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PSD2 AND THE E-COMMERCE SYSTEM

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PSD2 AND THE E-COMMERCE SYSTEM

By Ian Newns, Senior Business Solutions Architect EMEA, RSA and Nathan Close, Head of Solutions Engineering EMEA, RSA

The European Banking Authority recently drafted the latest technical standards for the Payment Services Directive II (PSD2), which serves as the legal foundation for a new cross-EU payments market. In 2016, European e-commerce sales are expected to increase 17% to €183 billion and the use of payment service providers (PSPs) is increasing significantly. Couple this with the changing attitudes around Internet banking and online payments, it is no surprise that the directive is coming out at this time, as the payments market is changing at such a rapid pace.

A new standard is being defined for the market. But does PSD2 take Card Not Present (CNP) payments in the right direction? Within the latest draft, one of the key elements is the requirement for strong customer authentication for all transactions except those under a certain monetary threshold. However, strong customer authentication is most often to the detriment of the convenience for customers.

The inclusion of CNP transactions

The original password-based 3D Secure protocol (v1.x) added too much friction into the transaction and consequently suffered from a lack of user adoption. This, plus the prevalence of new payment methods like mobile and eWallet, have led the industry to call for an updated protocol.  Led by EMVCo, industry leaders and security vendors came together to develop the long-awaited, and recently released 3D Secure 2.0 protocol which eliminates static passwords and recommends a risk-based approach for card-not-present transactions (and several other new enhancements).

With a risk-based approach, every transaction is still evaluated to ascertain if it should be flagged as suspicious or potentially fraudulent. For most issuers, a typical fraud rate is <1-2%, so it is imperative to be able to identify only the highest risk transactions to challenge for further authentication.

The impact of customer authentication for card issuers

A major UK bank, found that when it moved away from mandatory password-based authentication for all transactions, it realised a 4% increase in transaction success rate as a result of improved customer experience. This translates to a 4% growth in transaction volumes, not only for issuers, but also for the merchants, the card schemes and the acquirers, and most importantly the customers. However, if friction to the end user experience is added, it’s possible to lose 4% of sales. That is not a figure any provider in the e-commerce ecosystem wants to be reporting to their key stakeholders.

Experience from the field

What about the increased fraud? We’ve found that risk-based authentication can improve fraud detection rates when compared to 100% authentication. Issuers, merchants, acquirers, card schemes and, especially, cardholders benefit tremendously from a risk-based approach. Less fraud and less friction is a win-win combination.

Despite the successes from this approach, there’s always room for even higher fraud prevention rates with improved omni-channel visibility. For example, when looking at card-issuing banks in the UK, the bank’s view of a digital footprint starts at application for the new card account, and is reinforced through every interaction the customer has with them. This includes every time a user logs into online banking and every time a CNP transaction is carried out online. In isolation, an expensive watch being purchased online may look like a high-risk transaction. However, when cross-referenced, the bank will see it’s the same device from the same location that was used to open the credit-card account giving them much greater confidence that the transaction is being performed by the legitimate cardholder. Is it necessary for the user to get up and go find the hardware token to authorize a low risk transaction?

What the future holds

The EBA is being overwhelmed by the amount of responses to the technical standards consultation. The industry is saying that the proposed technical standards are counterproductive to the goals of the PSD2 and even the 3D Secure 2.0 protocol – to provide strong customer authentication and a friction-less customer experience. In the card not present space it took more than ten years, but issuers and merchants learned that a challenge all approach did not work and thus a major change was necessary.

Such is the nature of the technology required to address the ever-changing fraud threat, organisations must incorporate layered fraud prevention using a number of technologies. Vendors will need to do much more to provide components that fit neatly into the organisation’s architecture to address a specific problem.

To challenge the EBA, it’s necessary to look at the bigger picture, and not just the transaction in isolation. Of course, they will cite the fact that not all PSPs are equipped with the resources and the data available to big banks. This may be true, but the directive needs to be flexible enough to adapt to that. Don’t penalise the issuers, the merchants, the card schemes, the acquirers – and most importantly, customers – by introducing unnecessary friction that won’t do anything to improve the fraud prevention rate.

