The last few years have witnessed a huge change in the way we make payments.
At a recent speech at Trinity College Dublin, Tim Cook CEO of Apple proclaimed confidently that the next generation will not know what money is.
They will also not know what cheques are if a proposal by the Payments Council goes ahead, stating that by 31st October 2018 cheques will be abolished due to a dramatic decline in their use. The fact that banks still make money from the anarchic three-day payment cycle that accompanies the use of cheques is one reason that calls are being made for banks to modernise or die.
Technology is evolving at a faster rate than ever before and the payment sector is by no means getting left behind. First Capital Cashflow, a Direct Debit solutions provider, has been asking experts in the payments sector what their predictions are as we move into 2016.
Five key trends emerged…
- Banks must evolve if they are to survive
A Bank, according the Oxford Dictionary definition, is “a financial establishment that uses money, deposited by customers, for investment, pays it out when required, makes loans at interest, and exchanges currency.”
While this definition remains relevant, how we use a bank is certainly changing.
Nowhere is this more obvious than in the development and widespread use of online banking apps, which have revolutionised what we expect from banks. It is no surprise that many challenger banks and third parties have emerged as a result, adding a new lease of life to the sector and becoming an integral part of the nation’s financial landscape.
So what will the next stage of evolution be?
Mike Laming, Lead Technologist at Adaptive Lab, has predicted that “software companies, with banking licenses, are going to redefine what it means to be a bank… they have the freedom to reimagine from the ground up what a bank should be.”
This will be made even easier come 2017 when the second generation Payment Service Directive comes into play. A further blow to the core banking services, the directive will require all banks to open up their Access to Accounts (XS2A) leaving the door wide open to new entrants into the payments marketplace.
An Open API adoption is already high on the UK Treasury’s agenda, and while this is great news for consumers and businesses, traditional banks will now have to work a lot harder to compete against third parties.
Innovation, Integration and Instantaneous will be the buzzwords for banks come 2016.
2) The continuation of contactless
Speed and ease are not are just key for banking. Unless you have been living under a rock for the last year or so, you will have heard of Apple Pay and its various cousins. Mobile payment, Contactless and eWallets were big news in 2015 and this will continue into 2016.
Research by Payments UK found that 771 million “Faster Payment” transactions were made in 2014 and this figure is predicted to rise to 1.94 billion by 2024 due, in part, to the ever increasing number of mobile apps that have now been developed.
Remi De Fouchier, SVP of Gemalto, commented that: “mobile payments are here to stay… new apps and solutions are popping up on a regular basis. To date over 150 have been launched or piloted worldwide…ignoring mobile commerce and mobile payments isn’t a viable option.”
Having said that, it will not happen overnight. John Cooke, Commercial Director Card Services at allpay Limited warns that “change in payments is usually very slow…contactless has been around since 2008 and it’s still not accepted in most supermarkets.”
However, John does acknowledge that this will change over the coming year, predicting that “all debit cards should be contactless by the end of the year.”
Ray Brash, Managing Director of PrePay Solutions concurs, claiming: “Contactless is obviously the word of the moment when it comes to payments. With the limit having increased to £30 at terminals, contactless will take off further as customer demand for convenience grows.”
Looking to the future, we can be assured that the use of contactless and mobile payment will be used for ever smaller transactions, becoming a regular form of easy payment that was previously the reserve of cash.
3) Fighting fraud with fingerprints
A key concern for many consumers and businesses is the impact increased data sharing and use of technology will have on security. Data breaches far too frequently made the news in 2015 and so it will be interesting to see what measures and regulations will be put in place in 2016 to placate fears.
Way back when magnetic strips were replaced by EMV (better known as chip and pin), fraud cases dropped dramatically, however, this did not address all card security issues, especially during CNP (card not present) transactions.
The next step on from EMV is already being used by the likes of Apple Pay, and that is biometric authentication. Fingerprints will always remain unique and, unless a terrible accident occurs, they cannot be lost or forgotten like PIN codes and security questions.
