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IS THERE LIFE BEYOND THE CREDIT CARD?

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IS THERE LIFE BEYOND THE CREDIT CARD?

Andrew Edem, Head of Engineering & Information Security Officer, PPRO Group

In the UK and across the English speaking world, credit card payments remain prominent, totalling £14.6 billion in May 2015 alone. Despite new innovative payment methods on the horizon, the popularity of credit cards as an online payment method shows no signs of diminishing and renewed efforts to fight fraud are not making much of a dent.

For those operating across international online borders, getting to grips with and fighting card fraud can be even more difficult. For example, in Germany, credit card usage for online payments and “card not present” transactions is low, with invoice and SEPA direct debit leading as the more popular options. In the Netherlands, almost two thirds of shoppers use iDEAL which prevents the misuse of sensitive data by putting the onus on the shopper to initiate the payment meaning merchants don’t collect it in the first place. In the US, credit card use is prevalent but they are only just undergoing migration from magnetic strip to chip–and-pin so the nature of fraud in this territory will change from cloned cards to “card not present” transactions in the near future.

Varying credit card penetration and usage across different territories can make a global response difficult. But with e-commerce an easy target for fraudsters and at best, attempts by the industry to stay one step ahead are still a few years behind, risks of credit card fraud still remain no matter who you are and where in the world you operate.

Assessing the risks

The use of credit cards to make a purchase can be a double edged sword for both merchants and consumers alike. For merchants, credit card payments will increase conversion rates in those territories where usage is high but with that, the likelihood of fraud also increases which could lead to both monetary and reputational consequences.

High profile cases of Sony Playstation, Xbox and Amazon user accounts being hacked and credit card numbers and expiry dates being published, are increasing in occurrence alongside the more common, daily risk of chargebacks. This shows just how vulnerable and valuable customer data is to a fraudster and how companies which rely on credit card payments to seal the deal, could also be opening themselves up to financial and reputational damage.

For larger companies, being able to deal with fraudulent transactions and data theft might not have a significant impact on their bottom line or long-term reputation, but for smaller ones, a fraudulent transaction or data breach could cost them dearly.

The right response?

We have already discussed security measures and the attempts to minimise fraudulent online transactions, but what steps can merchants realistically take to minimise the impact whilst still ensuring consumers can use credit cards safely and securely?

As a rule, these types of “pull” payments – i.e. those initiated by merchants – are less secure and appropriate for online purchases, with the merchant storing customer data and becoming an easy target for data theft. To try and counteract this risk, the credit card industry has introduced measures including 3D Secure to authenticate online payments which prompts the card holder to provide a password associated with that card, making them more of a “push” experience. These efforts have however had a largely detrimental effect on transaction rates and as such adoption among merchants is still low.

On top of this, merchants can incur the additional risk of chargebacks. Originally designed to provide security for dissatisfied customers, by enabling them to dispute charges and receive their money back, this concept has established itself as a playground for swindlers. In “friendly fraud”, customers simply maintain that they did not place a particular order, or that they never received their items. In such cases, merchants are almost always left holding the baby.

Credit cards are an integral part of online shopping, but a “healthy mix” is recommended. Online merchants should always offer “push” payment methods as well as including invoicing, prepayment and real-time bank transfer systems and schemes such as giropay and SOFORT banking in Germany, iDEAL in the Netherlands, Przelewy24 in Poland or Boleto Bancario in Brazil, all of which prevent misuse of sensitive data by not collecting it in the first place.

These consumer initiated payments mean the shopper needs the merchant’s details but their details remain secure. With push payments fraud is reduced, but there is a trade-off between convenience and a more robust, secure option. For merchants, push methods mean less work, they don’t have to adhere to the strict PCI (payment card industry data security standards) rules and the shopper has no chargeback right as they would with a credit card payment. The onus is therefore very much on the consumer to initiate the payment which can require more administration and effort. As a result, push payments could be perceived as an inconvenience for those used to the ease of paying by credit card or one-click ordering.

