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Finance

FINANCE PROFESSIONALS RISK REPUTATIONS BY IGNORING TAX

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Finance Professionals Risk Reputations By Ignoring Tax

Fewer than four in ten of those working in banks, asset managers and hedge funds believe investments in corporate tax policy have a significant impact on reputation, according to a new report from professional services firm Kinetic Partners. Despite this, the firm’s 2014 Global Regulatory Outlook (GRO) report says tax is to be a “defining issue” for the remainder of the decade.”

Finance Professionals Risk Reputations By Ignoring Tax

Finance Professionals Risk Reputations By Ignoring Tax

The survey reveals that while large majorities believe investment in independent governance (84%) and internal compliance arrangements (93%) strengthens firms’ reputations, only 38% of respondents think the same of tax policy investments.

Kinetic Partners CEO and Founding Member Julian Koreksays: “Despite high profile controversies over large businesses’ tax arrangements, most still don’t see the link between tax and reputation. As governments continue to face years of stretched public balance sheets and public pressure to ensure businesses pay their fair share, that link will only strengthen.”

According to the report, the effects are resonating most acutely in offshore centres, which suffer from their portrayal in popular culture.

Gary Ashford, Tax Risk Member at Kinetic Partners, says: “Offshore centres are facing unprecedented scrutiny and pressure to demonstrate transparency. Efforts to shed their reputation as tax havens, however, are continually undermined by the ‘Hollywood effect’, as well as unfortunate headlines. Moreover, huge numbers of international exchange of information agreements are being signed around the globe. We are seeing tax disclosure facilities introduced in many countries enabling wealthy individuals to regularize their tax affairs.”

Despite these developments, many of those surveyed believe that adherence to the letter of the law is enough to satisfy the public and others. Only 29% of those polled agreed that stakeholders expected compliance with tax legislation beyond that set down in statute, compared with 43% who disagreed. The remainder, 28%, said they were unsure.

In the 2014 Global Regulatory Outlook report, Guernsey Financial Services Commission Director General William Mason urges firms to adapt to today’s more stringent regulatory environment.

“Having a business model that is only marginally compliant with international regulatory expectations is unlikely to provide a recipe for commercial success in what is a much less forgiving regulatory climate,” he writes.

Finance

Increased contactless spending could be linked to higher fraud and payment disputes, warns global risk expert

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Increased contactless spending could be linked to higher fraud and payment disputes, warns global risk expert 1

The rapid adoption of contactless payments during COVID-19 may be contributing to multiple strands of fraud

Monica Eaton-Cardone, COO and Co-Founder of merchant dispute specialist, Chargebacks911, and its revolutionary new financial institution brand, Fi911, warns of the chargeback and fraud risks associated with the increase in contactless payments following the COVID-19 outbreak.

In a bid to reduce human interaction, the use of cash, and the touching of contact points such as PIN pads and cash machines, the UK’s contactless spending limit increased from £30 to £45 in April this year.

Customers across the globe have also got onboard with the payment method following contagion concerns about using cash and cards. As a result, Mastercard reported a 40% increase in contactless payment activity in Q1 of 2020.

This dramatic increase in contactless payments may be contributing to the sharp rise in chargebacks that have been recorded since the pandemic began. According to Cardone, industries are now experiencing 10 times the amount of payment disputes that were taking place prior to COVID-19.

Monica explained: “Contactless payments present a number of fraud threats. For one, if a valid cardholder’s information is stolen, it can be added to a mobile device and used to make unauthorised purchases – leaving merchants covering customers’ losses. In addition to this third-party fraud, contactless payments present a greater opportunity for genuine customers to commit first-party (friendly) fraud and lie about whether or not a transaction was actually made by them.

“These scenarios pose even more of a threat while the retail landscape is going through this turbulent period and genuine claims are on the rise, so merchants are in less of a position to dispute false claims.”

Although merchants are the ones left refunding customers and losing valuable goods due to chargebacks and friendly fraud, the issue doesn’t start and end with them. Behind a payment dispute is an intricate network of merchants, acquirers, issuers, and card schemes that deal with disputes and adopt their associated costs.

And, when merchants lose money to disputes, the cost will inevitably end up back with customers, since merchants raise prices to cope with these losses. This is likely to become a necessity in our current period of economic uncertainty.

