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Invisible banking is in plain sight – here’s what to do about it

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Invisible banking is in plain sight – here’s what to do about it

Matt Phillips, VP Banking, Diebold Nixdorf UK/I 

In today’s mobile world, financial institutions are working hard to give their digital offerings an overhaul.

They are under pressure from several key factors to do so: firstly, because of changing customer behaviours, and secondly, because other organisations – such as retailers, restaurants and convenience firms – have rapidly evolved how they interact with customers.

Mobile technology has changed the rules of engagement forever, and the customer experience stakes continue to rise.

The industry must respond – banks and financial services organisations need to evolve, innovate, and connect the complete customer journey in new and interesting ways. And they need to do this quickly.

Sound like a familiar problem? It’s one that has evolved out of changing consumer behaviours. For example, according to research, people have an average 24 apps installed on their phone[i] and most people unlock their phones 28 times a day to check these apps. Millennials are almost never seen without their mobile phones in their hands, or placed on the table next to them in a meeting, with half carrying their phones with them everywhere they go.[ii]

Our obsession with everything digital is nurtured by many businesses already – and the time for the financial services industry to follow suit is now. Retailers have been particularly adept at finding new ways of connecting with customers – with Amazon and eBay among the most popular apps in the UK at the moment. These apps make transactions simple, seamlessly connecting customers to their purchases.

For many financial institutions, following in these footsteps (or fingerprints), involves a seismic shift – from relying on physical touchpoints such as using a debit card at an ATM, to focusing on the digital, the unseen, and the automatic.

This is invisible banking. This is where engagement takes place over apps (not just over the counter), where the mobile wallets go beyond customer expectations, and where an open API economy offers up new opportunities.

With so much to achieve, and with so little time, here are five key tips for making the most out of digital opportunities.

  1. Chose to focus on areas where you’ll have quick wins– for banks, digitisation involves more than simply adding new and improved features to a mobile banking app. It is a big beast, and one that is constantly changing shape according to customer demands and the competitive landscape. Focusing on where you can make quick changes is a useful tactic to employ, if you want to make an impact, while working on the long-term strategy in the background.
  1. Build in flexibility– the open API world is bringing with it a new realm of possibility for organisations that want to digitise. By creating an open and standardised platform, it becomes possible to integrate more offerings into your portfolio more quickly – with flexibility and adaptability built in from the beginning. Ultimately, being open and flexible like this, will allow financial services firms to future-proof their operations and evolve quickly.
  1. Don’t close the doors on integration – integrating out-of-the-box services into your offering can be a really effective way of bringing new solutions to market, quickly. Many app creators have multiple ready-to-go financial services apps and hundreds of features that can be integrated with back-end platforms and data to bring them to more customers quickly.
  1. Consider working with third parties– many banks are already working on incubator schemes with third parties to develop, test and deploy new innovations into their complex systems. The Barclays Accelerator and the City Ventures Fintech Accelerator are two great examples of this. Both are helping fintech start-up concepts to find a place in the banking ecosystem, thus reducing the pressure on internal teams.
  1. Consider your different markets– every market is different, and customers have different needs in each. The UK is further advanced in the world of mobile banking than some other countries in Europe – with payments, contactless transactions, and even biometric authentication building momentum in the UK. So, if you are implementing person-to-person payments or customer experience bots as part of your digital offering, make sure they are tailored to your customer’s needs.

Ultimately, digitisation is about more than just adding fads or gimmicks to your offering. It’s about making banking a seamless part of your customer’s lives, improving their experience and bringing your services in line with their expectations. It doesn’t matter that you are in a different industry to Uber, eBay, or Amazon. This, is what you are going to be compared to.

Striking the right balance is crucial. This new era of seamless banking happens in the background. Consumers don’t see it, but they do experience it.

For some firms this might involve making it possible for customers to pre-order cash, and then scan a code at their closest ATM to withdraw that cash. For others, it might involve using data intelligently to develop more personalised services or account aggregation apps. It depends on the market, the customer demand, and the overall business objectives involved. Do you have your customer experience goals in plain sight?

[i]Source: Fiserv, “Expectations and Experiences: Channels and New Entrants” survey/ YouGov US

[ii]Source: Fiserv, “Expectations and Experiences: Channels and New Entrants” survey/ YouGov US

Banking

Hackers can now empty out ATMs remotely – what can banks do to stop this?

