As a business model, the cloud’s massive resources and ubiquity offers unbeatable value – but it has evolved as a general-purpose solution, and not one geared to the very special demands of financial services. Says James Walker President of the CloudEthernet Forum
As business moves to the cloud, however, developments are accelerating and industry forums are emerging with the power to control and shape tomorrow’s cloud structure and experience. This presents a real opportunity for the finance industry to become involved and make sure that it will be served by a cloud that is fit for finance.
In this article we look at just three areas where the cloud could have so much to offer financial services and yet, in its current form, falls short of what could be achieved. These are simply pointers to encourage further discussion and, above all, participation by major players in the finance industry.
Controlling the cloud for compliance
The whole evolution of the cloud as a universal system of storage, compute and communication has been geared by the need to deliver on demand: “ask and ye shall receive”.
If the shortest or most obvious routes for transmitting data are in any way compromised, the network will divert its messages any way it can, rather than fail to deliver. The e-mail from next door will reach you, even if it is forced to travel via New York, London and Tokyo to do so.
This is one fabulous achievement, but it presents real and growing problems as governments wake up to the strategic value and implications of all this data on the move. New regulations are beginning to focus on this area and tighten restrictions on the free flow of information.
Banks in Canada, for example, can no longer rely on standard MPLS services for shifting data between branches, because MPLS guarantees delivery but does not specify what route is taken. Any slowdown in local routes, and data is likely to be diverted south of the border via US nodes to ensure timely delivery – but the Canadian Government no longer allows its citizens’ personal data to be sent to or via the USA.
In the United States, recent extreme weather means that the East Coast regions are considered to be meteorological danger zones. So banks are required to have backup and emergency facilities that avoid the Eastern seaboard. Ironically, in view of the last example, it can mean that a typical London, New York, Phoenix Arizona financial transaction may have to be diverted via Canada to comply with such regulations.
Ah… the problems of the rich! International players can travel to Zurich to discuss financial arrangements with their personal bank, but they may not be able to do the same when visiting their Swiss bank’s Manhattan office just round the corner – because the Swiss government does not allow certain personal data to flow out of Switzerland.
These examples are just a glimpse into the growing responsibilities for anyone holding large amounts of data: whether personal data, public data or financial data. To add to this complexity: who does have liability when something does go wrong? You give private data to your bank and then you discover it has got into the wrong hands: is it ultimately the bank’s responsibility? Or does the bank then sue the service provider for letting secure data escape?
What is needed for the financial industry – as well as many other large organisations impacted by these issues – is a fundamental rethink of the cloud’s priorities? How the data is delivered could be as vital as the delivery itself. In fact it would be better to destroy and lose some data than have it delivered via a route that breaks the law.
Mechanisms such as SDN (Software-Defined Networking) are currently being explored that could provide visibility and control into the routes taken by network traffic. These controls are not innate to cloud culture, they must be actively insisted upon by stakeholders that would benefit from it, and this issue is high on the agenda of the CloudEthernet Forum (CEF) – an independent industry body recently created to develop open standards for large global datacenter deployments.
If the cloud is to deliver its colossal benefits to the finance industry, its storage must be specified to location, and its transport routes must be bounded. How this happens, and whether the solution is one that suits the financial industry will depend on early commitment to the relevant forum working groups.
A time-sensitive cloud
Financial traders know all about the threat of latency, how a few microseconds can make or break a deal, and specialist providers have responded with dedicated services guaranteed to reduce latency to a minimum between sites. Carrier Ethernet is playing an important role in this by removing the need for translation between LAN and WAN protocols and providing fast connection between nodes.
However, there are many financial applications where “minimal latency” is not the need so much as “guaranteed latency”. If you are running trading applications that rely on being, say, ten microseconds behind the market, then a provider who promises “latency less than five microseconds 99% of the time” may deserve a pat on the back, but not your custom. Because what you need is “latency less than ten microseconds 100% of the time”. Financial data turns poisonous a lot faster than any foodstuff, so data past its “sell-by microsecond” may be no longer actionable and had rather be trashed than used.
