- Only a third of Americans delayed a major life decision in the past year for financial reasons, a significant improvement from 2015.
- The number of Americans putting off specific life decisions such as marriage, having children, buying a house and higher education is shrinking.
- Bad financial habits are making a comeback as fewer people report making positive changes to their financial behavior.
The recent recession caused Americans to face some hard economic realities. As the economy continues to recover, more Americans are taking their lives off hold as fewer are being forced to delay going to college, getting married or having kids because of financial concerns. A new survey found that the number of American adults that have postponed at least one important life decision in the last year for financial reasons has fallen to 35 percent. This is an improvement from the 51 percent in a similar 2015 survey when Americans were still recovering from the recession.
The percent of Americans putting off specific life events for financial reasons has been nearly cut in half for a few areas. For example, 6 percent put off marriage last year, a change from 12 percent in 2015. Additionally, only 7 percent put off having children, compared to 13 percent in 2015. This according to a recent telephone survey, conducted in April 2018 on behalf of the American Institute of CPAs (AICPA) by The Harris Poll.
Unstable economic times can often make getting married and starting a family difficult because of the potential financial commitment involved. With the average wedding in the US costing more than $30,000 and the estimated price to raise a child through age 17 eclipsing $230,000, it is clear that these big life steps come with a price tag.
“As the economy continues to pick up steam and we put the recession further in the rearview mirror, it is important to be cautious and not forget the difficult financial lessons we learned,” said Greg Anton, CPA, chairman of the AICPA’s National CPA Financial Literacy Commission. “When making a major life decision, don’t just focus on the immediate costs. Consider the long-term financial implications as well. Taking on too much credit card debt to buy things your savings can’t cover, or making big purchases when you aren’t financially stable are reckless moves in any economy.”
The percent of Americans delaying higher education due to financial concerns saw a big drop. Back in 2015, nearly a quarter of Americans (24 percent) reported delaying higher education. Now, only 13 percent are delaying, an 11 percent improvement. With overall college enrollments down and the average cost of college tuition continuing to creep up, these results suggest that Americans may be questioning the idea that going to college is the best financial decision for everyone. And with the average student graduating with $39,400 in loans, higher education has the potential to affect savings and other financial decisions well into early adulthood.
In a similar positive trend, fewer Americans say costs are preventing them from getting into the housing market. In 2018, only 14 percent delayed buying a home for financial reasons, compared to 22 percent in 2015. Also, less Americans are delaying getting a medical procedure (12 percent delayed in 2018, compared to 19 percent in 2015) and retiring (10 percent delayed in 2018, compared to 18 percent in 2015) for financial reasons.
For those Americans who were forced to postpone life decisions, the top concern cited was a lack of savings (60 percent). This is consistent with the 60 percent who pointed to a lack of savings in 2015. In the most recent survey, the second highest factor was concerns about the U.S. economy which saw the largest change, shaving 12 percentage points from 50 percent in 2015 to 38 percent in 2018. Medical bills came in as the third highest cited factor and the only one to get worse (34 percent in 2018, compared to 29 percent in 2015).
With health spending projected to grow at an average rate of 5.5 percent per year, it is no surprise that medical bills are causing more Americans to postpone major life events. And there is a serious downside of those payments piling up – the financial burden from medical bills is the number one reason Americans file for bankruptcy.
Additional reasons Americans delayed life decisions this past year include difficulty paying non-mortgage monthly bills (29 percent), credit card debt (27 percent), a need to take care of elderly parents or other relatives (25 percent), concerns about losing their job (22 percent), and difficulty making mortgage payments (17 percent).
While it is good news that financial situations appear to be improving, Americans may be forgetting the lessons that they learned in the wake of the recession. Alarmingly, the percent of Americans to report making at least one positive change to their financial behavior since the recession has declined (68 percent in 2018, compared to 85 percent in 2015).
These specific changes include:
- Following a monthly budget (39 percent in 2018, compared to 58 percent in 2015)
- Starting or increasing their savings rate (36 percent in 2018, compared to 44 percent in 2015)
- Putting less money on credit cards (30 percent in 2018, compared to 50 percent in 2015)
- Starting or adding to an emergency fund (30 percent in 2018, compared to 35 percent in 2015)
- Starting or increasing contributing to retirement accounts (28 percent in 2018, compared to 32 percent in 2015)
“It is important to remember there is a natural ebb and flow to the economy that can have a significant negative impact on those who overextend their finances,” said Anton. “America is in the middle of a strong economic period, but not too long ago many were caught off-guard by the recession. With the economy stable for the time being, it is the perfect time to check in your financial plan to make sure that when you do come to the crossroads of a major life decision, you are not being held back by your bank account.”
