By James Woudhuysen, Visiting Professor of Forecasting and Innovation, London Southbank University
According to some, physical money faces extinction within the near future because of electronic payment methods.
Those on the opposite side of the debate would argue that human nature finds far greater comfort in physical currency, and as such it will always be used. However, the reality is a little more complex.
The prolific march of electronic money
In certain parts of Asia, currencies consisting of electronic tokens have promising futures.In China, companies like Alibaba and Tencent don’t simply organise mobile payments, they also use a system whereby they receive salaries from their customers’ employers. In India, students, artisans and employees of Infosys have long benefitted from identification cards that also double up as bankcards. Both of these examples demonstrate economies where physical cash becomes less needed. Indeed, when the Indian government scrapped 500-rupe notes (the equivalent of slightly over £5) in 2016, it abolished no less than 86 per cent of India’s cash value.
A strong example of this is Scandinavia. Here, the use of physical currency is very low, but in Sweden for example, the number of citizens aged 16-84 use krona for their most recent purchase plummeted from 39 per cent to 13 per cent between 2010 and 2018 alone. A similar case exists in Denmark, where an astonishing 46 per cent of Danes carry around the equivalent of only 13 euros in krona. In Denmark, the use of cash is certainly in decline, and it’s certainly possible to live without using it.
Africa has also done much to popularise alternate variations of physical cash. It was the first to establish airtime used on mobile phones as its own currency that could be used across national borders. This vast variety of payment methods suggests that there is very little that is unique about physical cash. On top of this, cash can be costly to produce, dirty to handle, often deteriorates after extensive useand on very rare occasions proves almost worthless (such as in Weimar Germany and Zimbabwe). The range of options beyond the realm of physical currency has grown enormously.
But is cash actually dying out?
The “death of cash” theories are almost certainly an exaggeration. The world market for printing banknotes – which must ensure ease of handling, durability and traceability – is set to grow from under $10bn in 2018 to nearly $12bn in 2023. Meanwhile, the actual cash in use worldwide could grow by 5 per cent per year, meaning that 2026 will see nearly a trillion banknotes and 200 billion coins changing hands.
In the Eurozone, if countries like Greece, Cyprus and Malta build more of an IT infrastructure for card payments, they can use cash for 33 per cent or less of the value of their transactions. The same case exists in Benelux, Estonia, Finland and France. However, the European Central Bank is clear that the use of cash at point of sale is still widespread. This seems to challenge the perception that cash is rapidly being replaced by cashless means of payment.
In the UK, cash is gaining popularity again
Cash carries convenience and familiarity, and with it, the tendency for corner shops and SMEs to use it. Furthermore, the feel of cash has appeal amongst families. The crispiness of new banknotes given to a child on a birthday remains something to be savoured. Then, there’s the universality of cash. Collections for colleagues at work are made easier, and friends can always help each other if one of them falls short of change.
However, these historic elements are far from the only factors that ensure the future of cash. A number of trends in the UK currently favour the continued use of it. These trends include:
- The ATM to adult ratio is still high. Currently, the UK is one of the countries with the highest usage of cashpoints in the world – among major countries, it lies only behind Canada (2.23) and Russia (1.69). This ease of withdrawing cash will definitely help support its future.
- For a small but appreciable minority, electronic money is simply not part of their landscape. In 2018, 8.4 percent of UK adults – 4.5 million – have never used the Internet, let alone gone Internet banking Among people over 75, 51 percent of men use the Internet, but only 38 percent of women.
- Due to issues such as cybersecurity and bad general management, cash still seems preferable to many people over making payments electronically. Communicating these setbacks to the public decreases trust even further. That, and the June interruption of the Visa card payments network, can make cash look far more favourable to Internet banking.
- Popular suspicion of large branded virtual institutions – not just banks – has grown.
- Recent revelations about electronic privacy have reinforced a desire for anonymity.
- The desire for authenticity in money matters and for certainty about where one stands financiallyhas grown since the 2008 financial crisis – a task that can be trickier in the virtual realm than a quick glance at a pile of banknotes.
- Among sizable sections of the public, there’s a yearning for a sense of national identity in an ever more global world. With English and Scottish banknotes, for example, one handles images of the Queen and promises by the Bank of England, which may offer some subconscious reassurance.
- Criminals, whether blue-collar or white-collar, prefer cash.
- It can be harder to forge polymer banknotes than it is to hack banks.
The human element
Deeply connected to the trends we have discussed is the likely survival of branch banking, and of face-to-face interactions within bank branches.