For this reason, Monica warns everyone involved in the payment process to remain vigilant when it comes to chargebacks that stem from contactless payments.

Monica continued: “If merchants want to reap the benefits of contactless payments, they need to be aware of the threats involved and have strategies in place to respond effectively.

“At the same time, financial institutions should watch for activity that is unusual and out of line with typical consumer behaviour – for instance, a consumer suddenly making a high-value purchase at a store that’s thousands of miles away from home. They should also be on the lookout for repeated use of the chargeback process, which might indicate friendly fraud, as 40% of consumers who commit this fraud successfully will repeat the practice within 60 days.

“I also urge consumers to be aware of their account activity and to keep a close eye out for anything that may indicate that a contactless payment account has been compromised.”

Going forward, Monica is anticipating that contactless payment adoption will continue to grow, especially against the backdrop of COVID-19. To help combat the growing chargeback problem and fraud associated with contactless payments, Chargebacks911 is working closely with merchants – particularly those in the most susceptible industries – and financial institutions to tackle the issue head-on.

If you’re concerned about COVID-19 chargebacks effecting your business, speak to a member of the Chargebacks911 team at: [email protected].

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Finance

Pay and Go, why seamless checkout is essential for the customer experience

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Pay and Go, why seamless checkout is essential for the customer experience 2

By Ralf Gladis, CEO, Computop

Shopping for many is therapy…until they reach the queue for the checkout. It’s easier online to pay for goods, but physical retail, with all the sensory benefits it offers the shopper, would be so much easier if payment was quick and easy. In an industry that has proven it can reinvent itself, its time to focus on the point of sale.

Shopping serves less to satisfy our basic requirements than it does to satisfy our love of new things, our desire to spend money, and our curiosity. It’s an experience, and we’re not interested in spending time on anachronistic, time-consuming procedures like queuing at the till. In a digitalised world where everything can be seen and bought in seconds through a smartphone, what we want from shops is a new approach, and the point of sale is not living up to expectation.

The reason for this lies in retailers’ reluctance to invest in IT infrastructure a decade or so ago, when smartphone app developers were experimenting with location-based services. They could have enabled customers to use their mobile phones as indoor navigation systems, guiding them to the goods they were looking for, or to items they were promoting online. But they were wary. What if network access allowed customers to see if they could get a better price for products before they paid? Would they be able to work out the margins that retailers were making? This reluctance was pointless since customers could just as easily leave the store to do a quick online search, and who’s to say whether they would ever return?

Ralf Gladis

Ralf Gladis

In an age in which the range of goods on offer offline and online is identical, the shopping experience becomes a differentiating factor alongside the price – for better or worse. In order to retain regular customers, it is no longer enough for a store to carry a brand and have the right articles of that brand in stock or be able to obtain them quickly. Shopping must stimulate the brain’s reward system from the initial contact with the goods – looking, touching, feeling, grasping – to spending money.

Payment points in stores, particularly department stores are positioned around the edges of the shop floor for historic reasons – they used to be close to the offices and safes where the cash was stored before being taken to the bank – but why make customers walk any distance at all when they could pay exactly where they are already standing? In the Apple Store salespeople move around with their iOS mobile devices and they can provide information and process payment. There’s not even the need to provide a paper receipt because it can be sent by email. Some stores are offering apps that allow their customers to pay on their own smartphones once they’ve scanned the barcode of the item they want to purchase.

The way forward is to think about stores as showrooms. Assistants are there to provide information and seamlessly enable payment, not to stand behind a physical POS. If the customer would rather not lug their shopping bags around with them, the assistant can arrange next day delivery as they are paying. If an item isn’t in stock, it can be ordered at the same time. In fact, some retailers are now specialising in the display of goods, particularly clothing, in just one size and if the consumer likes the look of it, they scan the label with their phone, reserve a changing room and the item is ready for them to try on when they enter.

But when it comes to actually making payment, retailers have all the technology they need at their disposal. Contactless payment by card or mobile phone, for example, takes just seconds, and with biometric authentication now such an integral part of electronic payments, both retailers and customers are infinitely better protected from fraud than they have ever been. Biometrics are also attractive to retailers and consumers because they reduce time spent securing payment, and smartphone-supported payment methods such as Apple Pay which can be combined with self-scanning are increasingly being used by shoppers in a hurry.

