter and tamper with. This makes these transactions highly secure. Each transaction on a blockchain is also visible to everyone involved, and can’t be altered after it has been confirmed.
Blockchain is used widely in cryptocurrency transactions and international money transfers. It removes intermediaries and reduces transaction times as well as fees. Although the advantages of this technology are significant, there are issues with scalability and concerns regarding energy consumption.
Conclusion
Everyone who pays online knows the importance of secure online money transfers. Understanding some of the technology behind these transactions can give us an appreciation for what’s involved in protecting our assets.
Whether it’s authentication, encryption, a payment gateway facilitated by open banking APIs or blockchain, having an appreciation for security means we are more aware and can protect ourselves better from becoming a victim of fraud.
