What are 2FA and MFA? A Guide to Authentication Methods

Cyberattacks are amongst the top concerns of the financial industry, and they show no signs of slowing down. According to an Accenture report, security crimes have risen 31% between 2020 and 2021, despite all the innovative security tools companies and individuals can have in place. Data protection is crucial for any organisation, especially as the cost of cybercrime is expected to hit $10.5 trillion by 2025 (Cisco/Cybersecurity Ventures report).

Both 2FA and MFA help organizations protect their customer data by adding an extra layer of security when creating accounts, logging in, or making payments. In this article, we explore the advantages of 2FA and MFA and how they differ from each other.

What is 2FA?

2FA or 2 Factor Authentication is a process by which users need to add an extra piece of information before accessing their accounts. Aside from the usual username and password entering, 2FA requires users to add other personal data to verify their legitimacy. This adds extra protection to their data because even if criminals could find out the user’s username and password, they are unlikely to know or have the second factor required to authenticate themselves, so they wouldn’t be able to access the account. The second factor could be any of the following:

Something you know

This can be another password or, most often, a secret answer to a particular question related to your hometown, pets, childhood, parents, etc.

Something you have

This is something that users own, which could be a credit card, smartphone, or other pieces of hardware that they can use to verify their identity.

Something you are

This includes biometric patterns such as a fingerprint, voice print, or iris scan. Users are required to, for instance, take a selfie, so their face is scanned and matched to their account records.  

The pandemic and rise of online payments required strong security tools.

Types of 2FA

There are various types of 2FA that websites have in place. Some are slightly more advanced than others, but any 2FA is more secure than the regular password and username combination. These are some of the most popular 2FA types that users may find on websites and apps:

SMS-based 2FA

Various companies use SMS-based 2FA to verify their customers’ identities. This type of authentication includes sending a unique one-time passcode or OTP via SMS to customers once they have correctly introduced their username and password. Customers often have a limited time to check the OTP and add it to their website. Once the time limit has passed, customers must request an OTP again. While this method is widely used, it is considered one of the least safe ways of authentication, so companies that manage personal information may opt for more advanced techniques.

Push notifications

Another common type of 2FA is push notifications. When users log in to a website, they get either an email or SMS message stating that somebody tried to access their account. Then, they can either confirm it was them or deny access if it wasn’t them. These notifications often contain the exact time when the tentative log-in happened and the IP Address of the person who tried to access the account. No password or tokens are required for this method, just a button click.

2FA Software Tokens

This 2FA method requires users to download an authentication app such as Google Authenticator, Microsoft Authenticator, or Lastpass. These are all free to install and contain time-limited codes, usually composed of a set of numbers. These codes, or soft-tokens, change every other minute. When logging in to a website and adding the username and password, the website will require users to add their unique code. Users must open their authenticator app, check the code and add it to the website. The apps enable users to connect to multiple websites, so having one app is enough. 

Differences between 2FA and MFA

MFA, or multi-factor authentication, is a method that requires more than two authentication factors. These factors are taken from the list above: something users have, something they own, or something they are. The only difference between the two methods is that while 2FA requires only one extra factor from the list, MFA requires at least two.

Despite MFA seeming more complete and more secure, it is difficult to determine precisely which method adds more security. This is because it very much depends on the types of authentication chosen. For instance, as we have seen, SMS-based authentication is not highly reliable, whereas a fingerprint or iris scan is much more challenging to fake. Generally, however, the more layers of security, the better.

Customer identity processes help to prevent money laundering crimes.

Advantages and disadvantages of 2FA and MFA

Advantages of using 2FA and MFA include, naturally, higher security and higher flexibility as both employees and customers can access systems from anywhere without risking their safety, reduced costs in help desks and security management, and increased credibility and trust from customers. 2FA and MFA are also convenient for customers, as they don’t have to go out of their way to authenticate themselves and most users have a mobile phone on hand. This creates a more frictionless experience for them, which also helps increase customer satisfaction.

On the other hand, customers want as few steps as possible when logging into their accounts, and it takes longer to go through various authentication steps. So, there has to be the right mix of security and speed. MFA also isn’t free for companies, and they can’t build a security tool like this themselves, so they have to outsource it to a third party. Luckily, various platforms offer 2FA and MFA, so there isn’t a lack of choice or availability in the market.

About Imburse

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.

In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or needs, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.

What does ASAP mean in payments?

