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REMITTANCE TRENDS HIGHLIGHT ECONOMIC SHIFT FROM WEST TO EAST

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Jan-Hillered

Western Union’s Senior Vice President, Europe and CIS, Jan Hillered, explains how economic migrants sending money back home sheds new light on this major macro-economic trend.

Jan Hillered

Jan Hillered

Remittances are, in many ways, an unseen cornerstone of the world economy. Still under-reported and relatively poorly understood, remittances form a major part of the economies of many developing countries.

The amount of money sent in remittance payments has tripled in the past decade to an estimated $406 billion in 2012 (World Bank figures) and stands at three times the size of official aid budgets.

As an illustration of the contribution remittances make to developing economies, top recipients, by share of GDP, include Tajikistan (31%), Lesotho (29%) and Samoa (23%).

Remittances flows have proved robust in the face of the economic difficulties that have followed the global financial crisis. Remittances to Bangladesh and Pakistan have doubled in the past five years, as residents continue to move abroad for employment and remit money to their families at home.i

Analysing remittance flows gives us a way of understanding changes occurring in the world economic order. We have seen significant shifts in the flow of money between countries as migration patterns have adapted to the new economic reality.

The Asia-Pacific region has had positive net migration for 10 years now and countries like India or China are now seeing migration inflows that begin to look similar to their outflows.  As a result, traditional remittance receivers are now becoming big senders. In 1990, people in China received 40 times more in remittances than they sent, but now this multiple has fallen to 17 as increased immigration to that country takes effect.

The European Union has seen significant changes to its remittance dynamics over the past decade. One of the most noticeable has been the growth in remittance flows from the more prosperous northern countries, such as Germany, Benelux and the Nordics, to southern economies such as Spain and Italy. Spain was predominantly an inbound remittance market in the year 2000, with inflows representing approximately 70% of remittances because of high emigration. By 2007, just before the financial crisis, inflows accounted for only 40% as more people had been moving to Spain for work and were sending money back home.

Since the financial crisis, that trend has been reversing mainly due to the economic situation in Spain. As a result, many migrants have left the country, resulting in lower outflows. At the same time, inflows have been growing faster than outflows as emigrating Spanish nationals seek a career outside their country.

Some countries have already completed the change in status. Our statistics show that Portugal became a net beneficiary of remittances in 2012, with a 28 per cent increase in the number of transfers into Portugal between 2010 and 2012.

Conversely, some countries with a history of being net recipients of remittances are on their way to being “outbound” nations. A prime example of this is Turkey. While some Turkish emigrants to European nations have struggled in the midst of the on-going Eurozone crisis, their compatriots back home have been the beneficiaries of a relatively booming economy.

By way of example, approximately 80% of transfers between Germany and Turkey are sent from Turkey to Germany, with only 20% flowing in the other direction. One trend fuelling this is the increasing number of highly educated Turks returning to their home country and sending money to support family that are still in Germany. Remittances outflows from Turkey totalled $205 million in 2011.ii

Alongside the changing flows between developed and developing countries, another key theme that emerges through our analysis of data flows is that of “south-south” migration between developing countries. As income differentials are usually quite small between developing countries, proximity, networks and conflict are seen as greater drivers of “south-south” migrations.

Migrations have been particularly evident in Africa, seen by the large percentage of income being represented by remittances – in Liberia and Lesotho recipient remittance percentage of GDP totaled 31% and 27% respectively in 2011 3. As some countries such as Nigeria and Zambia have profited economically in recent years, they have acted as a magnet to migrant workers from struggling nations, causing a significant rise in cross-border remittances within the continent. The Middle East and North Africa region has the strongest growth in remittances driven by economic activity.

Large scale movement of workers has given rise to the spectre of “brain drain” from countries lacking in economic opportunity as ambitious workers seek out new frontiers. The data on this is inconclusive, however, and World Bank studies suggest that emigrant countries may in fact benefit from a long-term “brain gain” due to increased access to knowledge and skills that comes from having links to more developed nations.

The main observation that arises from a study of remittances data is that the developed world is no longer the source of opportunity it once was. Many people looking to find work and future careers to support their families are looking beyond the established major economies to new grounds of possibility where they may find it easier to make their mark.

