By Bill Trueman CEO of fraud prevention consultancy UKFraud.co.uk
I have always believed that the effective fraud consultant has to have some ability to read the runes – to see how fraud will change over time or where it will evolve to once it has been defeated in a particular area. However, you don’t need to be that much of a fortune teller to see the risks that are facing the mobile payment sector; even though little research has been done into the nature of the threat in this sector, the problems at hand or the likely response of the differing parties.
Thus, UKFraud.co.uk decided to set up a new Special Interest Group (SIG) for the Mobile Payments sector. The new SIG will monitor, analyse and report on key market developments for use by stakeholders in the domestic fraud prevention sector. The SIG consists of leading fraud prevention consultants coupled with representative input from a wide range of mobile payment industry specialists. In its initial review,the SIG will analyse those characteristics and challenges of the mobile payment market that are most likely to encourage fraudsters to target the sector. In particular, the SIG will investigate the factors that could give rise to an increased risk of fraud. Amongst the key market challenges that the SIG will review are:
1 Sheer Scale of Market Growth
The SIG notes the appearance of a number of spectacular recent mobile payment market forecasts. These include a report from Reuters, in March 2013, highlighting a survey by ‘Heavy Reading Mobile Networks Insider’ suggesting: “The mobile payment industry is growing, offering revenue generating solutions throughout the market and potentially… $1 trillion in global transactions by 2015.”
The SIG is also conscious of the global spread of mobile payment, with the explosive growth of m-commerce in the United States, China, India, Latin America and the Far East. Recent data from the ITU (International Telecommunication Union) supports this, pointing to global mobile subscriptions now reaching 6 billion. However, in the face of this backdrop of explosive growth, the SIG is concerned that key sector protagonists lack visible preparedness for the likelihood of such large-scale market expansion or the resultant fraud risks that might ensue.
Indeed, the SIG believes from its own analysis of the sector,that only a small proportion of marketers currently have any formal strategy for leveraging and exploiting mobile payments fully. And, whilst there are also other reports that there is a huge need for ‘Mobile SEO’ to spread the news of the latest products to potential consumers, it is the SIG believes, also still a relatively scarce activity. Should this scenario represent reality on the promotional side, then it is also unlikely, the SIG believes, that adequate fraud systems will have been put in place by many of the main players either.
2 The Speed of Technology Advances
The SIG also recognises that the greatest challenge to the development of plans and strategies that align organisations within the mobile payments sector is the sheer speed of technical change. Seemingly, all the main mobile device players are racing to produce the ‘next best thing’ and major forces such as Google with its Wallet and Apple with the Passbook are also having a significant and positive impact with market pundits. The international card schemes also have an influence on the development route(s) as do many other highly innovative and respected third parties including: iZettle, mpowa, and PayPal. However the chances are, says the SIG, that whilst some of the other sector protagonists, regulators and customers could potentially struggle to keep pace with such an enormous rate of change, the fraudster thrives in such fast moving environments and simply ‘adapts’ like an ‘amorphous entity’ to outsmart and outflank the market’s developments.
3 What Are The Customer Perceptions of The Mobile Payments Sector?
Amongst the other contradictions to be reviewed by the SIG are claims by some pundits who point to the relatively modest levels of take up of mobile payment products to date. Whilst some believe that many people are waiting until the next ‘big thing’ appears, others cite the plethora of new products already appearing. Some claim that this consumer reluctance to adopt, is the result of confusion over the number and nomenclature of devices and financial products. Yet others highlight a number of recent high profile data breaches both amongst financial services and social media companies which drive caution amongst consumers. However,it is felt that once a major new standard or solution appears that the dam could break. When the dam breaks, the SIG feels,there is a potential concern that some of the new solutions will be more easily and quickly exploited by fraudsters than those that currently benefit from clear best-practice and consumer guidelines.
4 Can Standards Keep Pace?
Whilst standards would boost consumer confidence, the impact of technology and financial product churn coupled with extreme growth could, the SIG believes, threaten the applicability of many existing standards. Other newer standards might simply not keep pace. There is also, the SIG believes, a myriad of organisations from which such standards can come. This could well cause confusion for consumers and therein delight the fraudsters.
The SIG feels that a widely respected organisation that might potentially take a positive lead in the payments sector is UK Payments (formerly APACS). The SIG will also review other alternatives and analyse which existing standards bodies might develop an effective solution. Well regarded bodies might include: the ISO or the European Payments Council, which could potentially, some feel, develop a new SEPA regulation for the mobile sector.The SIG will also review whether widely acclaimed and respected card schemes (such as: Visa / MasterCard etc.) might take a lead as there is potentially a strong interest to capture the market if it grows rapidly.
