Lee Hills, founder of SolutionsHub, offers traditional investors advice on how to approach initial coin offerings
As the world goes digital, traditional ways of doing business are changing beyond all recognition. Even heavily regulated sectors and practices find themselves being disrupted.
Take investing, for example. Crowdfunding has been around in various guises for a few years now, with several platforms gaining prominence. In the last couple of years, however, a new type has been garnering significant attention – Initial Coin Offering, or ICO.
An ICO is an event where a company releases its own cryptocurrency for funding. It creates a certain number of cryptographic (“crypto) tokens and sells those tokens to its intended audience by establishing a smart-contract (an immutable piece of code published publicly online), with those willing to participate sending Bitcoins or Ethereum to receive tokens.
As a result, the company gets the capital to fund further product development, R&D and expansion and token purchasers get their heavily discounted crypto tokens which can be used to purchases goods and services on the platform, participate in the ecosystem, or other benefits afforded to those with tokens. This way of raising capital is primarily used by companies operating in cryptocurrency and blockchain.
Whilst this may seem like an Initial Public Offering, investors should be aware of the differences. For instance, in an IPO shares always denote a proportion of ownership, which is not always the case with an ICO.
What the token denotes can differ significantly – it might be pro-rata royalty rights, or rights to a product or service. Some ICOs do offer tokens denoting equity, shareholding and voting rights, but these are likely traditionally regulated offerings that require similar processes to an IPO.
The other crucial difference is that IPOs are heavily regulated by the government, with the subsequent paperwork to undertake an IPO and consequences for non-compliance.
Until recently, Cryptocurrency crowd sales were largely untouched by government regulation, meaning a project could launch an ICO quickly with anyone taking part. This is changing with several countries now regulating, or supervising ICOs, a few prohibiting them, albeit the majority still yet to define their approach.
This still relatively liberal environment carries both new opportunities and risks.
What are the opportunities?
One of the major appeals of an ICO is the varying nature of the rights offered. However, similar to the ethos behind crowdfunding, there is a notion that the prime benefit is helping grow the ecosystem, with a side benefit of an opportunity to make a profit selling tokens after the ICO has completed and trading on exchanges.
In most cases, the crypto-tokens released during an ICO are sold at a fixed price (either in Bitcoins or US dollars). That price isn’t backed by anything but the community’s faith in the development team to release a finished the product at some point in the future, so can be quite low.
After the project is developed and launched, the value of the token becomes secured by a working product, usually leading to an increase in price. When this happens, the original backers can sell their tokens for a substantial profit.
For example, during the ICO of Ethereum in 2014, the price of tokens ranged from $0.30 to $0.40 per token. Following the release of the main platform in July 2015, the price rose significantly, hitting highs of up to $3.50. Just one year later and the price had hit a high of $14.90 equating to a return on investment of over 4950 percent for the luckiest participants.
At the time of writing the price is trading above $750.00 on various exchanges.
However, profits aren’t guaranteed. An ICO campaign may fail, or the developers may not be able to deliver on promises.
In the case of the former, all contributions will be returned to senders, as can be coded within the smart-contract. In the latter, the token price will never rise. In that sense, an ICO presents the same risk to investors as an IPO, where shares may not reach projected highs.
There are, however, other risks specific to ICOs that all potential participants should be aware of.
Protecting yourself from risk
As is always the case, the greater the potential reward, the greater the potential risk. The lack of regulation has given rise to scam ICOs, so investors need to know how to spot the warning signs.
In many ways the lack of government regulation has led to a degree of self-regulation, as the community realised that establishing trust was critical in undertaking successful ICOs.
To that end, several best practices were established, including storing contributions in escrow wallets which needed several private keys to access (with one of the keys held by a third party with no ties to the project development), establishing a legal entity for the company and defining terms and conditions for the ICO.
These best practices also make it easier to spot a fraudulent project. The key signs are anonymous developers, no escrow wallet, a lack of transparency and unclear or unrealistic goals.
What you need to consider
So what does an investor evaluating a legitimate ICO need to consider. The practice of many successful ICO campaigns shows that the team, the goals and the protection of investor capital are the three topics that need to be considered the most carefully.
In that sense, ICOs are similar to IPOs. Being able to communicate to potential backers in a transparent and open manner is critical. When it comes to team members, having experienced people with an established network goes a long way in inspiring investor confidence.
One example of an ICO successfully leveraging an accomplished team is ICONOMI’s. The members of that project were known for having created Cashila, a project in operation since 2014. Staking their reputations on the new ICO helped to secure over $10 million.
Even where the founding team is unknown or less established, bringing on board individuals with knowledge and experience as advisors could mean the difference between success and failure.
To define goals, many ICOs use white papers, traditionally a technical blueprint much loved by the IT industry, to lay out the project, including its ambitions and the issues it is solving, and in a way in which less technical audiences can understand.
Finally, when protecting investors’ interests, a good ICO will have premiums for early investors, an escrow wallet for the contributions and a process for returning the funds in case of failure.
An opportunity rich in rewards and risk
New approaches will always hold both risk and reward, yet what is striking about ICOs is how the basic principles of investing still hold true.
For those used to more traditional investing models, sticking to their best practice approaches should mean that they are well placed to approach ICOs with confidence, cutting through the hype and buzz to identify the projects which have the potential to generate a profitable return and avoid the scams.
Whilst there are never any guarantees in investing, by combining traditional common sense with innovative approaches established investors can thrive in the digital era.
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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