Another angle on the importance of controlled latency is the “split brain” problem that can arise between sets of mirrored data. It makes sense to build in redundancy and have a secondary backup system that can step in as soon as a fault arises in the primary system. At that point the secondary system becomes primary and timing must be very strictly controlled to stop data being updated independently on the two systems. Once the supposedly identical mirror sets are allowed to diverge, it can become a nightmare to reconcile the two.
As in the routing example, the Internet has been brought up like a good boy scout to “do its best”. But what is sometimes needed is not “the best” but rather a clearly specified standard – whether by geography or time lapse. This is an important issue that is not innate to cloud philosophy, so it needs pressure from concerned stakeholders to get timing on the agenda for future cloud development.
Can’t we just use private clouds?
There is an obvious solution to the challenges discussed so far: forget the public cloud and still take advantage of the cloud concept by commissioning your own private cloud purpose-built to meet your exact requirements.
This is fine in theory, but what do you need from your private cloud, and do you have the necessary resources? If computation power is what you want, then it would be very costly to build anything to compare with the massive resources available from public cloud providers.
While storage of data might be wisely constrained to a secure private cloud, there are certain tasks that are better farmed out. For example the colossal number-crunching needed to rebuild some of the today’s complex trading algorithms would be beyond the power of any normal company datacentre. But cloud services can provide a “sandbox” big enough for any experimental algorithm to play in until it is proven.
This would be by far the fastest route to accelerating development of trading systems ahead of competitors but, even without the use of private data safely stored in-house, the algorithm itself becomes very interesting to competing companies. So security in the cloud again becomes a very hot topic.
It is an opportunity
A cloud that promises to do its best, and not bother you with the details as to how it achieves it – that is what we have inherited and it serves most of the world very well on those terms. But it is not a cloud that large parts of the finance industry can trust.
It does not have to be that way. The cloud is changing fast right now, and there are industry forums, including the CloudEthernet Forum, that are having an increasing say in how it is changing. These must be explored.
Find a forum that addresses the sort of interest that would serve your business. Join it, become active and make sure your voice is heard.
Service providers, equipment vendors, software developers and systems integrators are already joining the CEF to make sure that tomorrow’s cloud is shaped to serve their needs. Don’t let the needs of the finance sector be overlooked in this rush.
The value of digital identity in payments
By Vince Graziani, CEO, IDEX Biometrics ASA
In ever more challenging times, the payments industry needs to maintain trust by finding a way to protect consumers from the constant threat of payment fraud and theft. Consumer’s wishing to limit physical contact during the current pandemic has led to the popularity of contactless payments which has accelerated in multiple territories.
In the US, one in five shoppers have made a contactless payment for the first time during the pandemic according to research published in August by the National Retail Federation and Forrester. The bad guys have unfortunately taken note. This has led to a real need for the industry to fight back with enhanced security.
At the 2019 Money2020 Europe conference, there was a universal call for a comprehensive form of digital identity (ID) to enable digital payments. A form of digital identity that would make cashless payment interactions – secure, intelligent, efficient and private. The feeling was unanimous: without functioning digital ID, the payments revolution will stall.
Unlocking the payment ecosystem
In an increasingly connected world, consumers find themselves needing to authenticate their identity daily. Whether that be with financial institutions, retailers, government departments or healthcare providers. Yet, it is rarely known where consumer data is stored, how secure it is or how it may be traded. Privacy regulations such as the European Union’s General Data Protection Regulation (GDPR) have attempted to restore some trust, but the industry still has a way to go.
Currently, authentication is fragmented and unwieldy. It requires a mix of hardcopy documents, online login credentials and digital wallets. This is not only frustrating for consumers but leads to the reuse of passwords and PINS that make the user vulnerable to fraud. Mastercard believes there is a clear need for a verified identity that is accepted globally and across multiple digital touchpoints and doesn’t involve aggregating more information in potentially vulnerable data stores, but instead gives the individual control over their identity data.
An integrated digital ID scheme would enable the payments industry to fight fraud on a global scale. It would also meet the pressing need for a payment authentication system that consumers can access anytime, anywhere, and on any device. This joined-up approach is vital to ensure no consumer is left behind as the world continues its digital transformation.