There are many ways Americans can make sure financial worries don’t get in the way of their life goals. The AICPA’s National CPA Financial Literacy Commission recommends the following:
- Navigate expenses with a long-term financial plan. Establishing and sticking to a realistic plan to achieve your long-term goals, like a home purchase and funding retirement, can help you avoid difficult decisions that may hurt your financial wellness.
- Manage spending with a month-to-month budget. A current view of your income and how much of it is absorbed by obligations like rent and car payments can help you make better spending decisions. By knowing what you have available, you won’t find yourself having spent part of next year’s income for this year’s costs of living.
- Use credit cards cautiously. The temptation to overspend may be strongest when you feel like you’re “riding high” and the media signals a growing economy — but keep in mind that the economy has ups and downs, and even the most promising careers can come with an unplanned employment gap. Unpaid balances that grow with high interest charges, along with an income interruption from an unexpected layoff, can be a “perfect storm” of financial distress. If you can’t pay off your balances with cash each month, you’ve gone too far.
- Shore up resources. The economy is a roller coaster. Enjoy the time at the top, but make sure you’re buckled in for the drop. Take any extra income and use it to pad your emergency fund. If you’re in the type of work that would do layoffs during a downturn, start networking in your industry now so that if you do lose your job, you’ll have others who know you to help you find a new position.
- Rebalance your investment portfolio. After the market gains of the last couple of years, it’s time to make sure that your investment portfolio (both inside and outside of retirement plans) still carries an appropriate risk profile and that the proportion of “safe” investments such as money market accounts is sufficient to carry you through an unexpected financial setback. This rebalancing is critical on a periodic basis, especially after a long run-up in the market.
The Harris Poll Methodology
The 2018 survey was conducted on behalf of AICPA by The Harris Poll by telephone within the United States between April 5 and 8, 2018, among 1,014 adults (510 men and 504 women aged 18 and over) including 414 interviews from the landline sample and 600 interviews from the cell phone sample. The 2015 study was conducted on behalf of AICPA by The Harris Poll by telephone within the United States between March 19 and 22, 2015, among 1,010 adults (506 men and 504 women aged 18 and over) including 510 interviews from the landline sample and 500 interviews from the cell phone sample. Results were weighted (using data from the Current Population Survey) where necessary to bring them into line with their actual proportions in the population.
The Psychology Behind a Strong Security Culture in the Financial Sector
By Javvad Malik, Security Awareness Advocate at KnowBe4
Banks and financial industries are quite literally where the money is, positioning them as prominent targets for cybercriminals worldwide. Unfortunately, regardless of investments made in the latest technologies, the Achilles heel of these institutions is their employees. Often times, a human blunder is found to be a contributing factor of a security breach, if not the direct source. Indeed, in the 2020 Verizon Data Breach Investigations Report, miscellaneous errors were found vying closely with web application attacks for the top cause of breaches affecting the financial and insurance sector. A secretary may forward an email to the wrong recipient or a system administrator may misconfigure firewall settings. Perhaps, a user clicks on a malicious link. Whatever the case, the outcome is equally dire.
Having grown acutely aware of the role that people play in cybersecurity, business leaders are scrambling to establish a strong security culture within their own organisations. In fact, for many leaders across the globe, realising a strong security culture is of increasing importance, not solely for fear of a breach, but as fundamental to the overall success of their organisations – be it to create customer trust or enhance brand value. Yet, the term lacks a universal definition, and its interpretation varies depending on the individual. In one survey of 1,161 IT decision makers, 758 unique definitions were offered, falling into five distinct categories. While all important, these categories taken apart only feature one aspect of the wider notion of security culture.
With an incomplete understanding of the term, many organisations find themselves inadvertently overconfident in their actual capabilities to fend off cyberthreats. This speaks to the importance of building a single, clear and common definition from which organisations can learn from one another, benchmark their standing and construct a comprehensive security programme.
Defining Security Culture: The Seven Dimensions
In an effort to measure security culture through an objective, scientific method, the term can be broken down into seven key dimensions:
- Attitudes: Formed over time and through experiences, attitudes are learned opinions reflecting the preferences an individual has in favour or against security protocols and issues.
- Behaviours: The physical actions and decisions that employees make which impact the security of an organisation.
- Cognition: The understanding, knowledge and awareness of security threats and issues.
- Communication: Channels adopted to share relevant security-related information in a timely manner, while encouraging and supporting employees as they tackle security issues.
- Compliance: Written security policies and the extent that employees adhere to them.
- Norms: Unwritten rules of conduct in an organisation.
- Responsibilities: The extent to which employees recognise their role in sustaining or endangering their company’s security.
All of these dimensions are inextricably interlinked; should one falter so too would the others.
The Bearing of Banks and Financial Institutions
Collecting data from over 120,000 employees in 1,107 organisations across 24 countries, KnowBe4’s ‘Security Culture Report 2020’ found that the banking and financial sectors were among the best performers on the security culture front, with a score of 76 out of a 100. This comes as no surprise seeing as they manage highly confidential data and have thus adopted a long tradition of risk management as well as extensive regulatory oversight.