If retailers are committed to keeping their physical stores relevant and attractive, they could do much worse than to make paying for goods as frictionless as possible. Make payment part of a great customer experience.

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Finance

Is cash now redundant in western society?

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Is cash now redundant in western society? 3

By Daumantas Dvilinskas, CEO and Co-Founder of TransferGo

Research from UK Finance has shown that cash consisted of less than a quarter of all payments in 2019, suggesting that as a method of payment, it was already on the decline before the pandemic struck. Evidently, this means that current negative attitudes towards cash have been compounded by COVID-19 and no doubt suggest that fears are growing over how the use of physical currency could be a possible vehicle for virus transmission. In turn, this has caused a shift in consumer behaviour with those stuck at home turning to digital as the only way to spend, send and save money.

But if the usage and popularity of cash was already on the decline – what factors were driving this? Primarily, it’s been a shift in consumer behaviour towards online shopping, and the increasing speed and convenience offered to end users by contactless payments and new services in the fintech market. An example of the latter is in digital money transfer services, which facilitate the flow of money across borders but without the added fees and hidden exchange rates traditional cash-based businesses have.

But what impact will this behavioural shift have on our society, and what does this mean for the finance industry?

The finance industry’s response

With the pandemic bringing country-wide lockdowns, consumers were forced to turn to digital as trips to banks and post offices to make deposits or collect banknotes became inaccessible. Fintechs, who are digital by default, were particularly well placed to support customers by allowing them to send and spend funds by facilitating online transactions through digital payment services.

Additionally, digital lending firms, who were able to move fast in response to the surge in loan applications as a result of redundancies and businesses shutting down, were much more nimble than physical branches and traditional financial institutions. And the demographic of users has widened too, with digital lending platforms seeing not just tech savvy users, but older users in their 40s and 50s turning to their services.

Prior to the pandemic many people, for reasons such as lack of trust, being technophobes or just being creatures of habit, were hesitant to use digital finance services over cash. We expect to see a continued reversal of that as consumers get used to the ease and accessibility that fintechs have bought to the sector.

Remittance sector has already proved that cash wouldn’t reign supreme

This issue of cash vs digital is especially prevalent amongst the migrant worker community. Migrants are often relied upon by their families for income support, and in some cases are the sole source of income. For example, in 2019 remittances amounted to $554bn according to the World Bank, beating all other forms of cross-border financial flows to poor countries.

Alongside the lockdown, we also had to deal with the issue of closed borders, which prevented migrants arriving home with actual cash. Combine that with the closure of most retail finance operations, options for sending physical cash were basically eliminated. Workers therefore needed to find other ways of ensuring their hard earned money could get to those that needed it at home. Digital finance bridged the gap.

Through the benefits of digital, providers can offer guaranteed and fair exchange rates, ensuring that migrants, who may be undergoing financial difficulties, are not stung by hidden remittance fees. They can also provide consistent and accessible support, for example by offering in-country agents who understand local discourse and issues and can help find appropriate solutions. What’s more, these services can offer a seamless customer experience, increased service reliability and perhaps most importantly security. For example, TransferGo recently announced a partnership with end-to-end ID verification companies SumSub and Veriff, which ultimately means that migrants are able to have their identity verified, quickly and reliably, preventing fraudulent activity, without causing a delay to registering for and using the service.

Was this a result of the pandemic or is cash truly on its last legs?

COVID has undoubtedly caused a huge shift in consumer propensity to use cash. Findings suggest over half of consumers had used digital transfers to give money to friends and family at least once during the first month of lockdown, with 20% doing so more than twice.  When you consider that cross border payments are expected to hit $240 billion by 2024 due to an increasingly global and interconnected economy and TransferGo experienced a 63% growth in transactions in April compared to the same time last year, the future is seemingly evident.

The convenience, speed, improved customer experience and security offered to consumers through digital payments will be difficult to surrender – especially as people become accustomed to new ways of working and living.

At the current pace of technological innovation, I can’t help but feel that this is the irreversible direction of travel. It is incumbent on those of us at the sharp edge of innovation in the industry to ensure it remains secure and fit for purpose as the world continues to change around us.

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