1 World Bank remittance data inflows, November 2012
2 World Bank remittance data outflows, November 2012
3 World Bank remittance data inflows, November 2012

Finance

The Psychology Behind a Strong Security Culture in the Financial Sector

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The Psychology Behind a Strong Security Culture in the Financial Sector 1

By Javvad Malik, Security Awareness Advocate at KnowBe4

Banks and financial industries are quite literally where the money is, positioning them as prominent targets for cybercriminals worldwide. Unfortunately, regardless of investments made in the latest technologies, the Achilles heel of these institutions is their employees. Often times, a human blunder is found to be a contributing factor of a security breach, if not the direct source. Indeed, in the 2020 Verizon Data Breach Investigations Report, miscellaneous errors were found vying closely with web application attacks for the top cause of breaches affecting the financial and insurance sector. A secretary may forward an email to the wrong recipient or a system administrator may misconfigure firewall settings. Perhaps, a user clicks on a malicious link. Whatever the case, the outcome is equally dire.

Having grown acutely aware of the role that people play in cybersecurity, business leaders are scrambling to establish a strong security culture within their own organisations. In fact, for many leaders across the globe, realising a strong security culture is of increasing importance, not solely for fear of a breach, but as fundamental to the overall success of their organisations – be it to create customer trust or enhance brand value. Yet, the term lacks a universal definition, and its interpretation varies depending on the individual. In one survey of 1,161 IT decision makers, 758 unique definitions were offered, falling into five distinct categories. While all important, these categories taken apart only feature one aspect of the wider notion of security culture.

With an incomplete understanding of the term, many organisations find themselves inadvertently overconfident in their actual capabilities to fend off cyberthreats. This speaks to the importance of building a single, clear and common definition from which organisations can learn from one another, benchmark their standing and construct a comprehensive security programme.

Defining Security Culture: The Seven Dimensions

In an effort to measure security culture through an objective, scientific method, the term can be broken down into seven key dimensions:

  • Attitudes: Formed over time and through experiences, attitudes are learned opinions reflecting the preferences an individual has in favour or against security protocols and issues.
  • Behaviours: The physical actions and decisions that employees make which impact the security of an organisation.
  • Cognition: The understanding, knowledge and awareness of security threats and issues.
  • Communication: Channels adopted to share relevant security-related information in a timely manner, while encouraging and supporting employees as they tackle security issues.
  • Compliance: Written security policies and the extent that employees adhere to them.
  • Norms: Unwritten rules of conduct in an organisation.
  • Responsibilities: The extent to which employees recognise their role in sustaining or endangering their company’s security.

All of these dimensions are inextricably interlinked; should one falter so too would the others.

The Bearing of Banks and Financial Institutions

Collecting data from over 120,000 employees in 1,107 organisations across 24 countries, KnowBe4’s ‘Security Culture Report 2020’ found that the banking and financial sectors were among the best performers on the security culture front, with a score of 76 out of a 100. This comes as no surprise seeing as they manage highly confidential data and have thus adopted a long tradition of risk management as well as extensive regulatory oversight.

Indeed, the security culture posture is reflected in the sector’s well-oiled communication channels. As cyberthreats constantly and rapidly evolve, it is crucial that effective communication processes are implemented. This allows employees to receive accurate and relevant information with ease; having an impact on the organisation’s ability to prevent as well as respond to a security breach. In IBM’s 2020 Cost of a Data Breach study, the average reported response time to detect a data breach is 207 days with an additional 73 days to resolve the situation. This is in comparison to the financial industry’s 177 and 56 days.

Moreover, with better communication follows better attitude – both banking and financial services scored 80 and 79 in this department, respectively. Good communication is integral to facilitating collaboration between departments and offering a reminder that security is not achieved solely within the IT department; rather, it is a team effort. It is also a means of boosting morale and inspiring greater employee engagement. As earlier mentioned, attitudes are evaluations, or learned opinions. Therefore, by keeping employees informed as well as motivated, they are more likely to view security best practices favourably, adopting them voluntarily.

