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CONSIGNING CASH, CARDS AND WALLETS TO HISTORY

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Consigning cash, cards and wallets to history

Peter Keenan, Zapp, Chief Executive Officer, tells us why 2014 will be the year that mobile payments finally take off in the UK…

Peter Keenan

Peter Keenan

The Bank of England is experimenting with plastic bank notes and looking at ways of ‘revolutionising’ cash. Why? In today’s digital age, does it really make sense to invest in a payment method that first dates from China in AD806?

Granted, from a consumer perspective, paying with cash is immediate, seemingly risks only the amount being physically paid and is anonymous. But cash is rapidly going out of fashion – and with good reason.

For UK retailers, cash remains incredibly costly to process, with huge losses due to fraud (as many as one in 36 £1 coins in circulation are estimated to be counterfeit), handling and counting. The Centre for Retail Research (Cebr) looked at the cost of different payment options as a percentage of takings, and found cash to be a staggering 2.75% – more than cheques, debit or credit cards.

From the point of view of the Exchequer, the ‘cash in hand’ economy also remains a major headache. The “tax gap” in the economy – the difference between tax collected and the tax that should be collected is estimated to cost as much as £32 billion per year.

Consumers too are rapidly embracing new forms of payment – but more on that later.

Another payment method that has virtually stood still for decades is credit cards. Plastic cards really caught on in the fifties, but the way we us them has changed little in the past half century. With the exception of EMV chips and NFC, we have seen minimal innovation.

Like cash, cards also remain vulnerable to a huge problem, that of fraud. In recent years, certain types of card fraud have remained constant, costing £100 million every year. Mail non-receipt fraud losses rose by over 25% between 2007 and 2012.

The fact that these types of fraud have held up highlights one of the security challenges associated with some traditional payment methods – individuals do not necessary need a PIN to purchase goods and services using these methods. Sometimes details visible on debit/credit cards themselves are sufficient to make a payment. The proposed card-based solution to this – digital wallets – are not the answer either. They are online-only, confusing to consumers and costly for merchants.

Much like cash, cards were designed for a different consumer age and the time has come for a fundamental change in payments.

Managing Money

The Internet age has already brought about sweeping changes in the way we manage our money.

Consigning cash, cards and wallets to history

Consigning cash, cards and wallets to history

Online is now the primary way most bank customers transact in the UK. According to a July survey from Maritz Research, 80% of UK banking customers use online banking, compared with 72% who use branches. Three out of five banking customers reported using online banking services about once each week.

But we are on the cusp of an even bigger change in the way we manage money, driven by rapid smartphone adoption. In the UK, 60% of people in the UK have a smartphone, rising to 80% in the 16-24 year old bracket. One quarter of UK smartphone users already have banking or financial apps on their phones, and checking balances, accessing bank details and viewing transactions are the most common tasks.

Data in Ofcom’s 2013 Communications Market Report show that UK consumers are becoming increasingly digitally sophisticated, using mobile phones to enhance their shopping experiences. The share of mobile internet users purchasing goods or services with their mobile phones increased from 16% in April 2012 to 21% in April 2013. The majority of mobile internet users purchasing goods and services (63%) spent up to £100 per month, with a significant 37% spending more than this.

The mobile payments tipping point

Despite these advances, today “mobile payment” covers a wide range of processes, and the market remains fragmented – with everyone from established household brands to ambitious entrepreneurs jumping on the bandwagon, adding to the confusion. There is no dominant way of making a payment for a good or service using a mobile phone. Some individuals use mobile phones to pay for parking by calling a phone number, others use payment systems such as Paypal to purchase goods. Other individuals use mobile web browsers and websites to enter credit/debit card details.

A move towards standardisation of mobile payment options over the coming years will help increase take-up of mobile payment in general, offering consumers clarity and a “clear choice” on the best means of buying a product or service using a mobile phone. A growing ability to use mobile phones to buy goods in shops will also increase take-up.

But for this to happen, will require strong cooperation across the financial services, retail and payment industries, with everyone deciding to put the needs of the consumer first.

This is, of course, no mean feat, but I’m confident it will be achieved. At Zapp, we’re close to completing the UK’s first true mobile payment alliance of financial institutions, retailers and merchant acquirers who believe that by putting the bank account back at the heart of payments, mobile payment adoption can be rapidly accelerated.

Zapp is not a standalone app, but a payments ecosystem that brings banks, consumers and retailers together. This eco-system will be more secure than current payment methods because it operates behind existing, proven bank-grade technology and no confidential data is given away. Instead, a token that lasts for a few minutes and has no information is passed between Zapp, the retailer and the customer’s bank. No confusing new things to sign up for, no new passwords to remember. Just a bank account, an existing mobile banking app, and a smartphone to deliver instant payments.

There is a huge market opportunity here – the Cebr estimates that the value of purchases of goods and services made using a mobile phone will almost triple from £4.8bn in 2013 to £14.2bn in 2018. They forecast 20m people in the UK people will pay for goods and services using their phone by the end of the decade.

We and our partners are confident that we will play a major role in unlocking these benefits when we launch to consumers in 2014. As a result, I believe that within years cards and cash payments will have become a fond novelty in the same way that handwritten letters are today.

purchase made using mobile

purchase made using mobile

Finance

The value of digital identity in payments

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The value of digital identity in payments 1

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.

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Finance

It’s time to press ‘reset’ on travel and expense processes

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It’s time to press ‘reset’ on travel and expense processes 2

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.

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Finance

Covid-19 and the rise of remote payment fraud: how do we catch a digital thief?

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Covid-19 and the rise of remote payment fraud: how do we catch a digital thief? 3

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.

Lockdown behaviour

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.

Exploiting vulnerabilities

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.

Evgenia Loginova

Evgenia Loginova

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.

Lingering problem

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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