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Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up

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Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up 1

By Sergio Goncalves

LISBON (Reuters) – Portugal will start producing green hydrogen by the end of 2022 and already has private investment worth around 10 billion euros ($12 billion) lined up for eight projects that are expected to move forward, Environment Minister Joao Matos Fernandes said.

He told Reuters in a telephone interview there were also several “pre-contracts for the purchase and assembly of electrolysers” to produce the zero-carbon fuel made by electrolysis out of water using renewable wind and solar energy.

Such hydrogen is more expensive to extract than the heavily polluting conventional method of using heat and chemical reactions to release hydrogen from coal or natural gas, known as brown and grey hydrogen respectively.

Hydrogen is now mostly used in the oil refining industry and to produce ammonia fertilisers, but sectors such as steelmaking, transportation and chemicals are beginning to develop large-scale hydrogen applications to gradually replace fossil fuels as countries try to reduce pollution.

The European Commission has mapped out a plan to scale up green hydrogen projects across polluting sectors to meet a net zero emissions goal by 2050 and become a leader in a market analysts expect to be worth $1.2 trillion by that date.

“By the end of 2022, there will certainly be green hydrogen production in Portugal,” Matos Fernandes said. “Green hydrogen will, over time, allow Portugal to completely change its paradigm and become an energy exporting country.”

He said seven groups had submitted applications under Europe’s IPCEI scheme for common-interest projects to make part of a planned export-oriented “hydrogen cluster” near the port of Sines, from where hydrogen could be shipped to Rotterdam. Total investment there is estimated at some 7 billion euros.

A consortium including Portugal’s main utility EDP, oil company Galp, world’s largest wind turbine maker Vestas, among others, is behind one of the projects.

In Estarreja in north Portugal, local firm Bondalti Chemicals aims to invest 2.4 billion euros in a hydrogen plant.

Altogether, these envisage an installed capacity of over 1,000 megawatts (MW).

Matos Fernandes said Portugal was also negotiating with Spain the construction of a pipeline for renewable gases, including hydrogen, from Sines to France, crossing Spain.

LITHIUM PLANS

Spain and Portugal also want to develop an ambitious cross-border lithium project taking advantage of the geographical proximity of their lithium deposits and aiming to cover the entire value chain from mining to refining, cell and battery manufacturing to battery recycling, he said.

Portugal is already a large producer of low-grade lithium mainly for the ceramics industry, but is preparing to make higher-grade metal used in electric car batteries.

A much-awaited licensing tender for lithium-bearing areas that has been delayed by the COVID-19 pandemic should take place by the year-end, Matos Fernandes said.

He promised the tender would address environmental concerns by local communities and there would be no lithium mining “at any cost”.

The minister also said Portugal would use its six-month presidency of the Council of the European Union to finalise a landmark law that would make the bloc’s climate targets irreversible and speed up emissions cuts this decade, expecting it to be approved in the first half of 2021.

(Reporting by Sergio Goncalves; Editing by Andrei Khalip and David Evans)

 

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Under fire in EU, AstraZeneca CEO says ‘hopefully’ will meet vaccine supply goals

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Under fire in EU, AstraZeneca CEO says 'hopefully' will meet vaccine supply goals 2

BRUSSELS (Reuters) – AstraZeneca boss Pascal Soriot said on Thursday he hoped to meet the European Union’s expectations on the number of COVID-19 vaccines the company can deliver to the bloc in the second quarter, after big cuts in the first three months of the year.

The Anglo-Swedish drugmaker has been under fire in the EU for its delayed supplies of shots to the 27-nation bloc, which ordered 300 million doses by the end of June.

“We are working 24/7 to improve delivery and hopefully catch up to the expectations for Q2,” Soriot told EU lawmakers in a public hearing.

Under its contract with the EU, the company has committed to delivering 180 million doses in the second quarter.

Soriot did not mention the 180 million target, but said he was confident the company will be able to increase production in the second quarter using factories outside the EU that had no production problems, including in the United States.

He confirmed the company was trying to get 40 million doses of the COVID-19 vaccine to the EU by the end of March, which is less than half the amount it promised for the quarter in its contract.

