By Ramesh Ramani, Head of Banking & Financial Services Europe, Cognizant
The UK’s Financial Conduct Authority (FCA) has confirmed an 18-month deadline extension for the introduction of Secure Customer Authentication (SCA) regulations, in an attempt to give firms more time to prepare for the impending Second European Payment Services Directive (PSD2) deadline. With the new rules for cashless payments originally due to come into force on 14th September 2019, this has given cause for a temporary sigh of relief amongst many in the e-commerce industry.
This is because, as part of PSD2, the SCA requirement stipulates stronger payment security standards for higher value transactions based on multifactor authentication, increasing the security of electronic payments. This comes as FCA data reported that cyber incidents at financial services firms increased by 1,000 per cent in 2018, and this figure is only expected to rise with the growth in mobile payments.
The delay to the implementation of the directive is intended to prevent disruptions to online payment processes and facilitate the smooth transition to the new requirements put in place to make cashless payments safer. But why has the deadline been extended, and what can businesses do to make sure they are ready for the revised implementation date?
What is going to change?
Applicable across the whole of the EU including the European Economic Area (EEA), the directive will provide better customer data protection and ensure that data transmission over the internet is more secure. Simply put, only payment services that are PSD2-compliant can be used for online purchases using cards.
Another important element of the directive is that those who accept payments online will have to demand a two-factor authentication. Customers will no longer be able to order with just one click or by credit card number, but will instead have to confirm their purchase with two security features.
According to the directive, the security features must combine two out of the three following security criteria:
- Knowledge features – information that only the customer knows, such as a password or PIN;
- Possession features – a physical entity that the customer has access to, such as a credit card, mobile phone or TAN generator (the device issued by banks to enable customers to generate security codes when undertaking home banking);
- Inherence features – biometrics coming from unique personal characteristics, such as the customer’s voice, iris or fingerprint.
This means that the traditional combination of a PIN and password is no longer sufficient, as both entries will come under the “knowledge features” category.
A future without the extension
While banks and third-party providers like Fintechs – such as as Monzo and Revolut – are already well prepared to meet the deadline, many organisations that offer online payments and even entire markets are not. In fact, levels of readiness for implementing a PSD2-compliant process in time for 14th September are now extremely varied. But as SCA comes into effect, all parties in the payments chain will need to be ready at the same time to avoid challenges. An extended deadline will therefore provide regulators with more time to consult, engage and work with relevant market participants, industry representatives and financial institutions. It will also provide the opportunity to educate customers of the impending security measures as many still remain blissfully unware of the upcoming changes.
Without an extended deadline, a significant number of transactions could have been abandoned, resulting in a loss of revenue as well as disgruntled customers. According to an EU-wide study by the payment platform Stripe and 451 Research, revenues would have fallen by €57 billion in the first year after the directive came into force.
Needless to say, this could have impacted the retail industry and have had an adverse effect in terms of what the EU wants to achieve with the new directive: more security and protection against fraud; more innovation by registered third parties; and, above all, a better, frictionless, convenient customer experience.
Three tips for businesses preparing for PSD2
This extension may now be in place, but it is not a time for retailers to rest on their laurels. It is time for retailers to act and take advantage of the increased time they have been given to prepare for PSD2. But how should they best use the time? Here are three of the most important considerations merchants should take into account:
- Start (or continue) with 3DSv2 and create a migration plan: select a service provider for payment processes and pay particular attention to the extent to which it will enable the smoothest possible shopping experience with strong authentication. If the business and/or the service provider already rely on 3DS technology, then it would be best to continue working with them, rely on the upcoming version, 3DSv2, and create the migration path from there. If still dependent on standards such as one-time password (OTP), it is still advisable to switch to 3DSv2, as this is the best technology to ensure a smooth customer experience and comply with the new directive.
- Include exceptions to improve the customer experience: small transactions could be exempt from a two-factor authentication: subscription payments are a good example. It is also possible to white list a trader as a ‘trusted trader’ with the company’s respective credit provider, and merchants should be making the most of these opportunities.