The SIG feels that potentially mobile payments control could be evolved through an entirely new ‘standard’ that will develop by default and be adopted by others. It is possible, says the SIG, that this could be led by a card organisation, a proprietary payments provider, by an individual bank or a telecoms company. Indeed, the SIG believes that there is every chance that it could result from a collaboration or spin-off of any of the above. Indeed, as things roll-on so fast, this body may not yet exist.
Mobile payments could potentially, the SIG claims, replicate traditional magnetic stripe read transactions; or even replace the later ‘chip read’ transactions. This would cause an evolution in ecommerce transactions through m-commerce, and be the ideal facilitator of NFC contactless payments. In addition, mobile devices could very well become the first choice to be used by merchants as a payment acceptance terminal themselves.
5 Who Owns The Regulation?
The SIG will also review whether a ‘potential standards debacle’ might have a ‘knock-on’ effect upon regulation. The SIG feels that there are so many complications, and so many interested stakeholders, all with conflicting desires to collaborate or compete, that it is hard to know where and how mobile payments will be regulated, let alone who will ‘own’ the regulation.
It will be interesting to see the role governments play. The SIG feels that with the respected EU Cyber directive focussing on setting good foundations with the Network and Information Security standards in individual member states, the current thrust seems potentially a long way from specifically addressing mobile payments. Turning to the UK, the SIG questions whether the government is likely to drive innovation in this area, as the risk, payments and fraud skills within the leading departments (Cabinet Office, FED and the National Fraud Bureau) might not be those required.
The SIG’s new Chairman Kevin Smith (a former head of fraud management at Visa Europe and now an independent payments, risk and fraud specialist) feels that the review will highlight a need to ‘build fraud prevention in’ at all stages early on. In his inaugural address he noted that, “There will be so much potential change and growth, that it’s not just the technology vendors or financial service providers that are watching the situation closely. Rest assured that a seasoned group of criminals will be looking just as closely, albeit at a different range of opportunities. Only by sharing information and working together at an early stage can the sector start to properly understand the challenges and offer a really effective series of counter-measures. Our aim is hopefully to assimilate and collate a weight of analysis that will prove useful to those stakeholders who are keen to fend off fraudulent activity.”
Kevin makes a good point. In my view, sharing information and collaboration could work at all levels and could even be led by the UK government. Potentially there is a golden opportunity here for the UK to take a lead. Naturally a governmental lead would be preferable. However, some feel that The NFA (National Fraud Authority) and also the Cybercrimes Unit are rather more engaged in defending UK Plc., against attacks than driving commercial standards globally in internationally applicable growth areas such as this. However, they should play a major role here. Some though feel that recently the priority of these bodies has been turned upon the domestic public sector, as this alone is a mammoth area to direct and protect. Hopefully, though, if the mobile payments sector grows as fast as has been suggested, the UK government will then see an opportunity to invest an appropriate amount of money in safeguarding the UK from fraud in the mobile payments sector. In the meantime, we shall work alongside other like-minded groups as a collective approach is certainly one way to ensure that the right information is shared by those in fraud prevention who most need it.
The SIG’s findings will be published later this year.
About UKFraud (www.ukfraud.co.uk)
UKFraud is a leading UK based consultancy, with an impressive international track record of eliminating the risk of fraud. Its founder Bill Trueman is widely accepted as one of Europe’s leading fraud experts and a frequent commentator and writer on the issues involved. Trueman has extensive experience of the banking, insurance and the financial services sectors and is a thought leader at the forefront of many industry wide and international debates.
Tax changes, volatility and care: the challenges of later life planning in 2021
By Matt Dickens, Senior Business Development Director at Ingenious
Later life planning has become more topical than ever over the past year as our whole industry has worked hard to absorb the changes brought about by the pandemic, progressing financial planning to meet the “new normal”. This article explores three of the greatest challenges later life planners currently have to consider and prepare for, tax changes, market volatility and the cost of care, and shows how a comprehensive later life plan, delivering more than just estate planning for inheritance, is increasingly important.
The threat of tax rises
In 2019, the new Conservative Government, facing the challenge of delivering an orderly Brexit, but not yet dealing with the impact of a global pandemic, promised there would be no changes to Income Tax, National Insurance or VAT. Eighteen months on, they find themselves in an unprecedented economic scenario, with a deficit of £394 billion1 (19% of GDP), its highest level since 1945. While commentators remain focused on the ongoing pandemic and its impact on both lives and livelihoods and when it might come to an end, they also have one eye on the issue of paying for the extreme lengths the Treasury has gone to, to keep the country financially afloat. Likewise, investors are equally mindful of this issue – if the Government needs to balance the books through fiscal policy, how will any decision made now fare in a post-pandemic financial future?