Branch closures and branch automation, of course, will continue. The branches that remain, and some of the smaller one-stop shop specialist branches that may still be opened, will transition from interpersonal dialogues away from transactions, and on to advice. This is what management consultants McKinsey call ‘complex service interactions’. Moreover, as McKinsey notes of digital banking:
‘Customers are not merely logging in to check balances or buy simple products and services. Many bankers have long thought that human interaction is needed to make a complex sale, but our research suggests that is not true. Customers are happy to buy and be advised online and via remote advisors even for such products as a mortgage loan — provided they can easily find the best product for their needs, and get enough information to be confident in the purchase.’
Yet this is still a big ‘provided’. In the UK, McKinsey found that just 22 percent of consumers had, in 2016, a high willingness to switch to getting advice online – even when the service included screen-sharing, voice and video.
Putting remote bank staff on consumers’ video feeds may not quite be right, either. In the US, people are already worried about what are called ‘deep-fake’ videos, where politicians are traduced by clever footage purporting to be them. So even home video banking with live faces may, before very long, fall victim to impersonators who aren’t in fact human.
For many Brits, and especially older ones with more sizable, complicated collections of financial assets, banking advice will still largely rely on human-to-human interaction. In the branch, both bank employee and customer will continue to use the Internet, no doubt. Yet the resilience of the branch and its staff, and the convenience of dealing with cash in bank branches, will together do much to assure the longevity of the folding stuff.
With the world market for printing bank notes set to grow to nearly $12bn in 2023, reports of the death of cash are exaggerated. With cash, there’s a convenience, familiarity, and tangibility that you don’t get from electronic money. For a small but significant minority, electronic money is simply not part of their landscape. In 2018, 8.4 per cent of UK adults have never used the internet, let alone banked online. Recent revelations about electronic privacy have also reinforced a desire for anonymity – a comfort that only cash can still provide.
In addition, the desire for more authenticity in money matters since the 2008 financial crash – a task that is trickier in the virtual realm than glancing at a pile of banknotes – will support cash’s future for years to come. There will be lots of new kinds of money, but no real end to cash. Cash is down, but it certainly isn’t out.
Professor James Woudhuysen was presenting his thought on the future of cash at an event hosted by marketing specialists Jaywingduring London Tech Week.
To take the nation’s financial pulse, we must go digital
By Pete Bulley, Director of Product, Aire
The last six months have brought the precarious financial situation of many millions across the world into sharper focus than ever before. But while the figures may be unprecedented, the underlying problem is not a new one – and it requires serious attention as well as action from lenders to solve it.
Research commissioned by Aire in February found that eight out of ten adults in the UK would be unable to cover essential monthly spending should their income drop by 20%. Since then, Covid-19 has increased the number without employment by 730,000 people between July and March, and saw 9.6 million furloughed as part of the job retention scheme.
The figures change daily but here are a few of the most significant: one in six mortgage holders had opted to take a payment holiday by June. Lenders had granted almost a million credit card payment deferrals, provided 686,500 payment holidays on personal loans, and offered 27 million interest-free overdrafts.
The pressure is growing for lenders and with no clear return to normal in sight, we are unfortunately likely to see levels of financial distress increase exponentially as we head into winter. Recent changes to the job retention scheme are signalling the start of the withdrawal of government support.
The challenge for lenders
Lenders have been embracing digital channels for years. However, we see it usually prioritised at acquisition, with customer management neglected in favour of getting new customers through the door. Once inside, even the most established of lenders are likely to fall back on manual processes when it comes to managing existing customers.
It’s different for fintechs. Unburdened by legacy systems, they’ve been able to begin with digital to offer a new generation of consumers better, more intuitive service. Most often this is digitised, mobile and seamless, and it’s spreading across sectors. While established banks and service providers are catching up — offering mobile payments and on-the-go access to accounts — this part of their service is still lagging. Nowhere is this felt harder than in customer management.
Time for a digital solution in customer management
With digital moving higher up the agenda for lenders as a result of the pandemic, many still haven’t got their customer support properly in place to meet demand. Manual outreach is still relied upon which is both heavy on resource and on time.
Lenders are also grappling with regulation. While many recognise the moral responsibility they have for their customers, they are still blind to the new tools available to help them act effectively and at scale.
In 2015, the FCA released its Fair Treatment of Customers regulations requiring that ‘consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale’.