Indeed, the security culture posture is reflected in the sector’s well-oiled communication channels. As cyberthreats constantly and rapidly evolve, it is crucial that effective communication processes are implemented. This allows employees to receive accurate and relevant information with ease; having an impact on the organisation’s ability to prevent as well as respond to a security breach. In IBM’s 2020 Cost of a Data Breach study, the average reported response time to detect a data breach is 207 days with an additional 73 days to resolve the situation. This is in comparison to the financial industry’s 177 and 56 days.
Moreover, with better communication follows better attitude – both banking and financial services scored 80 and 79 in this department, respectively. Good communication is integral to facilitating collaboration between departments and offering a reminder that security is not achieved solely within the IT department; rather, it is a team effort. It is also a means of boosting morale and inspiring greater employee engagement. As earlier mentioned, attitudes are evaluations, or learned opinions. Therefore, by keeping employees informed as well as motivated, they are more likely to view security best practices favourably, adopting them voluntarily.
Predictably, the industry ticks the box on compliance as well. The hefty fines issued by the Information Commissioner’s Office (ICO) in the past year alone, including Capital One’s $80 million penalty, probably play a part in keeping financial institutions on their toes.
Nevertheless, there continues to be room for improvement. As it stands, the overall score of 76 is within the ‘moderate’ classification, falling a long way short of the desired 90-100 range. So, what needs fixing?
Towards Achieving Excellence
There is often the misconception that banks and financial institutions are well-versed in security-related information due to their extensive exposure to the cyber domain. However, as the cognition score demonstrates, this is not the case – dawdling in the low 70s. This illustrates an urgent need for improved security awareness programmes within the sector. More importantly, employees should be trained to understand how this knowledge is applied. This can be achieved through practical exercises such as simulated phishing, for example. In addition, training should be tailored to the learning styles as well as the needs of each individual. In other words, a bank clerk would need a completely different curriculum to IT staff working on the backend of servers.
By building on cognition, financial institutions can instigate a sense of responsibility among employees as they begin to recognise the impact that their behaviour might have on the company. In cybersecurity, success is achieved when breaches are avoided. In a way, this negative result removes the incentive that typically keeps employees engaged with an outcome. Training methods need to take this into consideration.
Then there are norms and behaviours, found to have strong correlations with one another. Norms are the compass from which individuals refer to when making decisions and negotiating everyday activities. The key is recognising that norms have two facets, one social and the other personal. The former is informed by social interactions, while the latter is grounded in the individual’s values. For instance, an accountant may connect to the VPN when working outside of the office to avoid disciplinary measures, as opposed to believing it is the right thing to do. Organisations should aim to internalise norms to generate consistent adherence to best practices irrespective of any immediate external pressures. When these norms improve, behavioural changes will reform in tandem.
Building a robust security culture is no easy task. However, the unrelenting efforts of cybercriminals to infiltrate our systems obliges us to press on. While financial institutions are leading the way for other industries, much still needs to be done. Fortunately, every step counts -every improvement made in one dimension has a domino effect in others.
Has lockdown marked the end of cash as we know it?
By James Booth, VP of Payment Partnerships EMEA, PPRO
Since the start of the pandemic, businesses around the world have drastically changed their operations to protect employees and customers. One significant shift has been the discouragement of the use of cash in favour of digital and contactless payment methods. On the surface, moving away from cash seems like the safe, obvious thing to do to curb the spread of the virus. But, the idea of being propelled towards an innovative, digital-first, cashless society is also compelling.
Has cashless gone viral?
Recent months have forced the world online, leading to a surge in e-commerce with UK online sales seeing a rise of 168% in May and steady growth ever since. In fact, PPRO’s transaction engine, has seen online purchases across the globe increase dramatically in 2020: purchases of women’s clothing are up 311%, food and beverage by 285%, and healthcare and cosmetics by 160%.
Alongside a shift to online shopping, a recent report revealed 7.4 million in the UK are now living an almost cashless life – claiming changing payment habits has left Britons better prepared for life in lockdown. In fact, according to recent research from PPRO, 45% of UK consumers think cash will be a thing of the past in just five years. And this UK figure reflects a global trend. For example, 46% of Americans have turned to cashless payments in the wake of COVID-19. And in Italy, the volume of cashless transactions has skyrocketed by more than 80%.
More choice than ever before
Whilst the pandemic and restrictions surrounding cash have certainly accelerated the UK towards a cashless society, the proliferation of local payment methods (LPMs) in the UK, such as PayPal, Klarna and digital wallets, have also been a key driver. Today, 31% of UK consumers report they are confident using mobile wallets, such as Apple Pay. Those in Generation Z are particularly keen, with 68% expressing confidence using them.
