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HOW ARE PRIVATE BANKS TO COMBAT IDENTITY FRAUD?

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Schalk Nolte

Schalk Nolte, CEO Entersekt, discusses the latest innovations in security, and asks if biometrics alone is secure enough when it comes to banking

Schalk Nolte

Schalk Nolte

Identity fraud is at an all-time high. According to figures from the fraud prevention organisation Cifas, there were almost 173 000 cases of identity fraud in the UK in 2016 – the highest number ever recorded. Last year, identity fraud cost the UK economy £5.4 billion, as revealed by research conducted by Experian in partnership with the University of Portsmouth’s Centre for Counter Fraud Studies. It should therefore come as no surprise that enterprises are increasingly looking to the digital space to improve their security, and private banks are no exception. Their challenge is that customer opinions are split between millennials, who are comfortable with the integration of social media, payments platforms and digital banking, and an older, more conservative client segment who do not necessarily trust this revolution. It therefore becomes a balancing act between a demand for one-click checkouts and all manner of mobile banking features, and a duty to ensure the security of these convenient digital channels, especially for high-risk transactions.

To add to this challenge, the Revised Payment Services Directive (PSD2) is now heralding an era of open banking, forcing financial institutions that operate in SEPA countries to allow third parties access to their customers’ accounts (with the customers’ consent). In the UK, the Competition and Markets Authority has underscored the importance of opening access to new entrants, saying that older and larger banks are not having to compete hard enough for consumers’ business. The aim of PSD2 to foster competition and customer-centric innovation may be commendable, but this opening-up of customer data will bring with it a host of new fraud vulnerabilities. Open banking therefore necessitates the strongest possible user authentication – but will the current developments in security technology be enough?

There is no silver bullet

Biometrics represents a leap forward in usability, but the irreplaceable identifiers they make use of, such as fingerprints, voice patterns and retina scans, represent a highly attractive target for hackers.

To avoid the theft of these identifiers, mobile manufacturers require that they never leave the mobile device on which they were scanned. This means that the identifier is never transmitted to an application’s server to be matched. During a biometric login, the application then simply attests that the identifier has been matched on the device. The bad news is that a fraudster could very easily attest the same thing – without matching anything at all.

As with biometrics, there have been significant advances in machine learning technology. These promise improved risk analysis based on past and present user behaviour and on the state of the user’s device when they access digital services. This approach is attractive to banks because the data that is used in doing risk assessment is collected without the user’s direct involvement, which means less user friction.

The problem is that reliance on risk-based authentication may not translate into better security. A false-positive authentication could result in an account breach, and a false-negative in a declined transaction – a key cause of the current prevalence of abandoned e-commerce carts. Card issuers are finding their top-of-wallet status threatened as consumers resort to competing institutions in frustration over risk-based declines.

A winning strategy

Risk assessment can certainly help determine which transactions qualify as high-risk, while biometrics can be used as a second factor of authentication. For example, in addition to a password and/or PIN, the user can be requested to present a fingerprint (or, in the case of voice biometrics, speak a phrase) in order to authenticate themselves before being allowed to log in, proceed with a transaction, add a beneficiary, or make a payment. But neither biometrics nor risk assessment can provide foolproof authentication on their own. 

Instead, the answer lies in deploying digital certificate technology on the mobile phone to enable out-of-band, multi-factor authentication and encrypted communication. Selecting an authentication solution that combines the best security with low user friction will go a long way in meeting the requirements of both customers and regulatory bodies, and help prepare private banks and other financial institutions for both imminent and future changes.

Banking

Sunak to give UK Infrastructure Bank £12 billion of capital in budget

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Sunak to give UK Infrastructure Bank £12 billion of capital in budget 1

LONDON (Reuters) – British finance minister Rishi Sunak is expected to announce an initial 12 billion pounds of capital and 10 billion pounds of guarantees for the new UK Infrastructure Bank in his budget statement next week, the government said on Saturday.

It said this will help the bank, which will launch in the spring and operate UK-wide, unlock billions in private finance to support 40 billion pounds of infrastructure investment.

The bank will offer a range of products, including equity, loans and guarantees, which can be tailored to support the needs of private sector infrastructure projects, in sectors such as renewable energy, carbon capture and storage and transportation, the government said.

It will also offer infrastructure loans to mayors and local authorities at low rates to help fund projects.

“We are backing this bank with the finance it needs to deliver modern infrastructure fit for the 21st century and create jobs,” said Sunak.

The government said he is also expected to commit a further 375 million pounds to co-invest alongside the private sector in high-growth, innovative UK firms.

While Sunak’s March 3 budget will include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown, he will also probably signal tax rises ahead to plug the huge hole in the public finances.

In an interview with the Financial Times, Sunak said he would use the budget to level with the public over the “enormous strains” in the country’s finances, warning that a bill will have to be paid after further coronavirus support.

($1 = 0.7178 pounds)

(Reporting by James Davey; Editing by Toby Chopra)

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Banking

SoftBank reaches settlement with former WeWork CEO Neumann

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SoftBank reaches settlement with former WeWork CEO Neumann 2

(Reuters) – SoftBank Group Corp said on Friday it has reached a settlement with WeWork’s special committee and the company’s co-founder and former chief executive, Adam Neumann, putting to rest a legal battle dating back to 2019.

SoftBank, the new owner of the office-sharing firm, did not disclose terms of the settlement. Media reports earlier this week indicated the deal includes a nearly $500 million cut in Neumann’s payout from SoftBank.