ASAP isn’t just the acronym we use in our everyday lives. In payments, it holds a different meaning. If you are based in the US, you may already be familiar with this term. Though it is unlikely you will come across it in your day-to-day, ASAP is an essential system for federal payments in the US. This article explains what ASAP stands for in the payments industry and how it works.  

What is ASAP?

ASAP, short for Automated Standard Application for Payments, is an electronic payment and information application used by federal agencies in the United States. Initially, it was developed by the Financial Management Service (FMS) and the Federal Reserve Bank of Richmond, which now operates the system. The ASAP allows organizations receiving federal funds to draw these funds from pre-authorised accounts established by the agencies issuing the payments. It is free to use for both parties.  

Recipient organisations must be enrolled by the federal agencies, responsible for authorizing every payment, managing their accounts, and providing technical support. The list of recipient organisations includes state and local governments, educational institutions, banks, other financial institutions, and vendors and contractors. ASAP only applies to organisations receiving federal funds- it doesn’t apply to any other party or individual. In this tax year of 2019, close to half a million payments were processed, totaling $594 billion.

How organisations can enroll in ASAP

Receiving organisations must have a Data Universal Numbering System (DUNS) to receive a payment via ASAP. They can get one for free by filling in this form. Organisations must also have an active registration in the Central Contractor Registry (CCR), and the registration is also free of charge. Once organisations meet these two conditions, the process goes as follows:

  1. Federal Enrollment Initiator starts the enrolment process by entering the DUNS, TIN, contact information for the Point of Contact, and type of organisation.
  2. Organisations can enroll online. The Point of Contact nominated by the organisation needs to confirm that all the information entered is correct and to enter information for the other officials who have roles in ASAP.
  3. The Head of Organisation approves this information.
  4. The Authorising Official confirms that all information is correct and identifies who in the organisation will use ASAP.
  5. The Financial Official enters the organisation’s bank account details.
  6. ASAP notifies the federal agency’s Federal Enrollment Initiator, who completes the enrollment.
  7. Organisations are notified that the enrollment process is completed, and the funded accounts are ready.
  8. Organisations can log in to ASAP to request payments, see payment status or get reports. They will also get a ASAP ID which they can use for reference.

Recipient users and roles for ASAP

Various roles must be fulfilled to receive federal funds through ASAP, some of which we mentioned in the section above:

  • Initial Point of Contact – added by the federal agency, self-designates all roles, and adds additional users
  • Point of Contact (POC) – adds users and can modify their roles
  • Head of Organisation (HOO) – approves changes to users and their roles
  • Financial Official (FO) – enters and manages bank account details
  • Authorising Official (AO) – Adds Payment Requestors and Inquirer Only users
  • Payment Requestor – initiates payment requests
  • Inquirer Only – Runs reports

When will organisations see the funds in ASAP?

The US Treasury may take up to 10 business days to validate bank information. Once this information is validated, the federal agency can enter the organisations’ ASAP ID into their financial system and link it to ASAP. Once this link is established, the funds will be transferred to the correspondent account. ASAP suggests waiting at least 15 days for the payment to be completed after enrollment.

Types of ASAP payments

There are two main types of ASAP payments: Fedwire and ACH transfers. ASAP payments can be processed on the same day or scheduled for a specific calendar date, depending on the type of payment organisations choose. Let’s check the differences between both:

Fedwire

Fedwire offers real-time payment settlement, so payments are processed instantly. Despite being quicker than ACH payments, Fedwire transfers often come with added costs, such as bank fees, making them more expensive. You can check their 2022 pricing structure for a detailed overview of all the potential costs and extra expenses you may be charged with.

ACH

ACH offers next-business-day settlement or same-day settlement for payments requested before 2:30 pm Eastern Time. Though you can’t receive your funds instantly, there are fewer costs associated with ACH transactions. The ACH network is often the preferred payment system for ASAP payments, as it is cost-effective and secure and enables payments to be scheduled for later dates. Have a look at our latest post if you want to know more about the ACH network and how it works.

payments middleware are the connector between enterprises and providers.

Advantages of ASAP

  • Flexible payment options (Fedwire or ACH network)
  • Live customer support
  • Unlimited report access
  • Web-based and secure
  • Reduces the liability of having funds held outside of the Treasury
  • There are no fees to use ASAP

ASAP offers a range of training opportunities for organisations that wish to learn more about it. You can visit their Resources page to access their webinar training and further information and check their user guide.

About Imburse

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.

