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CARD SCHEME PROVIDERS IMPROVING THE CUSTOMER BUYING EXPERIENCE, BUT NEED TO BALANCE THE RISK

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Card scheme providers improving the customer buying experience, but need to balance the risk

MasterCard’s new “zero liability” promise and Visa’s new Checkout offerings aim to safeguard their combined 86% share of the market.  Even though the schemes are proving popular with merchants and consumers, they also bring the attention of increasingly sophisticated online criminals.  

Monica Eaton Cardone

Monica Eaton Cardone

Co-Founder and CIO of risk mitigation experts Global Risk Technologies, Monica Eaton-Cardone analyses recent moves from two of the world’s largest payment giants, looking at how they are protecting their European market share against up-and-coming competitors while taking account of the fraud threat.

Europe’s card market compromises some 1.5 billion payment cards, with a combined value of nearly €3 trillion.

Competitors such as Giropay, iPay, PayPal and Apple Pay are keeping the pressure on MasterCard and Visa.  It ensures the payment giants need to be proactive in ensuring they do more to protect their high market share.

Visa’s Checkout service has seen over 6 million user registrations – a 92% increase of sign-ups since the start of 2015.  It promises shoppers a simpler way to checkout online, using just three easy clicks. The online payment service has already secured high-profile partners such as fast-food giant Taco Bell, multinational consumer electronics giant Best Buy and bookseller Barnes & Noble, as well as Australian cinema chain Hoyts and sports ticketing company Ticketek.

The uptake from merchants and consumers confirms Visa’s mission to make payments easier is already a success, but MasterCard has also been active in maintaining its market share as it attempts to fight back since losing a point of market share to arch rival Visa in 2014.

MasterCard launched a recent ground-breaking promise to improve and expand the minimum standard for consumer protection against unauthorised transactions across the globe, with one single rate. Its Zero Liability promise, developed in line with issuers and regulators, offers greater protection for users, subject to any local laws that may be applicable.

The competitive advantage of this scheme is clear: less liability for the cardholder will ultimately equate to higher market share for MasterCard by increasing loyalty and usage. However, there is an underlying issue of more risk to such schemes – so called friendly fraud.

Risks in any new online payment service can generally be reduced by educating merchants to take precautions themselves as well as the safeguards MasterCard, Visa and other providers implement. However, the opportunities for fraudsters are increasing as online payments methods become easier and more widely available. The increasing sophistication of online criminals means that fraud managers must work harder than ever before to keep consumers safe.

Fraudulent transactions are varied, which makes it harder to identify among legitimate activity.

The advent of more convenient payment platforms inevitably runs the risk of higher levels of chargebacks.  For consumers who have genuinely been defrauded, the benefits of chargebacks are evident, enabling them to recover illegitimately lost funds.

However, fraudulent chargebacks, or friendly fraud, can hit the bottom line for merchants unless they understand the reasons behind the chargebacks and are prepared to challenge them.  Merchants should not be discouraged from implementing quicker, easier payment schemes, especially if they can mitigate the chargeback risk.

It is merchants that ultimately support specialised fraud prevention strategies and chargeback analysis tools that will save resources in the long run, allowing them to reinvest in making their business successful.

In the on-going race between fraudsters on one side and payments providers and merchants on the other, we cannot and are not deterred as an industry in developing new services and improving the buying experience while also continuing the fight against fraud.

Finance

UK’s Sunak says public finances won’t be fixed overnight

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UK's Sunak says public finances won't be fixed overnight 1

By William Schomberg and David Milliken

LONDON (Reuters) – British finance minister Rishi Sunak said on Sunday he would not rush to fix the public finances as he readied a budget plan which will pile more borrowing on top of almost 300 billion pounds ($418 billion) of COVID-19 spending and tax cuts.

Sunak, who is due to deliver his budget to parliament on Wednesday, promised to help the UK economy through a gradual lifting of lockdown measures that will last at least until late June. But he also said he would “level with people” about how Britain’s 2.1 trillion-pound debt pile would carry on growing without action.

“This is not something that’s going to happen overnight. Given the scale of the shock we’ve experienced, the scale of the damage, this is going to take time to fix,” Sunak told Sky News on Sunday.

“But it’s important … to also have strong public finances over time.”

Sunak declined to comment on specific tax moves – including a widely reported plan to raise corporation tax – ahead of his budget speech.

He also would not say if he would stick to his Conservative Party’s promises made in 2019 – before the pandemic – not to raise the rates of income tax, value-added tax or national insurance contributions, the biggest sources of tax revenue.

The Sunday Times said Sunak was planning to raise income tax revenues by 6 billion pounds by freezing the point at which people start paying the basic rate of income tax and the threshold at which they begin paying the higher rate.

Britain has suffered the biggest COVID-19 death toll in Europe and the heaviest economic shock among big rich countries, according to the headline measures of official data.

In response, Sunak has racked up the country’s biggest ever peacetime budget deficit to protect jobs and help businesses, and to increase funding for health and other services.

“We went big, we went early, and there’s more to come and people should feel reassured by that,” Sunak told BBC television.