Providing access to a singular, unified digital ID will not only streamline the identity process, but also unlock new and enhanced consumer experiences during this digital transformation. Particularly in the new breed of smart buildings and cities, where everything from travel to payment systems will be connected to a user’s identity.
What form should our digital ID take?
While the need for digital ID is well established, the form it will take is less clear. There are two main challenges that payment providers need to overcome with a potential new identity solution: onboarding new users and ensuring the digital ID is compatible with all transactions.
Placing individual consumers at the centre of their own digital interactions will ensure confidence and broader adoption of new technology payments and services. Yet, for this to be successful, the payments industry must adopt a process that is simple, familiar and easy to understand.
Fingerprint biometrics as a digital identity
The use of fingerprint authentication to unlock a smartphone is now deeply entrenched. As far back as 2016, 89 percent of users with compatible iPhones were using fingerprints to unlock their devices. The solution for a frictionless onboarding has been at our fingertips the whole time.
Payment providers can incorporate fingerprint biometric sensors directly into their new breed of smart payment cards. A biometric payment card may be a new concept, but payment providers and retailers across the world are already using contactless card technology in the payment process, so it is the next logical step. Consumers are now used to carrying a card and tapping it for contactless payments. Plus, as we have seen, consumers are used to using their fingerprint as an authentication mechanism. Perhaps biometric cards could be the catalyst for financial inclusion desired by the World Bank, as they don’t require the ownership of expensive smartphones in developing nations.
Building a chain of trust with biometrics
Continuous developments in payment regulation mean that secure authentication is imperative. Under the second Payment Service Directive (PSD2) European banking regulation, all payment transactions will soon require Strong Customer Authentication (SCA) to validate users at the point of transaction to reduce fraud and increase security for customers. SCA requires two forms of authentication for every transaction above the contactless limit. While one is generally something you have like a smart card, the second can be something you are like a fingerprint. Using a fingerprint means that it can be used across multiple platforms and is always at hand. There should be no trade-off between convenience and privacy and fingerprint biometrics delivers on that expectation.
Biometrics can play an essential role in digital ID, significantly limiting exposure to potential fraud and criminality. The addition of a biometric sensor onto a payment card creates a secure ‘chain of trust’ that indelibly connects the user to the card. Furthermore, digital ID has the scope to be extended far beyond payments and used as a unique identifier in areas such as access, government ID and even across IoT devices.
Securing the future of the payments industry
While the world is becoming ever more cashless, commentators and analysts all agree – without a fully functioning digital ID, the payments revolution will stall. As Tony McLaughlin, Emerging Payments and Business Development at Citi put it recently: “If we fix digital identity, we fix payments”. I couldn’t agree more. Both consumers and the payments industry need a user-centric digital ID that is owned and managed by the individual, so they can unlock the full advantages of a transformative digital payment ecosystem.
Using fingerprint biometrics as a digital ID in a payment card will transform the way people authenticate transactions. This integration would enable consumers to confirm their identity wherever they are, on any device, and across every transaction. It will change the face of digital identity as we know it.
We believe that digital interactions should be privacy-enhancing, secure, intelligent, and efficient. To facilitate this, consumers require a user-centric digital identity that is owned, managed, and controlled by the individual. It is time to place individuals at the heart of their digital interactions globally.
It’s time to press ‘reset’ on travel and expense processes
By Rudy Daniello, EVP of Corporations, Amadeus
Travel & Expenses(T&E) is a large spend category for companies across the globe. In fact, for many firms, T&E is the second largest indirect spend category. While we all know the inherent value personal, face-to-face meetings bring, it’s important to quantify and manage the cost, especially in today’s climate.
While business travel has slowed due to COVID-19, many companies have accelerated their digital transformation during this period, especially in the way their teams work. One area that is under the spotlight as organisations look to transform digitally and control costs and processes better, is T&E.
Poor business travel spend management can frustrate staff, and lead to cost and productivity inefficiencies. Within the context of COVID-19, controlling T&E spend is likely to be even more important, so companies need a clear strategy around their travel and expenses.
To understand how organisations were assessing their T&E at this extraordinary time, Forrester Consulting conducted research on behalf of Amadeus, surveying more than 550 key decision makers involved in T&E solutions at large organisations worldwide.