The legal tussle between SoftBank and Neumann started in 2019, when SoftBank agreed to buy around $3 billion in WeWork stock belonging to Neumann as well as current and former WeWork employees. SoftBank later contested its obligation to purchase the shares.

Under the new settlement, SoftBank will purchase around half the shares it had originally agreed to buy, a source familiar with the talks had told Reuters on Monday.

The settlement is also expected to clear the decks for WeWork as it reportedly pursues a public listing by merging with a special purpose acquisition company (SPAC).

“This agreement is the result of all parties coming to the table for the sake of doing what is best for the future of WeWork,” said Marcelo Claure, executive chairman of WeWork and CEO of SoftBank Group International.

SoftBank, which poured more than $13.5 billion into WeWork, was pulled into the legal dispute with directors at WeWork after backing out of the $3 billion tender offer agreed when it bailed out the office-sharing firm following a flopped IPO attempt.

(Reporting by Shariq Khan in Bengaluru; Editing by Richard Pullin)

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Banks weigh up home working – the new normal or an aberration?

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Banks weigh up home working - the new normal or an aberration? 3

By Lawrence White, Iain Withers and Muvija M

LONDON (Reuters) – As the finance industry prepares for life post-pandemic, commercial banks are moving quickly to harness working from home to cut costs, while investment banks are keen to get traders and advisers back to the office.

HSBC and Lloyds are getting rid of as much as 40% of their office space as an easy way to make savings when bank profits have been crunched by the pandemic.

But there are concerns that remote working does not benefit everyone. Junior staff miss out on socialising and learning opportunities and there are also risks home working can entrench gender inequality.

At investment banks, where long hours in the office were the norm pre-pandemic, bosses say they want most people back where they can see them.

HSBC plans to almost halve office space globally, as it aims to squeeze more use out of the remaining space and increase the number of staff per desk from just over one to closer to two.

Britain’s biggest domestic lender Lloyds plans to shrink its office space by a fifth within three years. Standard Chartered will cut a third of its space within four years, while Metro Bank said it would cut some 40% and make more use of branches.

“We’ve had a period where flexible working has been tested in full, with about three quarters of people not based in offices as we used to call them, and the business has performed remarkably well,” Andy Halford, Standard Chartered CFO, said.

But major investment banks take a different view, with Goldman Sachs Chief Executive David Solomon pouring cold water on the potential of remote working.

“It’s not a new normal. It’s an aberration that we’re going to correct as soon as possible,” he told a Credit Suisse conference on Wednesday.

Barclays CEO Jes Staley, who last year said he thought the days of 7,000 employees trudging into its Canary Wharf headquarters were numbered, is also unwilling to commit for now to large office closures.

The Barclays boss has said the bank had “no plan” to make a major real estate move as Britain’s prolonged third lockdown had shown the strains of working from home.

Nick Fahy, CEO of online lender Cynergy Bank, said working over screens often could not compete. “You might have a disagreement on this, that or the other but actually over the coffee machine or over a glass of wine or a bit of lunch, issues can be resolved.”

UNINTENDED CONSEQUENCES

Some banks have acted quickly because they are used to flexing workforces in line with economic cycles, particularly in investment banks, Oliver Wyman principal Jessica Marlborough said.

But some are waiting on analysis of staff productivity changes before making final decisions, while others were mindful junior staff may still prefer going into offices, she said.

Banks are also concerned women may lose out from the shift to remote working.

“We thought the pandemic would be a big leveller for women. But actually what we’re starting to see is it’s extremely challenging to get women to move jobs in a pandemic,” Marlborough said.

“Banks were making progress in hiring a more balanced workforce in terms of gender and other metrics, but they’re actually struggling now (as banks are finding) they (women) are less likely to seek out a new job.”

Union leaders said part of the reason was that some women are juggling more childcare responsibilities during the pandemic.

Dominic Hook, national officer for UK union Unite, said banks must ensure working from home is voluntary, use of surveillance tools is limited, and employers respect staff hours so work does not spill into evenings and weekends.

“Our concern is that it won’t actually be a choice and that banks will pressure staff to work from home,” Hook said.

There are also concerns hybrid working will favour employees who visit the office more regularly, as they can spend more time in person with colleagues and managers, said Richard Benson, managing director at Accenture Interactive.

The staff most likely to go back to the office are traders, bank executives said, while back-office functions such as finance, risk management and IT will spend more time working remotely.

In Germany, Deutsche Bank said it had been challenging to adapt home office spaces for traders and expected many will want to return, but not all.

“We will pay more attention to the personal circumstances at home. Dealers also have children or parents in need of care. We have become more sensitive,” said Kristian Snellman, Deutsche Bank’s head of investment banking transformation for Germany and EMEA.

The trend to shed offices predated the pandemic as many banks made cuts after the 2007-09 financial crisis. Some have already made moves as a result of the pandemic, such as NatWest, which shut its tech hub in north London last summer.

Retained offices are being remodelled, with desks removed to make way for collaboration and break space such as coffee areas, gardens and libraries, property consultancy Arcadis said.

“It’s not just about adding a ping pong table and table football and hoping it will work, it’s about making sure people get downtime,” said Sarah-Jane Osborne, head of workscape at Arcadis.

David Duffy, CEO of Virgin Money, said the bank is among those planning to strip out office cubicles.

“The world of large-scale populations returning to a tall skyscraper building to come in and do their e-mail in the office doesn’t make any sense,” he said.

(Reporting By Lawrence White and Iain Withers in London and Muvija M in Bengaluru, Additional reporting by Patricia Uhlig in Frankfurt. Editing by Rachel Armstrong and Jane Merriman)

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