- Become familiar with the opportunities brought by PSD2: the new directive aims to create benefits for all involved. This includes more security, lower costs, increased flexibility and more innovation. Businesses should be thinking about how these benefits can be best maximised and incorporating such considerations into any migration plan.
The 18-month deadline extension in the UK is considerable, but as with anything, it will come around soon enough and the timetable that businesses not yet ready to meet the directive will need to stick to will be tight. Merchants should therefore seize the opportunity offered by the extension and ensure they are offering customers a seamless experience as they make the transition to being PSD2-compliant.
Robinhood plans confidential IPO filing as soon as March – Bloomberg News
(Reuters) – Online brokerage Robinhood, at the centre of this year’s retail trading frenzy, is planning to file confidentially for an initial public offering as soon as March, Bloomberg News reported late on Friday, citing sources.
The California-based brokerage has held talks in the past week with underwriters about moving forward with a filing within weeks, Bloomberg said.
Robinhood did not immediately respond to a request for comment.
Reuters reported last year that Robinhood has picked Goldman Sachs Group Inc to lead preparations for an initial public offering which could value it at more than $20 billion.
Robinhood was at the heart of a mania that gripped retail investors in late January following calls on Reddit thread WallStreetBets to trade certain stocks that were being heavily shorted by hedge funds.
The online brokerage tapped around $3.4 billion in funding after its finances were strained due to the massive trading in shares of companies such as GameStop Corp.
(Reporting by Ann Maria Shibu in Bengaluru; editing by Richard Pullin)
Analysis: How idled car factories super-charged a push for U.S. chip subsidies
By Stephen Nellis
(Reuters) – When President Joe Biden on Wednesday stood at a lectern holding a microchip and pledged to support $37 billion in federal subsidies for American semiconductor manufacturing, it marked a political breakthrough that happened much more quickly than industry insiders had expected.
For years, chip industry executives and U.S. government officials have been concerned about the slow drift of costly chip factories to Taiwan and Korea. While major American companies such as Qualcomm Inc and Nvidia Corp dominate their fields, they depend on factories abroad to build the chips they design.
As tensions with China heated up last year, U.S. lawmakers authorized manufacturing subsidies as part of an annual military spending bill due to concerns that depending on foreign factories for advanced chips posed national security risks. Yet funding for the subsidies was not guaranteed.
Then came the auto-chip crunch. Ford Motor Co said a lack of chips could slash a fifth of its first-quarter production and General Motors Co cut output across North America.
“It brings home very clearly the message that the semiconductor is really a critical component in a lot of the end products we take for granted,” said Mike Rosa, head of strategic and technical marketing for a group within semiconductor manufacturing toolmaker Applied Materials Inc that sells tools to automotive chip factories.
Within weeks, automakers joined chip companies calling for chip factory subsidies, and U.S. Senate Majority Leader Chuck Schumer and President Biden both pledged to fight for funding.
Industry backers now aim to be part of a package of legislation to counter China that Schumer hopes to bring to the Senate floor this spring. Still, all agree it will do little to solve the immediate auto-chip problem.
Headlines about idled car plants resonated with the public that had shrugged off abstract warnings in the past, said Jim Lewis, a senior fellow at the Center for Strategic and International Studies. Lawmakers, already worried that a promised infrastructure bill will not materialize this year, decided to push for quick solution.
“Nobody wants to be seen as soft on China. No one wants to tell the Ford workers in their district, ‘Sorry, can’t help,'” Lewis said. “It was one of those moments where everything aligned.”
The package includes matching funds for state and local chip-plant subsidies, a provision likely to heat up competition among states including Texas and Arizona to host big new chip plants that can cost as much as $20 billion.
The subsidies could benefit a factory in Arizona proposed by Taiwan Semiconductor Manufacturing Co and one in Texas eyed by Samsung Electronics Co Ltd, even though those factories would be geared toward high-end chips for smartphones and laptops, rather than simpler auto chips. And those factories would not come on line until 2023 or 2024, according to plans disclosed by the companies, the world’s two largest chip manufacturers.