As LPM usage continues to accelerate, the use of credit and debit cards are likely to decline in the coming years. Whilst older generations show an affinity with plastic, younger consumers feel less secure around its usage. 96% of Baby Boomers and Generation X confirmed they feel confident using credit/debit cards, compared to just 75% of Generation Z.
Does social distancing mean financial exclusion?
As we hurtle into a digital age, leaving cash in the rearview, there are ramifications of going completely cashless to consider. We must take into consideration how removing cash could disenfranchise over a quarter of our society; 26% of the global population doesn’t have a traditional bank account. Across Latin America, 38% of shoppers are unbanked, and nearly 1 in 5 online transactions are completed with cash. While in Africa and the Middle East, only 50% of consumers are banked in the traditional sense, and 12% have access to a credit card. Even here in the UK, approximately 1.3 million UK adults are classed as unbanked, exposing the large number of consumers affected by any ban on cash.
Even when shopping online – many consumers rely on cash-based payments. At the checkout page, consumers are provided with a barcode for their order. They take this barcode (either printed or on their mobile device) to a local convenience store or bank and pay in cash. At that point, the goods are shipped.
There are also older generations to consider. Following the closure of one in eight banks and cashpoints during Coronavirus, the government faced calls to act swiftly to protect access to cash, as pensioners struggled to access their savings. Despite the direction society is headed, there are a significant number of older people that still rely on cash – they have grown up using it. With an estimated two million people in the UK relying on cash for day to day spending, it is important that it does not disappear in its entirety.
Supporting the transition away from cash
Cashless protocols not only restrict access to goods and services for consumers but also limit revenue opportunity for merchants. While 2020 has provided the global economy with one great reason to reduce the acceptance of cash, the payments industry has billions of reasons to offer multiple options that cater to the needs of every kind of shopper around the world.
Whilst it seems younger generations are driving LPM adoption, it is important that older generations aren’t forgotten. If online shops fail to offer a variety of preferred payment methods, consumers will not hesitate to shop elsewhere. With 44% of consumers reporting they would stop a purchase online if their favourite payment method wasn’t available – this is something merchants need to address to attract and retain loyal customers.
UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies
- UnionPay International today announces that two of Europe’s leading travel companies, Logitravel and Destinia, have started accepting UnionPay.
- This acceptance will enable users of the groups’ travel websites to make purchases using UnionPay payment methods.
The acceptance partnerships between the OTAs and UnionPay began in July 2020 for customers across 13 European countries and another 90 countries and regions worldwide. The European countries covered by the agreements include the UK, Germany, France, Italy, Spain, Portugal, Norway, Denmark, Sweden, Austria, Switzerland, Hungary and Ireland. The brands covered by these acceptances include Logitravel.com and Destinia.com which together deliver more than 8.5 million worldwide travel bookings each year covering flights, hotels, holidays, car hire and other experiences.
With over 8.4 billion cards issued in 61 countries and regions worldwide, UnionPay has the world’s largest cardholder base and is the preferred payment brand for many Chinese and Asian expatriates and students based in Europe, as well as an increasing number of global customers. These cardholders are also particularly attractive to the two OTAs. Despite the impact of Covid-19, Logitravel and Destinia expect to see the demand for travel across the European continent as well as that between Europe and Asia return to growth in the coming years. They are now placing significant focus on offering more payment options and smoother payment services to meet this demand.
The partnerships incorporate UnionPay’s ExpressPay and SecurePlus technology, which will ensure seamless transactions for the customers, contained within a single process through the relevant websites. UnionPay’s technology also provides for the requirement to authenticate transactions under the EU regulation Payment Services Directive 2 (PSD2) ensuring that sites will be compliant as soon as the relevant countries apply the requirements.
Wei Zhihong, UnionPay International’s Market Director, said: “This is a major partnership with two of Europe’s leading online travel companies. Logitravel and Destinia are brands which have been at the forefront of e-commerce for many years and we are very excited to be working with them to extend their reach to new audiences. This highlights the work that we have carried out in ensuring that our technology provides effective solutions for the biggest e-commerce sites both in Europe and around the world. We look forward to announcing many more similar agreements in the near future.”
Jesús Pons, Chief Financial Officer at Logitravel Group said: “UnionPay has always been on our radar, and since travel has become a crucial part of its development, Logitravel felt it important to develop this important partnership. It really was an obvious decision for Logitravel since both companies share a passion for e-commerce and emphasising the payment experience for their customers.”
Ricardo Fernández, Managing Director at Destinia Group said: “We believe that this is the beginning of a really strong relationship. Our discussions with UnionPay in reaching this partnership have demonstrated their understanding of the needs of major online merchants and their ability to deliver the highest quality systems. We look forward to working together on further partnership as we move forward.”
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