The EU, which has fallen far behind the United States and former member Britain in vaccinating its public, has repeatedly urged the firm to deliver more.

Lower-than-expected yields – the amount of vaccine that can be produced from base ingredients – at its factories hurt output in the first three months.

Asked about supplies to Britain, which relies on the same factories used by the EU, Soriot said the former EU member with a population of around 66 million was smaller, and noted that most doses produced in the EU were used to serve the EU which has a population of about 450 million.

Executives from rival drugmakers that have developed or are testing COVID-19 vaccines, including Moderna Inc and CureVac NV were also part of the panel.

But most questions were directed at Soriot amid anger that the company has failed to deliver promised vaccine quantities to the bloc on schedule.

Moderna Chief Executive Officer Stephane Bancel said the company has experienced fluctuations as the U.S. biotech group ramps up output of its COVID-19 vaccine.

He said usually a company would stockpile product ahead of a launch, but it is shipping every dose it makes, leaving it without any spare inventory.

His comments came a day after the company increased its output target for this year and 2022 as it invests in additional manufacturing capacity.

(Reporting by Josephine Mason in London and Francesco Guarascio in Brussels; Editing by Susan Fenton, Bill Berkrot and Keith Weir)

 

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Shift to sun, ski and suburbs gives Airbnb advantage over hotels

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Shift to sun, ski and suburbs gives Airbnb advantage over hotels 3

By Ankit Ajmera

(Reuters) – Airbnb’s quarterly results are likely to show the pandemic may have helped the home rental company lure leisure travelers away from big hotels during the global travel collapse of 2020.

Weary of being locked up in their homes for months, travelers hit the road and booked homes and cottages on Airbnb, while avoiding flights and downtown hotels, analysts said.

Airbnb accounted for 18% of the total U.S. lodging revenue in 2020, up from 11.5% in 2019, data from hotel analytics provider STR and vacation rental data company AirDNA showed.

It outperformed the hotel industry and online travel agents such as Expedia and Booking.com thanks to its greater offer of ‘sun, ski, and suburban’ rental homes, Cowen & Co analysts said.

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 4

(Graphic: Airbnb grabs bigger share of U.S. lodging market in pandemic: https://graphics.reuters.com/AIRBNB-RESULTS/yxmpjxqdopr/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3pPbQwH

THE CONTEXT

In 2019, about 90% of Airbnb’s bookings came from leisure travels compared with about 20%-30% for large hotels chains, including Marriott and Hilton, that rely on business travel to grow their profits.

“Unfortunately, the hotel operators do not have as much supply in locations where people are willing to travel,” said Jamie Lane, vice president of research at AirDNA.

Lane said with mass vaccinations later in the year, the share of alternative accommodations including Airbnb will drop before continuing to grow at 2%-3% per year once normal travel patterns return.

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 5

(Graphic: Airbnb U.S. sales against top hotels: https://graphics.reuters.com/AIRBNB-RESULTS/gjnpwzkdbvw/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3dPKvsd

THE FUNDAMENTALS

* The San Francisco-based company is expected to report gross bookings of $23.10 billion in 2020, down from about $38 billion a year earlier, according to the mean estimate of 12 analysts according to Refinitiv; gross bookings are seen rising by 50% in 2021.

* Analysts’ mean estimate for Airbnb’s full-year net loss is $3.52 billion, bigger than a loss of $674.3 million a year earlier. Full-year revenue is expected to drop 32% to $3.27 billion.

WALL STREET SENTIMENT

* Of 34 brokerages, 20 rate Airbnb’s stock “hold”, 12 “buy” or higher and two “sell” or lower

* Wall Street’s median 12-month price target for Airbnb is $156​, about 22% below its last closing price of $200.20.

* The company’s stock has nearly tripled since listing in December

Shift to sun, ski and suburbs gives Airbnb advantage over hotels 6

(Graphic: Airbnb’s stock has nearly tripled since debut: https://graphics.reuters.com/AIRBNB-RESULTS/jznpnoqrlvl/chart.png)

For an interactive graphic, click here: https://tmsnrt.rs/3dG2lOd

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)

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