In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or needs, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.

What is embedded insurance?

Embedded insurance is a relatively new term that is transforming the insurance industry and shows no signs of slowing down. In fact, according to an InsTech London report, the embedded insurance market is expected to grow to $722bn in GWP by 2030. This article will dive into this industry phenomenon and explain the benefits it can bring to customers and insurers.

What is embedded insurance?

Embedded insurance is offering insurance services alongside other products that customers are purchasing. Think about, for instance, buying a car. Customers can purchase their vehicle and car insurance simultaneously as a bundled deal with embedded insurance. Buying insurance services stops being an ad-hoc task, as it is provided as a native feature included in the website/platform that customers buy their products from. 

With more customers turning digital to buy products, e-commerce has boomed drastically, and other industries were forced to meet customers there. Embedded insurance provides the customers with the convenience they are looking for, as it fits seamlessly in their online customer journeys. Embedded insurance is offering insurance services alongside other products that customers are purchasing.

Aside from the e-commerce boom, customers’ lifestyles have changed significantly over the past few years. There are fewer people buying cars, for instance, and more people renting e-scooters. Embedded insurance is an opportunity for insurers to reap the benefits of these lifestyle changes and adapt to their customers’ needs.

Examples of embedded insurance

There are many examples and use cases for embedded insurance, particularly in the mobility products arena. Aside from purchasing or renting a car, which we mentioned above, you can also:

  • buy travel insurance when purchasing flights
  • get Host Guarantee insurance when using home rentals platforms
  • opt for add-in insurance on your new mobile phone
  • add insurance protection to your new home appliances online

Most of these use cases fall into the P&C space.

Payment Service Providers are responsible for authorising a payment

Benefits of embedded insurance

Embedded insurance brings a significant number of advantages to both customers and insurers. Let’s explore how it can benefit both:

Benefits for customers

For customers, embedded insurance means they can get their insurance policies when it matters the most to them and the products that matter the most to them. Easy access to insurance at the time of purchase means that customers don’t have to look for insurance afterward and get more personalized and affordable deals. It is a two-for-one packaged offer that is more convenient for them.

There is an industry-wide emphasis on personalisation and its benefits in improving customer satisfaction, reaching new customers, and retaining existing ones. Embedded insurance is a part of this journey towards more personalised products, services, and customer experiences. It offers customers an end-to-end, frictionless experience that is likely to make them more satisfied with their customer journey and more willing to purchase insurance services.

As the saying goes, “Insurance is sold, not bought.” Buying insurance products can often be a cumbersome task that many will avoid, either due to complex customer journeys or simply because they think insurance isn’t necessary. Embedded insurance helps close the protection gap between customers and their products.

Benefits for insurers

For insurers, embedded insurance means reaching more customers while having lower-cost distribution and low acquisition costs. While the social media era makes it easier for insurers to know where their customers are, what they are seeing, and what they are interested in, it also comes with its downfalls.

Due to very high competition and high customer demands, getting customers’ attention and engagement is a challenging task. Embedded insurance helps insurers get their products and services to their customers in a much simpler and more effective way when they need it the most.

Insurers can also access more data that can be used to improve existing products, reduce underwriting risks, and explore new revenue streams. Most importantly, embedded insurance is here to stay, so failing to adopt it may make it increasingly difficult for insurers to remain relevant. However, reaping the benefits of embedded insurance isn’t as easy as it may seem.

Challenges of adopting embedded insurance and how to overcome them

The most significant barrier to adopting embedded insurance lies with the reliance on decades-old technology stacks. Large insurers that have been around for a long time still entirely rely on their traditional IT infrastructure, which hasn’t been changed or updated. Embedded insurance is a newer phenomenon that requires new and advanced technology. However, insurers struggle to connect to new technologies, as these integrations are highly complex, lengthy, and expensive. Aside from that, they require a lot of resources and expertise.

Embedded insurance’s biggest challenge is an excellent opportunity for collaboration with third parties that offer innovative solutions. For instance, in the payments space, insurers benefit from having a solution like Imburse to connect to the payments world and optimize their payments system. This digital transformation would be incredibly lengthy and costly without a third party. It is also essential to trust the subject matter experts and receive as much guidance as possible for insurers to make sure they make the right business decisions, as these can make or break the success of any product.  

About Imburse

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.

In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or needs, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.

What are card-on-file transactions?