For advisers, there are two clear ways to approach this planning dilemma.
Firstly, one could attempt to foresee the future and plan for the measures that might be implemented in the coming months and years. The problem with this approach is that one would need a crystal ball.
Secondly, one could accept that there is no way to predict the measures that will come into effect and wait until there is some form of clarity. But herein lies the problem of delay in the face of continued uncertainty. For almost a year now, many have held off on vital long-term plans due to the fear of the unknown, yet they need to accept that another year or more of inaction due to the potential of further uncertainty comes with its own real risk. And the longer it goes on, the more risk they are taking.
The simple answer to this conundrum is to embrace a strategy which remains flexible to any possible changes, but in the meantime delivers on the key outcomes the client requires. Any financial planning strategy needs to stack up in line with the wider objectives of the investor, such as achieving investment growth, rather than focusing purely on the tax advantages of a particular strategy, as these could change or even disappear. This is why I believe advisers should be developing a wider later life planning proposition, and not just narrowly focussing on estate planning.
Here is an example of a desired outcome of someone planning for later life;
- To invest capital in a way that maintains flexibility throughout later life to pay for any unplanned needs, but also consider any potential care needs that might be needed, knowing that their wealth has been successfully grown up to the point of death, so maximising the legacy that will be passed onto the chosen beneficiaries.
Breaking it down into individual objectives, the adviser needs to:
- Maximise wealth through continued investment growth
- Maintain flexibility and access to the investment, so they can make regular or lump sum withdrawals
- Provide both financial and logistical support to the delivery of care needs if ever needed
- Reduce the potential for Inheritance Tax (IHT)
Note the desire to reduce any IHT payable is deliberately last on the list of desired outcomes. The danger of focussing on the estate planning part of these objectives is twofold. Firstly, the threat of impending tax changes, or tax relief changes, causes uncertainty as to the efficacy of any purely tax-focussed strategy. And this remains the case whether one feels they can predict the future or not!
Secondly, the danger of ignoring the other higher priority objectives, as many tax-focused strategies are a one trick pony and restrict the potential for wider benefits. In this case, the investor may have to forgo any long-term investment growth, or the flexibility to easily and predictably access the investment to pay for care, for instance.
So, when considering the threat of tax changes to later life planning, the approach should always be to allow the investment rationale and wider utility of the service you recommend to lead the planning decisions, rather than just narrowly focusing on the tax benefits.
Another challenge that is particularly unwelcome in later life and particularly visible in the current environment is the potential for continuing investment volatility. In this phase of their lives, investors are unlikely to have the flexibility to “time the market” when they want access to their wealth. For instance, making a withdrawal to help family members in need, pay for care requirements or ultimately passing the investment onto beneficiaries upon death. These are not predictable events. Reflecting upon the volatility of markets in 2020 and the uncertainty of 2021 and beyond, investors may well be minded to forgo any potential upside of an investment, perceiving them as too risky.
However, an alternative, as many asset managers have been doing over the last decade, is to look to private investments that are not exposed to market sentiment in the same way as listed investments are. While on the face of it this sounds riskier, certain investment strategies can provide investors with an appealing level of security and predictable returns. One way to do this is via private companies that engage in secured lending. By their nature, loans carry lower risk than equity investments as they do not fluctuate in value over time. Senior, asset-backed loans provide the investor with additional protection against any loss in value. Executed within sectors that are demonstrating strong resilience to the pandemic and any ongoing Brexit effects, these loans can provide an attractive return with low volatility. Such companies are common investments for Business Relief qualifying services where services should be valued on their “fundamentals” not reliant on positive investor sentiment.
The ever-increasing demand for care services
In the same way that the increasingly maturing cohort called the baby-boomers have recently come under detailed discussion by advisers with respect to their intergenerational planning needs, the same level of consideration should also be given to their increasing need for long-term care. During the pandemic, the importance of and reliance upon the UK’s care system has become very clear, yet there is an insufficient level of planning taking place to ensure that people are prepared. Research shows that the majority of family members who have experience of a loved one being in care were not satisfied with their experience. One of the factors that can surely make this unfortunate outcome more comfortable is being prepared, both financially and through being armed with knowledge or advice on this complex sector.