But when the individual financial situation of customers is changing daily, never has this sentiment been more important (or more difficult) for lenders to adhere to. The problem is simple: the traditional credit scoring methods relied upon by lenders are no longer dynamic enough to spot sudden financial change.
The answer lies in better, and more scalable, personalised support. But to do this, lenders need rich, real-time insight so that lenders can act effectively, as the regulator demands. It needs to be done at scale and it needs to be done with the consumer experience in mind, with convenience and trust high on the agenda.
Placing the consumer at the heart of the response
To better understand a customer, inviting them into a branch or arranging a phone call may seem the most obvious solution. However, health concerns mean few people want to see their providers face-to-face, and fewer staff are in branches, not to mention the cost and time outlay by lenders this would require.
Call centres are not the answer either. Lack of trained capacity, cost and the perceived intrusiveness of calls are all barriers. We know from our own consumer research at Aire that customers are less likely to engage directly with their lenders on the phone when they feel payment demands will be made of them.
If lenders want reliable, actionable insight that serves both their needs (and their customers) they need to look to digital.
Asking the person who knows best – the borrower
So if the opportunity lies in gathering information directly from the consumer – the solution rests with first-party data. The reasons we pioneer this approach at Aire are clear: firstly, it provides a truly holistic view of each customer to the lender, a richer picture that covers areas that traditional credit scoring often misses, including employment status and savings levels. Secondly, it offers consumers the opportunity to engage directly in the process, finally shifting the balance in credit scoring into the hands of the individual.
With the right product behind it, this can be achieved seamlessly and at scale by lenders. Pulse from Aire provides a link delivered by SMS or email to customers, encouraging them to engage with Aire’s Interactive Virtual Interview (IVI). The information gathered from the consumer is then validated by Aire to provide the genuinely holistic view of a consumer that lenders require, delivering insights that include risk of financial difficulty, validated disposable income and a measure of engagement.
No lengthy or intrusive phone calls. No manual outreach or large call centre requirements. And best of all, lenders can get started in just days and they save up to £60 a customer.
Too good to be true?
This still leaves questions. How can you trust data provided directly from consumers? What about AI bias – are the results fair? And can lenders and customers alike trust it?
To look at first-party misbehaviour or ‘gaming’, sophisticated machine-learning algorithms are used to validate responses for accuracy. Essentially, they measure responses against existing contextual data and check its plausibility.
Aire also looks at how the IVI process is completed. By looking at how people complete the interview, not just what they say, we can spot with a high degree of accuracy if people are trying to game the system.
AI bias – the system creating unfair outcomes – is tackled through governance and culture. In working towards our vision of a world where finance is truly free from bias or prejudice, we invest heavily in constructing the best model governance systems we can at Aire to ensure our models are analysed systematically before being put into use.
This process has undergone rigorous improvements to ensure our outputs are compliant by regulatory standards and also align with our own company principles on data and ethics.
That leaves the issue of encouraging consumers to be confident when speaking to financial institutions online. Part of the solution is developing a better customer experience. If the purpose of this digital engagement is to gather more information on a particular borrower, the route the borrower takes should be personal and reactive to the information they submit. The outcome and potential gain should be clear.
The right technology at the right time?
What is clear is that in Covid-19, and the resulting financial shockwaves, lenders face an unprecedented challenge in customer management. In innovative new data in the form of first-party data, harnessed ethically, they may just have an unprecedented solution.
The Future of Software Supply Chain Security: A focus on open source management
By Emile Monette, Director of Value Chain Security at Synopsys
Software Supply Chain Security: change is needed
Attacks on the Software Supply Chain (SSC) have increased exponentially, fueled at least in part by the widespread adoption of open source software, as well as organisations’ insufficient knowledge of their software content and resultant limited ability to conduct robust risk management. As a result, the SSC remains an inviting target for would-be attackers. It has become clear that changes in how we collectively secure our supply chains are required to raise the cost, and lower the impact, of attacks on the SSC.
A report by Atlantic Council found that “115 instances, going back a decade, of publicly reported attacks on the SSC or disclosure of high-impact vulnerabilities likely to be exploited” in cyber-attacks were implemented by affecting aspects of the SSC. The report highlights a number of alarming trends in the security of the SSC, including a rise in the hijacking of software updates, attacks by state actors, and open source compromises.
This article explores the use of open source software – a primary foundation of almost all modern software – due to its growing prominence, and more importantly, its associated security risks. Poorly managed open source software exposes the user to a number of security risks as it provides affordable vectors to potential attackers allowing them to launch attacks on a variety of entities—including governments, multinational corporations, and even the small to medium-sized companies that comprise the global technology supply chain, individual consumers, and every other user of technology.