Card-on-file transactions are up there among the fastest and most convenient payment types. Customers want speed above all else, and nothing says speed more than the simple press of a button. Card-on-file transactions are adaptable to any industry and work particularly well with subscription-based businesses such as insurance, streaming services, or utility services. This article explores card-on-file transactions, how they work, and their benefits and disadvantages.

What are card-on-file transactions?

Card-on-file transactions are transactions where the cardholder’s details don’t have to be introduced. The cardholder needs to authorise the merchant to store their card details for future purchases. Once payment details are stored, every purchase from then on can be initiated simply by clicking a button. In the case of recurring payments, the card details are held, and the price automatically leaves the customer’s account on a set date.

Card-on-file transactions are prevalent in subscription-based services such as video and music streaming platforms. These services already contain all the payment information they need from the customer and are allowed by the customer to charge their card on a set basis. But card-on-file transactions are becoming increasingly popular in many other business models. E-commerce, for instance, is an industry that experienced exponential growth and that is helping shape other sectors too. Marketplaces like Amazon or eBay enable customers to purchase products using the card details already stored on the platform.  

Millennials are more likely to use online payments.

Advantages of card-on-file transactions

The main advantage we see is the speed and convenience of transactions for customers. Offering customers a fast and frictionless payment experience with one-click checkouts gives businesses the upper hand in retaining them and making them loyal to the brand. When competition is sky-high and new innovative players are frequently coming up, this is fundamental to nail. The less work the customer has to do, the better.

Enterprises can also leverage the latest technology to ensure data protection and payment security with card-on-file transactions. Technologies such as tokenisation and encryption are prevalent for card-on-file transactions, and it’s easy to see how they are relevant.

Disadvantages of card-on-file transactions

When it comes to the disadvantages of using card-on-file, one of the most significant risks of card-on-file transactions is safely storing this payment data. This can easily be a concern for customers, as they may not be aware of the security tools used to protect their data. However, aside from the potential reluctance from customers, these transactions are as safe as any other payment method.

Customers also do need to update their card details should they lose their card or should the card expire. This is an added task to the simplicity of card-on-file payments and a distinguishing factor between card-on-file and digital wallets. Customers don’t have to worry about updating their payment details with digital wallets, even when their card expires. These details are updated automatically, and the digital wallet is ready to use at any time, giving customers more flexibility and assurance. Because customers need to update their details on their accounts, card-on-file has a more significant risk of customer churn due to lost, stolen, or expired cards.

Payment networks regulations for card-on-file transactions

Card networks often issue their own set of regulations to protect customer data. These apply primarily to how merchants handle and manage stored payment credentials. While each payment network’s rules may be slightly different, there are some general terms that all of them include. These are:

  • Merchants must obtain consent from the cardholder before storing any payment details
  • Merchants must disclose precisely how the cardholder’s payment details are stored and when they will be used
  • Merchants must notify cardholders whenever there are any changes to the terms of use
  • Merchants must use specific data indicators to identify transactions made using stored payment data
Payment references are important for companies to match the payment with the customer account.

Card-on-file EMV payment tokenization

We have mentioned security as a concern for card-on-file transactions, and statistics back it up. In the UK, in 2020 only, the value of annual losses from CNP fraud reached £452.6 million (Statista report). This is a worrying figure that has been increasing over the past two decades. To prevent fraud and help protect customers’ card data, merchants can use various security technologies such as 3D Secure and Tokenisation. While these technologies are vital, they also can’t affect the user experience and the seamless journey customers expect.  

EMV payment tokenisation ensures that fraudsters can’t access the data stored in merchants’ databases. It replaces the customers’ primary account number (PAN) with a unique token. Even if fraudsters can get into the transaction flow, these tokenised numbers aren’t unreadable. This type of security tool enhances data protection while still ensuring that customers get a frictionless experience. You can read more about card tokenisation in our previous article or access a complete guide to payment tokenisation here.

While card-on-file transactions come with their risks, they are a very convenient way for merchants to process transactions,  and they are also heavily regulated. When storing and managing cardholders ‘ details, it is essential to keep in mind both the payment networks’ set of regulations and the international standards for payments, such as the PCI DSS, as meeting these standards ensures your customers’ protection.

Imburse can deliver a fully Level 1 PCI compliant solution while offering a truly payment provider agnostic ecosystem and highly customizable user interfaces and journeys. Imburse is PCI Level 1 compliant, delivering a suite of services and features that suit the enterprise’s broad needs.

About Imburse

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.

In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or needs, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.