This is why it is more important than ever to flexibly have access to one’s wealth in later life. It is impossible to predict what any one person’s needs are going to be in the future and so separating money to prepare for care and to prepare for estate planning is futile. At the same time, perhaps the need will not arise and so the money could be contributing to the investor’s other objectives rather than being held back from an investment. So, undoubtedly a flexible posture to later life planning is key and if the investment can gain value over time to contribute to paying for life’s needs then all the better. The final benefit that could assist with this challenge is a specialist care advice service, which is included for all Ingenious Estate Planning (IEP) investors. As well as advising clients and their families on the vagaries of the UK’s complex care system, the IEP Care Service helps investors to make decisions in a time of need and stress. Specialist, independent advisers give individuals and their families invaluable support, liaising between the NHS and care providers to achieve the best possible care outcomes.
Only by considering any changes to the legislative landscape, delivering consistent and attractive risk-adjusted returns and considering any future needs and costs of our clients, can we deliver a truly robust and value-adding financial later life plan for investors who need it.
Chinese fintech platforms expected to meet capital requirements within two years – regulator
BEIJING (Reuters) – China’s financial technology companies are expected to meet capital adequacy requirements within a maximum of two years, said Guo Shuqing, head of the China Banking and Insurance Regulatory Commission (CBIRC) on Tuesday.
Micro lenders, consumer finance firms and banks operated by internet platforms should all have adequate capital like other financial institutions, Guo said at a news conference.
Chinese financial regulators have rolled out a slew of measures since last year to tighten the oversight of online lending practices in the country, particularly of technology firms looking to expand into the financial space, moving away from its once laissez-faire approach.
The drive scuppered Ant Group’s $37 billion initial public offering last year and has seen Alibaba’s fintech affiliate formulate plans to shift to a financial holding company structure.
“Starting a business needs capital, so does starting a financial business,” Guo said.
“As long as internet platforms conduct financial operations, the requirement of capital adequacy ratio on them should be the same as financial institutions.”
Financial regulators have set various grace periods for different internet platforms, according to Guo. Some have until the end of 2020 and others until the middle of 2021 to meet capital adequacy requirements, he said.
“But by a maximum of two years, (the capital adequacy of) all platforms should be back on track,” Guo added.
With regards to Ant Group’s restructuring, Guo said there were no restrictions on the financial business it develops but that all of its financial activities should to be regulated by laws.
Ant Group is in talks with other shareholders in its new consumer finance unit to bolster the firm’s capital as the fintech giant prepares to fold in its lucrative micro-lending businesses, Reuters reported last week.
It would need an additional capital of 30 billion yuan ($4.64 billion) to meet regulatory requirements, according to the report.
($1 = 6.4714 Chinese yuan)
(Reporting by Tina Qiao, Cheng Leng and Ryan Woo in Beijing; Se Young Lee in Washington; Editing by Christian Schmollinger and Ana Nicolaci da Costa)
Oil rises as vaccine and U.S. stimulus boost demand outlook
By Laila Kearney
NEW YORK (Reuters) – Oil prices were up on Monday on rising optimism about COVID-19 vaccinations, a U.S. economic stimulus package and growing factory activity in Europe despite coronavirus restrictions.
Signs that Chinese oil demand is slowing kept prices from moving higher.
Brent crude rose 51 cents, or 0.8%, at $64.93 a barrel by 11:29 a.m. EST (1629 GMT), and U.S. West Texas Intermediate (WTI) crude gained 28 cents, or 0.5%, to $61.78 a barrel.
Both contracts finished February 18% higher.
“The three major supportive factors are the prevalent vaccine rollouts, the optimism about economic growth and the view that the oil balance will get tighter as a result of the first two points,” PVM Oil Associates analyst Tamas Varga said.
Support also came from a $1.9 trillion coronavirus-related relief package passed by the U.S. House of Representatives on Saturday.
If approved by the Senate, the stimulus package would pay for vaccines and medical supplies, and send a new round of emergency financial aid to households and small businesses, which will have a direct impact on energy demand.
The approval of Johnson & Johnson’s COVID-19 shot also buoyed the economic outlook.
Manufacturing data from around the world was mixed.
China’s factory activity growth slipped to a nine-month low in February, sounding alarms over Chinese crude buying and pressuring oil prices.
“One negative is more and more talk about Chinese oil demand maybe faltering, that they bought all the oil that they’re going to need for a while,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “There’s some talk that their strategic reserves are filled up and so some people are betting against the Chinese continuing to drive oil prices.”
German activity, on the other hand, hit its highest level in more than three years and Euro zone factory activity raced along, driven by rising demand.
OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to agreed reductions under a pact with allies, a Reuters survey found, ending a run of seven consecutive monthly increases.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, meet on Thursday and could discuss allowing as much as 1.5 million barrels per day of crude back into the market.
(Additional reporting by Bozorgmehr Sharafedin in London, Jessica Jaganathan and Florence Tan in Singapore; Editing by Jason Neely, Edmund Blair, Barbara Lewis, David Evans and Will Dunham)
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