The report, titled Digital Transformation For Travel & Expense: Balancing Process Efficiencies, Compliance, And Employee Experience highlights the challenges organisations face as they assess their T&E systems and processes before business travel picks up again.
The good news is that nearly three quarters (74%) of respondents agree that the improvement of T&E management processes and tools is critical to reducing costs, increasing efficiency, improving employee engagement, and forms part of their digital transformation.
All of these factors are key business objectives, so how can organisations address their T&E?
Focus on Systems
The research found that a lot of organisations are still relying on outdated systems to manage their travel and expenses. More than one in five (22%) of centralised companies still use spreadsheets to track expenses and just 15% of organisations use a cloud-based T&E solution.
Many decentralised companies also still rely on manual processes – either fully or partly – for their T&E. These outdated processes and systems add pressure on staff, managers, auditors and accountants. Reassess T&E Processes
Having the right systems in place will help rethink T&E processes, from researching hotels and appropriate transport, to making expenses claims post-trip. Travel managers surveyed difficulties around compliance-related expense tracking, reconciliation and auditing as a key challenge.
Three quarters (74%) of travel management leaders want to increase automation to reduce their reliance on manual processes. However, one in five (20%) organisations do not feel they are getting the analytical and reporting capabilities they need, despite data being a core priority.
The research shows that Human Resources (HR) and IT have key roles to play in redefining their organisations’ T&E processes.
Enable Smarter Booking
The research also finds that T&E leaders want to be able to manage the huge amount of content out there so that they can make clear decisions when making travel bookings. Multinational organisations need a global solution so that they can access the best deals and make more informed business travel booking decisions.
Integrated T&E solutions deliver cost and efficiency benefits
According to the research, those organisations that use an integrated T&E tool are much less likely to receive complaints from their traveling staff. More than a quarter (27%) of organisations that use an integrated T&E solution reported zero complaints from employees.
Integrated T&E solutions are essential for companies as they help their employees, take advantage of the best offers for the business trip. They also streamline expense processes, making it quicker and easier to claim and have their expenses approved and paid back.
Firms that do not have integrated T&E solutions report a 29% increase in delays in reimbursing expenses. Almost all (96%) of organisations interviewed that use integrated tools are satisfied with their T&E processes. Nearly three quarters (73%) of them even plan to expand or upgrade further.
Improving T&E is a team effort
What the Forrester Consulting research demonstrates clearly is that there is consensus across the board that T&E systems and processes can be improved.
Three quarters (74%) of IT leaders are focused on improving end-to-end experience of T&E processes, and 73% are committed to improving integration between T&E tools and other systems (73%).
And it’s not just IT leaders who see the value in integrated T&E solutions. More than four out of five procurement managers see improvement of T&E tools and processes as a key part of their organisation’s digital transformation, the highest of any group interviewed by Forrester.
While online conferencing has become the norm for many organisations, nothing can replace the value of face-to-face meetings. When business travel picks up again, companies with integrated T&E systems and processes will quickly see the benefits.
Covid-19 and the rise of remote payment fraud: how do we catch a digital thief?
By Evgenia Loginova, co-founder and co-CEO of Radar Payments
Covid -19 is finding different ways to hurt our finances – and like the virus, the threat is invisible.
Each time we tap our payments cards or make a purchase online, there’s always a risk of getting caught out by a digital fraudster. Yet during the global pandemic, the issue has not only escalated, but the ways in which people are conned have changed to reflect new social distancing and lockdown behaviours.
Indeed, the crisis has transformed the way we buy and shop – and those that are being targeted most are the millennial generation.
What are we doing differently?
It’s all down to the way we are interacting with service providers.
Since the World Health Organisation issued a pandemic in March, global payment fraud went up 5% with 100 million suspected fraud attempts from the period between March – April.
According to TransUnion, the firm analysing the data, billions of people around the world have been forced to spend time at home, which has led to industries such as financial services, ecommerce and healthcare to experience disruption in ways that have not been seen for generations.
This is due to the spike in online transactions, as more people adjust to the new normal of spending less time at the shops and more time doing everything on their digital devices. And with so many transactions shifting online – fraudsters are spending more time there too. These culprits are fully remote and are always on the lookout for vulnerable victims – as well as vulnerabilities within the payment systems.