In addition to considering alternative methods of payment it is important for merchants to know how to reduce the risks associated with credit card payments so they can continue to offer it alongside additional options.

In our experience, there are a number of key steps that merchants can take to minimise the risk of fraudulent card transactions:

  1. Understand your customers – for smaller merchants in particular, knowing your customers’ buying habits and patterns will help identify any unusual behaviour.
  1. Be vigilant – be suspicious of unusual behaviour as it could be a fraudulent transaction made using a stolen card. If in doubt, contact the customer to confirm the order. It might set alarm bells ringing and enable the merchants to halt the transaction if they feel it could be fraudulent.
  1. Work with a PSP. Merchants don’t need to go it alone. Whereas some of the bigger merchants might have their own risk models and the financial and reputational repercussions of a fraudulent transaction or data breach can be minimised and easily managed, for smaller players it could have devastating, long-lasting consequences. Working with an expert to help understand the options available could help put in place other payment methods which will minimise risk to merchants’ businesses.

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G20 to show united front on support for global economic recovery, cash for IMF

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G20 to show united front on support for global economic recovery, cash for IMF 1

By Michael Nienaber and Andrea Shalal

BERLIN/WASHINGTON/ROME (Reuters) – The world’s financial leaders are expected on Friday to agree to continue supportive measures for the global economy and look to boost the International Monetary Fund’s resources so it can help poorer countries fight off the effects of the pandemic.

Finance ministers and central bank governors of the world’s top 20 economies, called the G20, held a video-conference on Friday. The global response to the economic havoc wreaked by the coronavirus was at top of the agenda.

In the first comments by a participating policymaker, the European Union’s economics commissioner Paolo Gentiloni said the meeting had been “good”, with consensus on the need for a common effort on global COVID vaccinations.

“Avoid premature withdrawal of supportive fiscal policy” and “progress towards agreement on digital and minimal taxation” he said in a Tweet, signalling other areas of apparent accord.

A news conference by Italy, which holds the annual G20 presidency, is scheduled for 17.15 (1615 GMT)

The meeting comes as the United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies going despite COVID-19 lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new variants of the coronavirus mean the future of the recovery remains uncertain.

German Finance Minister Olaf Scholz warned earlier on Friday that recovery was taking longer than expected and it was too early to roll back support.

“Contrary to what had been hoped for, we cannot speak of a full recovery yet. For us in the G20 talks, the central task remains to lead our countries through the severe crisis,” Scholz told reporters ahead of the virtual meeting.

“We must not scale back the support programmes too early and too quickly. That’s what I’m also going to campaign for among my G20 colleagues today,” he said.

BIDEN DEBUT

Hopes for constructive discussions at the meeting are high among G20 countries because it is the first since Joe Biden, who vowed to rebuild cooperation in international bodies, became U.S. president.

While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.

The recovery is fragile elsewhere too – factory activity in China grew at the slowest pace in five months in January, hit by a wave of domestic coronavirus infections, and in Japan fourth quarter growth slowed from the previous quarter with new lockdowns clouding the outlook.

“The initially hoped-for V-shaped recovery is now increasingly looking rather more like a long U-shaped recovery. That is why the stabilization measures in almost all G20 states have to be maintained in order to continue supporting the economy,” a G20 official said.

But while the richest economies can afford to stimulate an economic recovery by borrowing more on the market, poorer ones would benefit from being able to tap credit lines from the IMF — the global lender of last resort.

To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by then U.S. President Donald Trump.

Scholz said the change of administration in Washington on Jan. 20 improved the prospects for more IMF resources. He pointed to a letter sent by U.S. Treasury Secretary Janet Yellen to G20 colleagues on Thursday, which he described as a positive sign also for efforts to reform global tax rules.

Civil society groups, religious leaders and some Democratic lawmakers in the U.S. Congress have called for a much larger allocation of IMF resources, of $3 trillion, but sources familiar with the matter said they viewed such a large move as unlikely for now.

