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Technology advancements have unlocked new avenues for governments to augment and enhance the payment experience, delivering increased value for agency staff and the residents they serve.

As the landscape of digital payments has evolved, so too have security and compliance regulations. Now more than ever, governments must not only be aware of new and emerging payment technology to meet the needs of their payers and staff. They must also ensure the industry-compliant technology stack they implement protects their organization and payers against growing threats, while maintaining a seamless payer experience.

The Push for Payment Digitization

There’s been a steady shift to electronic payments over the years and electronic payment acceptance isn’t showing signs of slowing down:

• Nearly half of all payments (43%) in the United States and Canada are expected to be cashless in 2025.¹
• There is a 42% increase in global cashless payment volumes since 2019.¹

Many factors are driving this shift:

• New cashless and mobile technologies: Introduction of digital wallets, buy now, pay later, cryptocurrency, Apple Pay, and Google Pay have created simple and quick access to purchases, delivering instant authorization, funds disbursements, and payer satisfaction.
• Resident demand and demographics: Residents demand the simplicity and convenience found through recurring online and mobile app payments.
• Inclusive economy and financial transparency: Digital payment tools can help those without access to traditional banking services better track and manage their finances. These options are key to expanded financial inclusion.
• Increased security awareness: Digital payments backed by ID and authentication create safer transactions and connections from banking entities to the acquiring bank to the payment processor, reducing fraud and data breaches.
• Improved cash flow management: Digital payments remove the cash flow challenges associated with late payments and slow processing times for cash and checks, delivering monies to both government agencies and payers in real-time.

Progress Requires Protection

Despite the overwhelming advantages of payment digitization, organizations must also be aware of its potential risks. According to a 2023 report, the rise of digital banking and faster digital payment methods have made financial institutions more vulnerable to fraud.² The public sector is not immune.

• Cost of data breaches to local, state, and federal governments in the past 10 years is $26 billion.³ Data breaches can include exposure to personally identifiable information (PII), social security numbers, and voting affiliations.
• Expected cost of cybercrime by 2025 is $10.5 trillion.⁴
• Organizations that expect to increase cybersecurity spending in the next three years totals 93%.

Understand and Safeguard Against Threats

Security threats and vulnerabilities are all around you, particularly in the world of payments and financial services. The better governments understand where and how to identify these threats, the better they will be prepared to protect their residents.

Common sources of cybercrime threats include:

• Ransomware: Malicious software (malware) that denies access to computer files, systems, or networks and demands payment (ransom) for their return.
• Open-source vulnerability: Application programming interfaces (API) accessible by customers and other parties via the web, allowing attackers to crash servers by overwhelming them with continuous calls or service requests, or using that API to facilitate a data breach.
• Advanced phishing technologies: Methodologies such as those that use artificial intelligence (AI) to make it nearly impossible for the average user to differentiate between legitimate communications and malicious ones.

Safeguards

Modern, forward-looking technology can go a long way toward protecting government organizations and residents against fraud, whether a payment is made in-person or online, by card, digital wallet, or automated clearing house. Working with a strategic payment technology provider, here are a few ways to safeguard against potential threats:

• Implement minimum and maximum transaction limits.
• Require validation of a CAPTCHA to differentiate between a human and bot.
• Provide real-time payment authorization.
• Utilize address verification services.
• Require card verification value, card identification number (CID), card verification code.
• Leverage NACHA account validation services for processing ACH transactions.
• Enable network tokenization to exchange primary account numbers for a token, reducing exposure to sensitive data and increasing security throughout the life cycle of a payment transaction.
• Use a card account updater to update and maintain users’ credit and debit card information, providing enhanced data security and simplifying recurring payments and auto-pay plans.
• Utilize fraud scoring, a managed service that uses machine learning to identify potential fraud for activities like account creation, online transactions, and guest checkouts.
• Adopt PCI-validated point-to-point encryption for secure transmission of payer data for in-person payments, rendering any card data obtained from a fraudulent actor useless.
• Comply with PCI Data Security Standards v4.0, including partnering with an approved scanning vendor, reducing the questions required to complete a self-assessment questionnaire for financial auditors.

Exploring Payment Possibilities for Forward-looking Governments

When it comes to new payment methods, security and compliance, and the risks of fraud, payment digitization can be a challenge for even the most forward-looking governments. But it doesn’t have to be. Here’s a simple checklist to help governments safely and securely embrace digital transformation.

• Understand current payments inventory, product offerings, and payment stakeholders across your organization.
• Determine priorities for payment solutions with a focus on data and analytics, fraud and security, and simple and safe payer experiences.
• Engage key internal stakeholders to develop an evaluation and plan for payments and disbursements that supports the enterprise and all agencies, departments, and services involved.
• Evaluate payment vendors and solutions that are specific to government and can scale across levels to best serve all branches of government and department function, including Information Technology, Finance, Business Operations, Economic Development, and other mission-critical areas.
• Choose a strategic partner that delivers a comprehensive approach to payments and can address every point of interaction within the payment life cycle with security and innovation at the forefront.

Tyler Technologies develops software solutions with an insider’s understanding of the public sector and decades of industry experience. Explore how Tyler Technologies’ powerful, scalable government payments solutions manage the entire payments life cycle from bill presentment and transaction processing, to funds settlement, reconciliation, and reporting.

Sources:

1. PwC Global. (2021, May 7). Navigating the Payments Matrix: Payments 2025 & Beyond. PwC Global. Payments 2025 and Beyond | PwC
2. PYMNTS.com & Hawk AI. (2024). The State of Fraud and Financial Crime in the U.S. In PYMNTS.com. https://www.pymnts.com/study/increasing-fraud-heightens-need-for-newer-better-technologies/
3. Weisner, M. (2022, December 30). Data Breaches, led by USPS, OPM, cost governments $26 billion. Federal Times. Data breaches, led by USPS, OPM, cost governments $26 billion (federaltimes.com)
4. Brooks, C. (2023, March 14). Cybersecurity Trends & Statistics for 2023; What You Need to Know. Forbes. Cybersecurity Trends & Statistics For 2023; What You Need to Know (forbes.com)