Securing the digital economy

Premier League

Today’s so-called digital economy is fostered by the “new-normal” way of doing things, such as retail sales, meetings, events, education, entertainment, payments, and more. As the UNCTAD notes, amid slowing economic activity, Covid-19 has led to a surge in e-commerce and accelerated digital transformation. Businesses and consumers have increasingly gone digital to provide and purchase more goods and services online. Such behavioral changes have raised the share of e-commerce in global retail trade from about 14 percent in 2019 to about 17 percent in 2020.

Not surprisingly, cybersecurity risks have been on the rise as well, with current defenses being challenged and weaknesses being exposed through the proliferation of work-from-home arrangements, as noted in a Forbes article. Cybercrime (also called computer crime), as defined by Britannica, is the use of a computer as an instrument to further illegal ends, such as committing fraud, trafficking in child pornography and intellectual property, stealing identities, or violating privacy. Cybercrime, especially through the Internet, has grown in importance, as the computer has become central to commerce, entertainment, and government.

For instance, as recently reported in the South China Morning Post, Hong Kong has experienced a boom in investment scams, with cases more than tripling and losses increasing 20-fold. Police investigators say there were 725 cases of investment scams in the first seven months of this year—accounting for some HK$2.5 billion in losses. This year also marks the first time that fraudsters have stolen non-fungible tokens.

Another recent example comes from Japan, where, as reported by Mainichi, a spate of fraud cases has been perpetrated by scammers using online dating applications to defraud people after convincing them to invest in virtual currencies that are difficult to trace. It is believed that such cases have emerged amid an increase in online dating, as the spread of coronavirus infections has resulted in fewer face-to-face encounters.

Now, how is the Philippines doing in terms of cybersecurity? It is worth highlighting that the Philippines ranks 36th out of 160 countries featured in the National Cybersecurity Index (NCSI) held and developed by the e-Governance Academy Foundation. NCSI measures the cybersecurity capacities of a country, as implemented by its central government. The NCSI of the Philippines is 63.64, while its Digital Development Level (DDL), which combines ICT development and network readiness, is just 46.33.

Interestingly, the Philippines and Japan have the same NCSI of 63.64, although the DDL of Japan is 78.92. This means that cybersecurity in the Philippines is ahead of its digital development (i.e., NCSI > DDL), while cybersecurity in Japan appears to be lagging behind its digital development (i.e., NCSI < DDL). Exhibiting the same trend as Japan are the Republic of Korea (ranked 29th, NCSI = 68.83, DDL = 81.55) and Singapore (ranked 16th, NCSI = 80.52, DDL = 80.94).

On the relationship between digitization and cybersecurity, according to McKinsey & Company, fundamental tensions can arise between the need to digitize and the need to protect an organization. If cybersecurity teams are to avoid becoming barriers to digitization and, instead, become its enablers, they must transform their capabilities along three dimensions. One, they must improve risk management by applying quantitative risk analytics. Two, they must build cybersecurity directly into the value chains of their respective businesses. Three, they must support the next generation of enterprise-technology platforms, which include innovations such as agile development, robotics, and cloud-based operating models.

Here in the Philippines, a promising development is Senate Bill 2380 (The Bank Account, E-wallet, and Other Financial Accounts Regulation Act), which aims to protect the public from fraudsters who target bank accounts and e-wallets. The Bangko Sentral ng Pilipinas (BSP) has expressed its support for this legislative measure, as it will strengthen the legal framework for financial consumer welfare and foster greater public awareness of cybersecurity. Amid the rise in online transactions during the pandemic, the bill is also expected to strengthen confidence in the use of electronic payments and promote financial stability.

The BSP is particularly aware of phishing, where scammers pose as legitimate entities to obtain sensitive information by doing any of the following: 1) illegally accessing individuals’ online accounts; 2) opening bank e-wallet accounts under fictitious names; and 3) using other people’s identification documents to receive, transfer, or withdraw proceeds derived from suspicious activities or cybercrimes.

Thus, the BSP strongly advises banks to ensure that consumer assistance helpdesks are always made available. There must also be increased surveillance on online banking systems and activities during holidays or long weekends. Accounts reported by clients as fraudulent or suspicious should be immediately blocked. Procedures to resolve disputes should have a quick turnaround time.

Indeed, securing the digital economy will mean ensuring economic survival.

Dr. Ser Percival K. Peña-Reyes is the Associate Director of the Ateneo Center for Economic Research and Development.