Businesses such as shops, bars, clubs, hotels, restaurants, gyms and hair salons will be offered 5 billion pounds of additional grants, the government said on Saturday.

BORROWING COSTS EDGE UP

But Sunak also raised the prospect of a fiscal reckoning to prepare Britain for future economic shocks and he noted a recent rise in the cost of borrowing from record lows as debt markets worldwide price in more inflation from the global stimulus push.

“Interest rates have been at very low levels, which does allow us to afford slightly higher debt levels,” he said.

“But that can always change and we’re seeing that in the last few weeks,” he said. “We have to be acute to that possibility.”

The opposition Labour Party said Sunak was already putting pressure on local authorities to increase taxes.

“We are an outlier both in terms of having had the worst economic crisis of any major economy but now also in having a government that seems to be focused on increasing tax right now on families when other countries have focused on securing the recovery,” its finance spokeswoman Anneliese Dodds said.

(Reporting by William Schomberg; Writing by David Milliken; Editing by Susan Fenton)

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Finance

Sunak warns of bill to be paid to tackle Britain’s ‘exposed’ finances – FT

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Sunak warns of bill to be paid to tackle Britain's 'exposed' finances - FT 2

(Reuters) – British finance minister Rishi Sunak will use the budget next week to level with the public over the “enormous strains” in the country’s finances, warning that a bill will have to be paid after further coronavirus support, according to an interview with the Financial Times.

Sunak told the newspaper there was an immediate need to spend more to protect jobs as the UK emerged from COVID-19, but warned that Britain’s finances were now “exposed.”

UK exposure to a rise of one percentage point across all interest rates was 25 billion pounds ($34.83 billion) a year to the government’s cost of servicing its debt, Sunak told FT.

“That (is) why I talk about leveling with people about the public finances (challenges) and our plans to address them,” he said.

The government has already spent more than 280 billion pounds in coronavirus relief and tax cuts this year, and his March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown.

He is also expected to announce a new mortgage scheme targeted at people with small deposits, the UK’s Treasury announced late on Friday.

Additionally, the government will also announce a new 100 million pound task force to crack-down on COVID-19 fraudsters exploiting government support schemes, it said.

(Reporting by Bhargav Acharya in Bengaluru; Editing by Leslie Adler and Cynthia Osterman)

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G20 promises no let-up in stimulus, sees tax deal by summer

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G20 promises no let-up in stimulus, sees tax deal by summer 3

By Gavin Jones and Jan Strupczewski

ROME/BRUSSELS (Reuters) – The world’s financial leaders agreed on Friday to maintain expansionary policies to help economies survive the effects of COVID-19, and committed to a more multilateral approach to the twin coronavirus and economic crises.

The Italian presidency of the G20 group of the world’s top economies said the gathering of finance chiefs had pledged to work more closely to accelerate a still fragile and uneven recovery.

“We agreed that any premature withdrawal of fiscal and monetary support should be avoided,” Daniele Franco, Italy’s finance minister, told a news conference after the videolinked meeting held by the G20 finance ministers and central bankers.

The United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies through lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new coronavirus variants mean the future path of the recovery remains uncertain.

The G20 is “committed to scaling up international coordination to tackle current global challenges by adopting a stronger multilateral approach and focusing on a set of core priorities,” the Italian presidency said in a statement.

The meeting was the first since Joe Biden – who pledged to rebuild U.S. cooperation in international bodies – U.S. president, and significant progress appeared to have been made on the thorny issue of taxation of multinational companies, particularly web giants like Google, Amazon and Facebook.

U.S. Treasury Secretary Janet Yellen told the G20 Washington had dropped the Trump administration’s proposal to let some companies opt out of new global digital tax rules, raising hopes for an agreement by summer.

“GIANT STEP FORWARD”

The move was hailed as a major breakthrough by Germany’s Finance Minister Olaf Scholz and his French counterpart Bruno Le Maire.

Scholz said Yellen told the G20 officials that Washington also planned to reform U.S. minimum tax regulations in line with an OECD proposal for a global effective minimum tax.

“This is a giant step forward,” Scholz said.

Italy’s Franco said the new U.S. stance should pave the way to an overarching deal on taxation of multinationals at a G20 meeting of finance chiefs in Venice in July.

The G20 also discussed how to help the world’s poorest countries, whose economies are being disproportionately hit by the crisis.

On this front there was broad support for boosting the capital of the International Monetary Fund to help it provide more loans, but no concrete numbers were proposed.

To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by Trump.

“There was no discussion on specific amounts of SDRs,” Franco said, adding that the issue would be looked at again on the basis of a proposal prepared by the IMF for April.

While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.

The recovery is fragile elsewhere too. Factory activity in China grew at the slowest pace in five months in January, and in Japan fourth quarter growth slowed from the previous quarter.

Some countries had expressed hopes the G20 may extend a suspension of debt servicing costs for the poorest countries beyond June, but no decision was taken.

The issue will be discussed at the next meeting, Franco said.

(Additional reporting by Andrea Shalal in Washington Michael Nienaber in Berlin and Crispian Balmer in Rome; editing by John Stonestreet)

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