The G20 may also agree to extend a suspension of debt servicing for poorest countries by another six months.

($1 = 0.8254 euros)

(Reporting by Michael Nienaber in Berlin, Jan Strupczewski in Brussels and Gavin Jones in Rome; Andrea Shalal and David Lawder in Washington; Editing by Daniel Wallis, Susan Fenton and Crispian Balmer)

 

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Oil set for steady gains as economies shake off pandemic blues – Reuters poll

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Oil set for steady gains as economies shake off pandemic blues - Reuters poll 2

By Sumita Layek and Bharat Gautam

(Reuters) – Oil prices will stage a steady recovery this year as vaccines reach more people and speed an economic revival, with further impetus coming from stimulus and output discipline by top crude producers, a Reuters poll showed on Friday.

The survey of 55 participants forecast Brent crude would average $59.07 per barrel in 2021, up from last month’s $54.47 forecast.

Brent has averaged around $58.80 so far this year.

“Travel and leisure activity look set to catch up to buoyant manufacturing activity due to the mix of stimulus, confidence, vaccines, and more targeted pandemic measures,” said Norbert Ruecker of Julius Baer.

“Against these demand dynamics, the supply side is unlikely to catch up on time, leaving the oil market in tightening mode for months to come.”

Of the 41 respondents who participated in both the February and January polls, 32 raised their forecasts.

Most analysts said the Organization of Petroleum Exporting Countries and allies (OPEC+) may ease current output curbs when they meet on March 4, but would still agree to maintain supply discipline.

“With OPEC+ endeavouring to keep global oil production below demand, inventories should continue falling this year and allow prices to rise further,” said UBS analyst Giovanni Staunovo.

Oil demand was seen growing by 5-7 million barrels per day in 2021, as per the poll.

However, experts said any deterioration in the COVID-19 situation and the possible lifting of U.S. sanctions on Iran could hold back oil’s recovery.

The poll forecast U.S. crude to average $55.93 per barrel in 2021 versus January’s $51.42 consensus.

Analysts expect U.S. production to rise moderately this year, although new measures from U.S. President Joe Biden to tame the oil sector could curb output in the long run.

“A structural shift away from fossil fuels” may prevent oil from returning to the highs of previous decades, said Economist Intelligence Unit analyst Cailin Birch.

(Reporting by Sumita Layek and Bharat Govind Gautam in Bengaluru; Editing by Arpan Varghese, Noah Browning and Barbara Lewis)

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Japan’s jobless rate seen up in January due to COVID-19 emergency measures – Reuters poll

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Japan's jobless rate seen up in January due to COVID-19 emergency measures - Reuters poll 3

TOKYO (Reuters) – Japan’s jobless rate is expected to have edged up in January as service industry businesses suffered renewed restrictions on movement to fight spread of the coronavirus in some areas, including Tokyo, a Reuters poll of economists showed on Friday.

While industrial production activity picked up in Japan, emergency curbs rolled out last month such as asking restaurants to close early and suspending the national travel campaign hurt the jobs market, analysts said.

The nation’s unemployment rate likely rose 3.0% in January, up from 2.9% in December, the poll of 15 economists found.

The jobs-to-applicants ratio, a gauge of the availability of jobs, was seen at 1.06 in January, unchanged from December, but stayed near September’s seven-year low of 1.03, the poll showed.

“As the impact from the coronavirus pandemic prolongs, it is hard for firms, especially the service sector, to expect their business profits to improve,” said Yusuke Shimoda, senior economist at Japan Research Institute.

“So, their willingness to hire employees appear to be subdued and it is difficult to see the jobs market recovering soon.”

Some analysts also said the government’s steps to support employment and existing labour shortages will likely prevent the jobless rate from worsening sharply.

The government will announce the labour market data at 8:30 a.m. Japan time on Tuesday (2330 GMT Monday).

Analysts expect the economy to contract in the current quarter due to the emergency measures to counter the spread of the disease.

(Reporting by Kaori Kaneko; Editing by Simon Cameron-Moore)

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