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Hackers can now empty out ATMs remotely – what can banks do to stop this? 1

By Elida Policastro, Regional Vice President for Cybersecurity, Auriga

In 2010, the late Barnaby Jack famously exploited an ATM into dispensing dollar bills, without withdrawing it from a bank account using a debit card. Fast forward to the present day, and this technique that is now known as jackpotting, is emerging as a threat and is growing as an attack on financial services. Recently, a hacking group called BeagleBoyz in North Korea have caught the attention of several U.S. agencies, as they have been allegedly stealing money from international banks by using remote hacking methods such as jackpotting.

The reality behind jackpotting

Jackpotting is when cybercriminals will use malware to trick their targeted ATM machine into distributing cash. As this criminal method is relatively easy to commit, it is becoming a popular tool for cybercriminals, and this trend will sure continue in 2021, unless financial organisations implement policies to prevent this and protect consumers.

During this difficult time, when access to cash has never been more important to banking customers, it is imperative that banks give their customers reliable ATMs that work, 24/7, 365 days a year. However, due to the sensitive data that ATMs possess, such as credit card or PIN numbers, they have now become a profitable object for cybercriminals to manipulate. As cybercriminals have been evolving in their efforts of attacking the IP in ATM machines, we will definitely see more jackpotting stories emerge in the coming months, especially with the large return on investment.

How criminals exploit the vulnerabilities found in ATMs

Since ATMs are both physically accessible and found in remote locations with little to no surveillance, this gives an opportunity for criminals to carry out jackpotting, especially with the software vulnerabilities that may exist in many ATMs.

ATM machines have been easily manipulated due to the outdated and unpatched operating systems that they run on. If banks wanted to resolve this issue and update these systems, it would take large amounts of time and money to do so. However, some banks do not have such resource and because of this, cybercriminals take advantage by penetrating the software layers in ATMs and exploiting the hardware to dispense cash.

How can banks tackle this?

As the sector has a complex technical architecture, banking organisations will have to make sure that they have control over the transactions that take place, and this includes the management of security when it comes to communication between various actors. When financial organisations are reviewing their ATM infrastructure, they will also need to protect their most vulnerable capabilities within their cybersecurity. Banks, for example, can encrypt the channels on the message authentication, in the event bad actors try to tamper with their communications.

Because ATM networks need to be available 24/7, banks not only, need to implement greater protection over their systems, but they need to do so with a holistic approach. One action that banks can take is to implement a centralised security solution that protects, monitors and controls their various ATM networks. This way banks can control their entire infrastructure from one location, stopping fraudulent activities or malware attempts on vulnerable ATMs.

Another way for banks to reduce the risk of jackpotting attacks is to update their ATM hardware and software. To do this, they will need to closely monitor and regularly review their machines in order to spot any emerging risks.

What the future holds for the banking industry

As confirmed by the warnings from the U.S. agencies, jackpotting remains a very serious threat for financial organisations. Evidence has also emerged, which shows hackers are becoming more innovative in their tactics. It was reported last year, for example, that hackers stole details of propriety operating systems for ATMs that can be used to form new jackpotting methods.

The emergence of jackpotting highlights the need for banks to actively work to protect their customers’ personal information and critical systems now and for the foreseeable future. In order to stay secure and reduce the risk of attacks, they will need to put in place the aforementioned solutions, which include updating their ATM hardware and software as well as closely monitoring and regularly reviewing their ATMs. As cybercriminals continue to become more innovative in their ways of attacking the machines, the issues mentioned will only continue to rise if they are not addressed. Although the method of jackpotting requires little action from cybercriminals, if financial organisations can implement a layered defence to their ATM security, they can stop themselves from becoming another victim to this type of attack in the future.

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Banking

SoftBank Vision Fund set for new portfolio champion with Coupang IPO

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SoftBank Vision Fund set for new portfolio champion with Coupang IPO 2

By Sam Nussey and Joyce Lee

TOKYO/SEOUL (Reuters) – SoftBank’s $100 billion Vision Fund is poised to have a new number-one asset in its portfolio with the upcoming floatation of top South Korean e-tailer Coupang, furthering a turnaround that has seen the fund yo-yo from huge losses to record profit.

The $50 billion target valuation that Reuters reported this month would likely see the decade-old firm surpass recently listed U.S. food deliverer DoorDash Inc on a roster of assets that also includes stakes in TikTok parent ByteDance and ride-hailers Grab and Didi.

The Vision Fund built up its 37% stake in Coupang for $2.7 billion, mostly at an $8.7 billion post-money valuation, a person familiar with the matter said. The fund is not expected to sell shares in the initial public offering (IPO) that Coupang filed for in New York, the person said, declining to be identified as the information was not public.

SoftBank Group Corp and Coupang declined to comment.