The risks of open source software for supply chain security
The 2020 Open Source Security and Risk Analysis (OSSRA) report states that “If your organisation builds or simply uses software, you can assume that software will contain open source. Whether you are a member of an IT, development, operations, or security team, if you don’t have policies in place for identifying and patching known issues with the open source components you’re using, you’re not doing your job.”
Open source code now creates the basic infrastructure of most commercial software which supports enterprise systems and networks, thus providing the foundation of almost every software application used across all industries worldwide. Therefore, the need to identify, track and manage open source code components and libraries has risen tremendously.
License identification, patching vulnerabilities and introducing policies addressing outdated open source packages are now all crucial for responsible open source use. However, the use of open source software itself is not the issue. Because many software engineers ‘reuse’ code components when they are creating software (this is in fact a widely acknowledged best practice for software engineering), the risk of those components becoming out of date has grown. It is the use of unpatched and otherwise poorly managed open source software that is really what is putting organizations at risk.
The 2020 OSSRA report also reveals a variety of worrying statistics regarding SSC security. For example, according to the report, it takes organisations an unacceptably long time to mitigate known vulnerabilities, with 2020 being the first year that the Heartbleed vulnerability was not found in any commercial software analyzed for the OSSRA report. This is six years after the first public disclosure of Heartbleed – plenty of time for even the least sophisticated attackers to take advantage of the known and publicly reported vulnerability.
The report also found that 91% of the investigated codebases contained components that were over four years out of date or had no developments made in the last two years, putting these components at a higher risk of vulnerabilities. Additionally, vulnerabilities found in the audited codebases had an average age of almost 4 ½ years, with 19% of vulnerabilities being over 10 years old, and the oldest vulnerability being a whopping 22 years old. Therefore, it is clear that open source users are not adequately defending themselves against open source enabled cyberattacks. This is especially concerning as 99% of the codebases analyzed in the OSSRA report contained open source software, with 75% of these containing at least one vulnerability, and 49% containing high-risk vulnerabilities.
Mitigating open source security risks
In order to mitigate security risks when using open source components, one must know what software you’re using, and which exploits impact its vulnerabilities. One way to do this is to obtain a comprehensive bill of materials from your suppliers (also known as a “build list” or a “software bill of materials” or “SBOM”). Ideally, the SBOM should contain all the open source components, as well as the versions used, the download locations for all projects and dependencies, the libraries which the code calls to, and the libraries that those dependencies link to.
Creating and communicating policies
Modern applications contain an abundance of open source components with possible security, code quality and licensing issues. Over time, even the best of these open source components will age (and newly discovered vulnerabilities will be identified in the codebase), which will result in them at best losing intended functionality, and at worst exposing the user to cyber exploitation.
Organizations should ensure their policies address updating, licensing, vulnerability management and other risks that the use of open source can create. Clear policies outlining introduction and documentation of new open source components can improve the control of what enters the codebase and that it complies with the policies.
Prioritizing open source security efforts
Organisations should prioritise open source vulnerability mitigation efforts in relation to CVSS (Common Vulnerability Scoring System) scores and CWE (Common Weakness Enumeration) information, along with information about the availability of exploits, paying careful attention to the full life cycle of the open source component, instead of only focusing on what happens on “day zero.” Patch priorities should also be in-line with the business importance of the asset patched, the risk of exploitation and the criticality of the asset. Similarly, organizations must consider using sources outside of the CVSS and CWE information, many of which provide early notification of vulnerabilities, and in particular, choosing one that delivers technical details, upgrade and patch guidance, as well as security insights. Lastly, it is important for organisations to monitor for new threats for the entire time their applications remain in service.
On the Frontlines of Fraud: Tactics for Merchants to Protect Their Businesses
By Nicole Jass, Senior Vice President of Small Business and Fraud Products at FIS
Fraud isn’t new, but the new realities brought by COVID-19 for merchants, and the rising tide of attacks have changed the way we need to approach the fight. Even before the pandemic broke out earlier this year, the transition to digital payments was well underway, which means fighting fraud needs a multilayered, multi-channel approach. Not only do you want to increase approval rates, you want to protect your revenue and stop fraud before it happens.
A great place to start is working with your payment partners to refresh your company’s fraud strategies with emerging top three best practices:
- AI-based machine learning fraud solutions helps your business stay ahead of fraud trends. Leveraging data profiles to model both “good” and “bad” behavior helps find and reduce fraud. AI-based machine learning will be increasingly essential to stay ahead of the explosive and sophisticated eCommerce fraud.