Predictably, the industry ticks the box on compliance as well. The hefty fines issued by the Information Commissioner’s Office (ICO) in the past year alone, including Capital One’s $80 million penalty, probably play a part in keeping financial institutions on their toes.

Nevertheless, there continues to be room for improvement. As it stands, the overall score of 76 is within the ‘moderate’ classification, falling a long way short of the desired 90-100 range. So, what needs fixing?

Towards Achieving Excellence

There is often the misconception that banks and financial institutions are well-versed in security-related information due to their extensive exposure to the cyber domain. However, as the cognition score demonstrates, this is not the case – dawdling in the low 70s. This illustrates an urgent need for improved security awareness programmes within the sector. More importantly, employees should be trained to understand how this knowledge is applied. This can be achieved through practical exercises such as simulated phishing, for example. In addition, training should be tailored to the learning styles as well as the needs of each individual. In other words, a bank clerk would need a completely different curriculum to IT staff working on the backend of servers.

By building on cognition, financial institutions can instigate a sense of responsibility among employees as they begin to recognise the impact that their behaviour might have on the company. In cybersecurity, success is achieved when breaches are avoided. In a way, this negative result removes the incentive that typically keeps employees engaged with an outcome. Training methods need to take this into consideration.

Then there are norms and behaviours, found to have strong correlations with one another. Norms are the compass from which individuals refer to when making decisions and negotiating everyday activities. The key is recognising that norms have two facets, one social and the other personal. The former is informed by social interactions, while the latter is grounded in the individual’s values. For instance, an accountant may connect to the VPN when working outside of the office to avoid disciplinary measures, as opposed to believing it is the right thing to do. Organisations should aim to internalise norms to generate consistent adherence to best practices irrespective of any immediate external pressures. When these norms improve, behavioural changes will reform in tandem.

Building a robust security culture is no easy task. However, the unrelenting efforts of cybercriminals to infiltrate our systems obliges us to press on. While financial institutions are leading the way for other industries, much still needs to be done. Fortunately, every step counts -every improvement made in one dimension has a domino effect in others.

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Finance

Has lockdown marked the end of cash as we know it?

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Has lockdown marked the end of cash as we know it? 2

By James Booth, VP of Payment Partnerships EMEA, PPRO

Since the start of the pandemic, businesses around the world have drastically changed their operations to protect employees and customers. One significant shift has been the discouragement of the use of cash in favour of digital and contactless payment methods. On the surface, moving away from cash seems like the safe, obvious thing to do to curb the spread of the virus. But, the idea of being propelled towards an innovative, digital-first, cashless society is also compelling.

Has cashless gone viral?

Recent months have forced the world online, leading to a surge in e-commerce with UK online sales seeing a rise of 168% in May and steady growth ever since. In fact, PPRO’s transaction engine, has seen online purchases across the globe increase dramatically in 2020: purchases of women’s clothing are up 311%, food and beverage by 285%, and healthcare and cosmetics by 160%.

Alongside a shift to online shopping, a recent report revealed 7.4 million in the UK are now living an almost cashless life – claiming changing payment habits has left Britons better prepared for life in lockdown. In fact, according to recent research from PPRO, 45% of UK consumers think cash will be a thing of the past in just five years. And this UK figure reflects a global trend. For example, 46% of Americans have turned to cashless payments in the wake of COVID-19. And in Italy, the volume of cashless transactions has skyrocketed by more than 80%.

More choice than ever before

Whilst the pandemic and restrictions surrounding cash have certainly accelerated the UK towards a cashless society, the proliferation of local payment methods (LPMs) in the UK, such as PayPal, Klarna and digital wallets, have also been a key driver. Today, 31% of UK consumers report they are confident using mobile wallets, such as Apple Pay. Those in Generation Z are particularly keen, with 68% expressing confidence using them[1].

As LPM usage continues to accelerate, the use of credit and debit cards are likely to decline in the coming years. Whilst older generations show an affinity with plastic, younger consumers feel less secure around its usage. 96% of Baby Boomers and Generation X confirmed they feel confident using credit/debit cards, compared to just 75% of Generation Z[2].

Does social distancing mean financial exclusion?

