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BANKS NEED TO BE THE FRONTRUNNER IN CONTACTLESS PAYMENTS

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Tony Virdi, VP of Banking and Financial Services in the UK & Ireland, Cognizant

NFC technology is currently the most prominent and visible trend in the banking industry. The advantages are huge, especially for smaller transactions. Since its inception, banks have been joined by other industries such as telecommunication and IT companies. Vodafone and Visa Europe, for example, have teamed up to launch the Vodafone Wallet allowing customers to make contactless payments via a special SIM card with embedded NFC technology.

The introduction of ApplePay alongside the launch of the iPhone 6 last month has the possibility to disrupt traditional payment methods even further.

So what can the banks do to ensure they stay ahead of the new competition?  Updating cards to include ID-readers, transport tickets and wireless couponsare already a step in the right direction.

Here are some steps that can help banks with the implementation of cashless payments:

Tony Virdi

Tony Virdi

Drive an aggressive NFC payments strategy:  Organisations like Vodafone, PayPal, Google and now Apple have been very proactive and vehement supporters of NFC payment solutions. Now, the leading solutions are moving toward marginalising banks by substituting bank account usage via cash or debit cards with proprietary pre-paid cards, cloud wallets or credit cards. At this rate, non-banking institutions will soon hold swayover the contactless payments market, demanding some or all of the transaction fees. Unless banks move to increase their influence in the contactless payment market now, they risk relinquishing much of their traditional role – and fees – to major non-financial players. In other words, banks need a more aggressive contactless payment strategy in the coming years.

Drive customer centricity by capitalising on customer trust: Banks need to invest in convincing consumers that the way banks are implementing NFC technologies is safer, more convenient and more cost-effective than the approach being taken by other companies. Here, banks have a competitive edge in that customers trust them more than other companies to look after their money and already rely on them for mobile banking. A successful campaign could help quicken the adoption of contactless payments and, once banks’ solutions have reached critical mass, it will be more inconvenient for merchants and consumers to switch.

Establish a robust risk management framework to address privacy and security concerns: Privacy advocates are particularly concerned about this technology; it is feared that having this much information available “in the open air” will inevitably lead to problems. Using a mobile device to pay at the POS presents a complex security challenge because the handset contains multiple applications that can access the Internet. Furthermore, businesses have a tendency to focus on the security of the device itself rather than the security of the network, which is the point of vulnerability where a fraudster can maximise an attack, infiltrate the system and therefore pose the biggest risk. Also, contactless payments pose the risk of customers being doubly charged without noticing if, for example, the contactless bank card is placed too close to the reader at the same time as the prepaid, contactless travel card. The vulnerability of exposing client sensitive information to third parties also poses a challenge for banks. As such, a bank must deploy a robust risk management framework in its ecosystem to ensure appropriate controls and mitigation measures are in place to safeguard against such vulnerabilities. Some banks have started implementing risk control measures to limit the amount that the customers can pay using contactless payments services, adding a security feature to this payment method.

Increase collaboration synergies among the parties involved: NFC-based payments rely a lot on the collaboration between banks, mobile carriers, card networks and merchants. Unless all the stakeholders are aligned, it is difficult to provide the customers with a seamless customer experience in NFC solutions. To ensure they are ‘first-to-market’ with such services, it is important for banks to increase collaboration efforts with the different partners. Data governance and clarity on who manages the solution and its data are also important here.

Understand customer adoption levels: Banks have to undergo a strategic evaluation of the preferences of their target customer segments and choose a medium best suited to their product positioning objectives. This way they can make sure consumer adoption is maximised.

Some countries have already seen strong adoption of NFC payments, but not all bank cards and smartphones are equipped with NFC technology. Therefore it is very important that banks increase collaboration with third parties and set strategies for a successful implementation of contactless payments. One thing is for sure: banks cannot avoid it.

Banking

Citigroup considering divestiture of some foreign consumer units – Bloomberg Law

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Citigroup considering divestiture of some foreign consumer units - Bloomberg Law 1

(Reuters) – Citigroup Inc is considering divesting some international consumer units, Bloomberg Law reported on Friday, citing people familiar with the matter.

The discussions are around divesting units across retail banking in the Asia-Pacific region, the report https://bit.ly/3pD57WP said.

“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy,” a Citigroup spokesperson told Reuters.

“Many different options are being considered and we will take the right amount of time before making any decisions.”

The move, part of Fraser’s attempt to simplify the bank, can see units in South Korea, Thailand, the Philippines and Australia being divested, the Bloomberg report said.

However, no decision has been made, according to the report.

Revenue from Citi’s consumer banking business in Asia declined 15% to $1.55 billion in the fourth quarter of 2020.

The divestitures could be spaced out over time or the bank could end up keeping all of its existing units, the Bloomberg report said.

The firm is also reviewing consumer operations in Mexico, though a sale there is less likely, the report said, citing one of the people.

Last month, New York-based Citigroup beat profit estimates but issued a gloomy forecast for expenses. Finance head Mark Mason said the lender’s expenses could rise in 2021 in the range of 2% to 3%, weighing on its operating margins. (https://reut.rs/2ZwXRB1)

(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)

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Banking

European shares end higher on strong earnings, positive data

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European shares end higher on strong earnings, positive data 2

By Sagarika Jaisinghani and Ambar Warrick

(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.

The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.

The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.

Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.

Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.

But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.

“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.

“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”

Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.

The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.

The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.

London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]

French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)

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Banking

ECB plans closer scrutiny of bank boards

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ECB plans closer scrutiny of bank boards 3

FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more closely at diversity within management bodies, ECB supervisor Edouard Fernandez-Bollo said on Friday.

The ECB already examines the suitability of board candidates in a so-called fit and proper assessment, but rules across the 19 euro zone members vary, so the quality of these checks can be inconsistent.

The ECB plans to ask banks to undertake a suitability assessment before making appointments, and they will put greater emphasis on the candidates’ previous positions and the bank’s specific needs, Fernandez-Bollo said in a speech.

The supervisor also plans more detailed rules on how it will reassess board members once new information emerges, particularly in case of breaches related to anti-money laundering and financing of terrorism, Fernandez-Bollo added.

Fernandez-Bollo did not talk about enforcing diversity quotas, but he argued that diversity, including diversity in gender, backgrounds and experiences, improves efficiency and was thus crucial.

“Supervisors will consider furthermore all of the diversity-related aspects that are most relevant to enhancing the individual and collective leadership of boards,” he said.

“Diversity within a management body is therefore crucial … there is a lot of room for improvement in this area in European banks,” he said.

(Reporting by Balazs Koranyi, editing by Larry King)

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