- Increasing capabilities around device fingerprinting and behavioral data are essential to detect fraud before it happens. While much of the user-input values can be easily manipulated to look more authentic, device fingerprinting and behavioral data are captured in the background to derive unique details from the user’s device and behavior. Bringing in more unique elements into decisioning, can help authenticate the users and determine the validity of the transactions.
- Prioritize user authentication. User authentication is a vital linchpin in any fraud defense and should receive even greater priority today. Setting strong password requirements and implementing multi-factor authentication helps curb fraud attacks from account takeover.
As well as working with your payment partners it’s more critical than ever to protect online transactions while not jeopardizing legitimate purchases. Fortunately, there are a few things you can do right now to address these concerns:
- Monitor warning signs
Payment verification is an important part of protecting your business. There are a variety of strategies to employ including implementing technology utilizing artificial intelligence and machine learning to help catch certain patterns. In addition to technology, here are a few other tips that may serve as warning signs. These are not a guarantee fraud is occurring, but they are flags to investigate.
o The shipping address and billing address differ
o Multiple orders of the same item
o Unusually large orders
o Multiple orders to the same address with different cards
o Unexpected international orders
- Require identity verification
Finding a balance between protection and ease of purchase will ultimately help you protect your customers and your business. The following tactics can make it more difficult for fraudsters to be successful:
o For customers that have a login, require a minimum of eight characters as well as the use of special characters in your customers’ passwords
o Set up Two-Factor Authentication that requires a One-time Passcode (OTP) via SMS or email
o Use biometric authentication for mobile purchases or logins
- Monitor chargebacks
Keeping good records is essential for eCommerce. If a customer initiates a dispute, your only available recourse is to provide proof that the order was fulfilled. Be prepared to provide all the supporting information about a disputed transaction. Worldpay’s Disputes solutions can connect to your CRM and provide you dual-layer protection against friendly fraud, first deflecting them before they arise and then fully managing chargeback defenses on your behalf.
- Monitor declines
Credit card issuers mitigate fraud by automatically declining payments that look suspicious, based on unusual card activity such as drastic changes in spending patterns or uncommon geolocations of spending. You can check your own declined payment history to help spot a potential problem. When volumes increase, the help of a payments fraud management partner is beneficial.
- Protect your own wallet
While you take the steps to protect your business, it’s also important to be mindful of your own protection—it’s incumbent on all responsible consumers to be vigilant about their data. Whether it’s simple awareness of how the fraudsters are operating today, sticking to trusted brands when shopping online, and thinking twice about what data you share and who you share it with, you’ll soon see how often you are sharing personal information about yourself.
Research exposes the £68.8 billion opportunity for UK retailers
Modelling shows increasing the proportion of online sales by 5 percentage points would have significantly boosted retailers’ revenues during the...
Want to serve your customers better? An effective online strategy is what financial institutions need
By Anna Willems, Marketing Director, Mention A strong online presence matters. Having a strong online presence, that involves social media...
The rise of AI in compliance management
By Martin Ellingham, director, product management compliance at Aptean, looks at the increasing role of AI in compliance management and just...
Simplifying the Sector: How low code can aid digital transformation in financial services
By Nick Ford Chief Technology Evangelist, Mendix From online banking to contactless payments and Apple Pay, it has been well...
Why the Boom is Long Overdue (and Here to Stay)
By Roger James Hamilton, CEO, Genius Group Virtually every aspect of our lives has been taken over by tech, so...
5 Sustainability Lessons That Are Crucial For Business Success
By Michael Stausholm, founder of Sprout World (sproutworld.com) Sprout World is the eco-company behind the world’s only plantable pencil, with...
Why financial brands need to understand consumer vitality
By Carolyn Corda, CMO at data consortium ADARA Our day to day lives have been turned upside down. Office workers have...
Why and how a modern marketing strategy should put customer experience first
By Jim Preston, VP EMEA, Showpad In 2004, the Leading Edge Forum coined the term ‘consumerisation of IT’, defining a...
Leading from the front – why decision makers must embrace automation
By Jeppe Rindom, Co-founder & CEO, Pleo Ask any decision maker at a business about admin and you’re likely to...
Business first, not compliance only is the future for accountants
By Peter Bracey, MD at Bracey’s Accountants. The past few months have underlined the need for better business insight to reduce...