In the longer term, a raft of U.S. companies are also poised to benefit. Any chipmakers that build factories will source many tools from American companies such as Applied, Lam Research Corp and KLA Corp.
Intel Corp, Micron Technology Inc and GlobalFoundries – which already have U.S. factory networks – will also likely benefit.
Smaller, specialty chip factories also could benefit.
“The recent chip shortage in the automotive industry has highlighted the need to strengthen the microelectronics supply chain in the U.S.,” said Thomas Sonderman, chief executive of SkyWater Technology, a Minnesota-based chipmaker that makes automotive and defense chips. “We believe that SkyWater is uniquely positioned due to our differentiated business model and status as a U.S.- owned and U.S.- operated pure play semiconductor contract manufacturer.”
Even with subsidies, the U.S. companies still must compete with low-cost Asian vendors over the long run, and the immediate auto chip troubles will probably persist.
Surya Iyer, a vice president at Minnesota-based Polar Semiconductor, which makes chips for automakers, said his factory is booked beyond capacity and has started to speed some orders up while slowing others down, to meet automakers’ needs as best it can.
“We are expecting this level of demand to continue at least for the next 12 months, maybe even longer,” he said.
(This story has been refiled to add attribution to quote in paragraph 9, add dropped words in paragraphs 10 and 17)
(Reporting by Stephen Nellis and Hyunjoo Jin in San Francisco and Alexandra Alper in Washington. Editing by Jonathan Weber and David Gregorio)
Atlantia disappointed with CDP bid for unit, continues talks
By Francesca Landini and Stephen Jewkes
MILAN (Reuters) – Italy’s Atlantia said on Friday an offer by a consortium of investors led by state lender CDP for its 88% stake in Autostrade per l’Italia fell short of the mark and asked its top managers to see if the bid could be sweetened.
“The offer falls below expectations,” the Italian infrastructure group said in a statement, adding it had mandated the chief executive and the chairman to assess “the potential for the necessary substantial improvements” to the bid.
Italian state lender CDP, together with co-investors Macquarie and Blackstone, has presented a proposal valuing all of Autostrade per l’Italia at 9.1 billion euros ($11 billion).
The consortium also requested Atlantia guarantee up to 700 million euros in potential damage claims and another roughly 800 million euros for a pending legal case, making the bid less attractive than previously expected.
One source said the consortium estimated overall pending legal claims against Autostrade at 3 billion to 4 billion euros, adding the 700 million euro cap did not mean the amount would be detracted from the offer price from the start.
Earlier on Friday Atlantia’s minority investors TCI and Spinecap had called on Atlantia’s board to reject the offer, saying it undervalued the asset.
“No deal is better than a bad deal, especially a bad deal and a wrong price,” TCI Advisory Services partner Jonathan Amouyal said in a emailed comment to Reuters.
TCI, which holds an indirect stake of around 10% in Atlantia, repeated that the value for 100% of Autostrade should be no less than 12.5 billion euros.
The board will hold a further meeting in order to take a final decision on the offer in due time, Atlantia said.
The negotiations between Atlantia and the CDP-led consortium are part of an effort to end a political dispute over Autostrade’s motorway concession triggered by the collapse of a motorway bridge run by the unit.
(GRAPHIC – Atlantia share performance: https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqggjdpx/image-1614331237501.png)
The bid expires on March 16, but the deadline could be extended in case Atlantia calls an extraordinary shareholders meeting (EGM) on the issue, according to one source with knowledge of the matter.
Shares in the group ended down 0,7%, after recovering some losses, as investors waited for the decision of the board.
Atlantia, which is controlled by the Benetton family, owns 88% of Autostrade, with Germany’s Allianz and funds DIF, EDF Invest and China’s Silk Road Fund holding the rest.
The group also kept open an alternative plan to demerge and sell its stake in Autostrade per l’Italia unit and called an EGM on March 29 to extend to end-July a deadline for offers for the demerged stake.
(Additional reporting by Stefano Bernabei, editing by Louise Heavens and Steve Orlofsky)
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