Achieving a $50 billion valuation would add to good news for the fund which is bouncing back from an annual loss in March. This month, it announced record quarterly profit, driven by the listings of DoorDash and home seller Opendoor Technologies Inc and share price rise of ride-hailer Uber Technologies Inc.

HIT PARADE

The fund has written big cheques for late-stage startups to fuel rapid growth, with two-thirds of the value of its portfolio concentrated in 10 assets including Coupang.

The 10 include 25% of British chip designer Arm – to be sold to Nvidia Corp pending regulatory approval – but not stakes in high-profile stumbles like office-sharing firm WeWork.

The fund’s largest assets include its 22% stake in DoorDash, whose share price has doubled since the firm’s December IPO, sending its market capitalisation to $65 billion.

FACTBOX: Vision Fund’s investment hit parade

SoftBank initially invested in Coupang in 2015, adding it to a stable of e-commerce hits that included 25% of China’s Alibaba Group Holding Ltd, before placing it under the fund.

The e-tailer has grown rapidly during stay-home policies while the COVID-19 pandemic has forced other portfolio firms like Indian hotel chain Oyo to scramble to preserve cash.

Analysts see Coupang’s $50 billion valuation as feasible given its first-mover status and as it expands beyond replacing brick-and-mortar retail with a rising number of online channels.

It is the biggest e-tailer in South Korea that directly handles inventory, with 2020 purchases at about 21.7 trillion won ($19.62 billion), showed data from WiseApp.

“The market’s assessment isn’t exaggerated,” said analyst Park Eun-kyung at Samsung Securities. “Coupang’s market leadership is a premium factor.”

($1 = 1,106.1800 won)

(Reporting by Sam Nussey in Tokyo and Joyce Lee in Seoul; Editing by Christopher Cushing)

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Banking

Five things to look out for in HSBC strategy update

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Five things to look out for in HSBC strategy update 3

By Alun John

HONG KONG (Reuters) – HSBC Holdings PLC will update its “transformation” plan announced a year ago on Tuesday, when the Asia-focussed lender also reports annual results.

As part of its latest strategy, the bank said in February last year it would shrink its investment banking operations and revamp its businesses in the United States and Europe resulting in 35,000 jobs being cut.

HSBC’s pretax profits for 2020 is expected to fall 38% to $8.3 billion, according to analysts’ estimates compiled by the bank, because of the impact of the COVID-19 pandemic.

Here are five key things to look out for in the new plan to revive its growth —

1. How will HSBC boost fee income?

The bank has promised details of its plans to make more money from the fees it earns from selling products to customers than it does by pocketing the difference between the interest rates it offers savers and charges borrowers.

This could involve selling more products to wealth management clients, charging corporate clients in different ways, and maybe even charging retail clients for basic banking services.

2. What do the plans to double down on China and Asia mean?

HSBC intends to refocus resources from elsewhere on what it calls its “high returning Asia business”, but investors want to know what this means in practice for markets and business lines.

Politics could make this harder. HSBC has been attacked by British lawmakers for assisting Hong Kong police with investigations into pro-democracy activists, including freezing some bank accounts.

CEO Noel Quinn said last month the bank had to comply with police requests and he could not “cherry-pick which laws to follow”.

3. Will HSBC resume paying a dividend?

HSBC has not announced a dividend since the third quarter of 2019, on instructions from the Bank of England. This angered retail investors in Hong Kong who tried unsuccessfully to have the policy changed.

The regulator has since lifted the ban, and British rival Barclays said Thursday it would pay a dividend of one pence a share. However, despite beating analyst expectations with its 2020 results, Barclays shares fell as a vague outlook without profit targets left investors underwhelmed.

HSBC investors will be looking beyond the day’s numbers for concrete commitments towards improved returns and a more positive outlook for key economies.

4. How will HSBC shrink its U.S. and European footprint?

HSBC’s French high street banking operations are up for sale, but it has had trouble finding a buyer.

The market is due an update on whether HSBC has managed to find a buyer on terms it will accept, or whether it will seek to wind the business down more gradually.

HSBC will also give details of how it will accelerate its existing efforts to shrink assets, staff and branches in the U.S., which accounted for 0.5% of the group’s pre-tax profit in the first half of last year.

5. More job cuts on the way?

HSBC employed 307,000 people at the end of 2010. The bank’s management said last year it was aiming to reduce the headcount of 235,000 closer to 200,000 by 2023. Investors want to know whether the new plan will mean deeper cuts. Nearly every new strategy launched by HSBC in the past decade has resulted in fewer people being employed by the bank.

(Reporting by Alun John; Editing by Sumeet Chatterjee & Shri Navaratnam)

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