However, the issue with CNP fraud cases will still be present. This is where the need for ‘Big Data’ will kick in. Being able to analyse transactions in real-time should allow abnormal purchases to be identified quickly and accurately. It is access to this data, and development of the technology required to maximise its potential, that will be the next step in cyber security and regulation over the next few years.
A research report published by Infosys entitled ‘Payments Strategy- Renew the Old, Ring in the New’ commented that: “IT will play a key role in this space as both a backbone enabling monitoring and compliance and also providing next-generation analytics solutions that can detect and prevent fraud attempts.”
Mark Prior-Egerton of The Logic Group agrees, claiming that tokenisation will remain the only solution: “At their heart, many of these payment methods will still be based on card data and securing that is vital. The key to this is tokenisation which allows card data to be encrypted whether payment itself is made via a smartphone, wearable or even your fingerprint.”
4) The customer will STILL always be right
The desire to create a seamless, easy-to-use payment solution is resulting in great steps forward in terms of UX.
Thanks to the likes of Uber, the expectations of customers have been raised to a level most dated e-commerce solutions never even dreamt of, and when placing these innovating giants against the more traditional offerings, it highlights just how far the industry has come in a very short space of time.
Marching ever forward, one slick and clean platform will now not be enough to satisfy consumers, as the Infosys report explained: “Customers now expect a Netflix-style experience across channels, in which they can pick from one channel what they left in another channel.”
This omni-channel experience is destined to be the next big thing for the payments sector, allowing bank, card and virtual payments to be accessed via one easy-to-use system. It is hoped that this kind of approach will eliminate the administrative burden currently facing businesses and consumers alike, resulting in a ‘friction-less’ and less confusing payment solution.
5) Cash will remain king… for now
Admittedly, this could be seen as one of the most unexpected trends on this list.
Despite banks losing relevance, contactless evolving, big data solving security issues and innovate tech revolutionising UX, cash is still king… for the majority of consumers anyway.
Statistics from the Bank of England show that the number of banknotes in circulation is now higher than ever, increasing from 1,895 million in 2004 to 3,239 million by the end of February 2015. Production has also increased from 469 million in 2006/7 to 843 million in 2014/15. According to Payments UK, over 18 billion cash payments were made in 2014, accounting for 53% of transactions. Surely this shows that the need for cold hard cash is in no way on the decline?
Peter Moore, CEO of Consolis commented: “To ignore cash is to ignore vast swathes of the population and the businesses that cater to them. For example, convenience stores and small, independent cafes and retailers still rely on cash as the cornerstone of their businesses… cash is still king [for many] that rely on these corner shops and cafes for their everyday needs. We should not ignore the large number of small businesses that rely on cash transactions to stay afloat.”
However, this is not to say that the evolution of payment technology is by any means superfluous. For the B2B sector specifically, it is of great importance that the payment industry continues to innovate and become more receptive to digital technology.
According to statistics from Bacs, recovering late payments costed SMEs almost £11 billion in 2014. As of July this year, £31.3 billion is still owed to those 99% of small businesses that make up the UK’s economy, hindering growth and reducing profitability.
This is why the payments industry has to step up, and fast! A reliance on antiquated payment systems is costing us dear.
Commenting on the research, Mike Hutchinson from Bacs had this to say: “Our figures show that while the late payment landscape is improving in terms of the totals owed, it is at a cost, and a very real one, with SMEs having to dip into their pockets to chase money they are owed. We urge businesses to look at automated payments like Direct Debit to reduce the time and money that companies are spending to recover payments due to them.”
In conclusion, there is much to look forward to in 2016 in terms of innovation in the payments sector. A need to move with the times, evolve and adapt to changing customer expectations, business demands and comply with regulation will drive forward change, but we can rest assured that despite all this talk of ‘new trends’, money will continue to make the world go round, how it is transferred.
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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