Digital savvy criminals
Businesses that come to grips with the problem will manage to stay afloat – but they won’t be able to do it without fraud prevention tools that can identify suspicious activity without adding friction to the customer payment experience. In other words, customers must be protected from theft – as well as the truth. They shouldn’t even know that they’re under attack in the first place. It’s all about prevention- or at least as much as what technology can provide.
Without some technological intervention, there won’t be prevention, as companies simply cannot keep up with the proliferation of digital thieves. Culprits are operating individually or in criminal gangs or both – and usually in countries that are often forgotten by global leaders. For example, the telecommunications sector witnessed a 76% increase in card fraud a month after the global pandemic was declared – and the top country for suspected fraud origination was Timor-Leste – how many people even know where that is? (East Timor – formerly part of Indonesia, if you must ask!). Financial services saw an 11% increase in identity theft that same period – with most suspected culprits based in war torn Syria.
Despite their location, fraudsters are quickly adapting to consumer behaviour, and finding ways to attack. With less in-person transactions taking place, criminals are doing things like infecting online points-of-sale with malware that enables them to skim credit card details of previous customers.
From our experience with our fraud detection networks the numbers point out that missing card fraud, in particular, has shot up by 70% over the past few months. This is where people’s card details are being used by criminals to make purchases, when they are not in possession of the card. They’ve just stolen the numbers and additional critical security information such as expiry date and CVC2/CVV2.
Identity theft is also on the rise, as well as phishing and social engineering attacks. For example, in the UK alone there’s been a rise in criminals impersonating trusted organisations like the NHS or HMRC to trick people into going online and paying for services that are fake or giving away their money and information to charities and other organisations that are fake.
Local councils in Britain have noted a 40% increase in reported scams since the start of the pandemic, while Citizens Advice believes one in three people have been targeted by a Covid scammer.
This is a problem that is too big to ignore. The moment the fraudsters have your payment details – whether they’ve stolen it or you’ve given it to them under false pretences, the problem leads to losses for the victim and the businesses and organisations too.
With Covid and lockdown, fraud has gone fully remote and everything from e-commerce and digital banking has been a target for abuse.
In this ‘new normal’ world we find ourselves, the prevention of suspicious transactions through customer profiling and enhanced analytics, use of AI and machine learning models becomes very important.
Fortunately, digital theft is now being taken seriously. Spending on security has skyrocketed in recent years, and the sector supplying protection predicted to grow by $6 Trillion by 2021.
Businesses that survive the pandemic must be able to anticipate and strive to block 100% of the digital theft they encounter. But to win the war against these online criminals they require a robust security strategy.
Here are some tips to consider.
Security policies should be enforced internally and across payment channels and distributed networks. This includes the core and cloud networks as well.
Security gaps should be closed. A lot of risk can be mitigated by performing regular checks and plugging security holes, settling on a unified security framework based on interoperability, centralising visibility and control, segmenting the network to restrict the fluidity of malware and high performance, and deep integration.
Invest in AI capabilities. Artificial intelligence possesses the sophisticated power to replicate the analytical behaviour of human intelligence, as well as enable decision-making in real time and offer predictive security notifications.
Investing in AI based security systems can significantly reduce digital attacks and spot suspicious activity. The best ones are integrated with artificial neural networks (ANN), which combined with deep-learning models, can speed up data analysis and decision-making. It also enables the network to nimbly adapt to new information it encounters in the network.
Prevent fraud in online and then investigate. It is crucial to stop fraud before it happens. As most of the payments became remote, reaction should be super fast: high-risk transactions should be declined, low-risk passed with no friction and suspicious challenged. This raises the importance of finding the balance between customer experience and risk mitigation as never before. And even with AI and enhanced analytics for complex cases an expert with natural intelligence should be equipped with all needed information for relevant and adequate decision-making.
Digital crime won’t disappear as long as there’s an opportunity that criminals can exploit. As the world braces for a new wave of lockdown measures, businesses operating in the online sphere must remain vigilant and prepare for more attacks – or face losses that could be impossible to recover from during these challenging economic times.
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