As we hurtle into a digital age, leaving cash in the rearview, there are ramifications of going completely cashless to consider. We must take into consideration how removing cash could disenfranchise over a quarter of our society; 26% of the global population doesn’t have a traditional bank account. Across Latin America, 38% of shoppers are unbanked, and nearly 1 in 5 online transactions are completed with cash. While in Africa and the Middle East, only 50% of consumers are banked in the traditional sense, and 12% have access to a credit card. Even here in the UK, approximately 1.3 million UK adults are classed as unbanked, exposing the large number of consumers affected by any ban on cash.

Even when shopping online – many consumers rely on cash-based payments. At the checkout page, consumers are provided with a barcode for their order. They take this barcode (either printed or on their mobile device) to a local convenience store or bank and pay in cash. At that point, the goods are shipped.

There are also older generations to consider. Following the closure of one in eight banks and cashpoints during Coronavirus, the government faced calls to act swiftly to protect access to cash, as pensioners struggled to access their savings. Despite the direction society is headed, there are a significant number of older people that still rely on cash – they have grown up using it. With an estimated two million people in the UK relying on cash for day to day spending, it is important that it does not disappear in its entirety.

Supporting the transition away from cash

Cashless protocols not only restrict access to goods and services for consumers but also limit revenue opportunity for merchants. While 2020 has provided the global economy with one great reason to reduce the acceptance of cash, the payments industry has billions of reasons to offer multiple options that cater to the needs of every kind of shopper around the world.

Whilst it seems younger generations are driving LPM adoption, it is important that older generations aren’t forgotten. If online shops fail to offer a variety of preferred payment methods, consumers will not hesitate to shop elsewhere. With 44% of consumers reporting they would stop a purchase online if their favourite payment method wasn’t available – this is something merchants need to address to attract and retain loyal customers.

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UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies

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UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies 3
  • UnionPay International today announces that two of Europe’s leading travel companies, Logitravel and Destinia, have started accepting UnionPay.
  • This acceptance will enable users of the groups’ travel websites to make purchases using UnionPay payment methods.

The acceptance partnerships between the OTAs and UnionPay began in July 2020 for customers across 13 European countries and another 90 countries and regions worldwide.  The European countries covered by the agreements include the UK, Germany, France, Italy, Spain, Portugal, Norway, Denmark, Sweden, Austria, Switzerland, Hungary and Ireland.  The brands covered by these acceptances include Logitravel.com and Destinia.com which together deliver more than 8.5 million worldwide travel bookings each year covering flights, hotels, holidays, car hire and other experiences.

With over 8.4 billion cards issued in 61 countries and regions worldwide, UnionPay has the world’s largest cardholder base and is the preferred payment brand for many Chinese and Asian expatriates and students based in Europe, as well as an increasing number of global customers. These cardholders are also particularly attractive to the two OTAs.  Despite the impact of Covid-19, Logitravel and Destinia expect to see the demand for travel across the European continent as well as that between Europe and Asia return to growth in the coming years. They are now placing significant focus on offering more payment options and smoother payment services to meet this demand.

The partnerships incorporate UnionPay’s ExpressPay and SecurePlus technology, which will ensure seamless transactions for the customers, contained within a single process through the relevant websites.  UnionPay’s technology also provides for the requirement to authenticate transactions under the EU regulation Payment Services Directive 2 (PSD2) ensuring that sites will be compliant as soon as the relevant countries apply the requirements.

Wei Zhihong, UnionPay International’s Market Director, said: “This is a major partnership with two of Europe’s leading online travel companies.  Logitravel and Destinia are brands which have been at the forefront of e-commerce for many years and we are very excited to be working with them to extend their reach to new audiences. This highlights the work that we have carried out in ensuring that our technology provides effective solutions for the biggest e-commerce sites both in Europe and around the world. We look forward to announcing many more similar agreements in the near future.”

Jesús Pons, Chief Financial Officer at Logitravel Group said: “UnionPay has always been on our radar, and since travel has become a crucial part of its development, Logitravel felt it important to develop this important partnership. It really was an obvious decision for Logitravel since both companies share a passion for e-commerce and emphasising the payment experience for their customers.”

Ricardo Fernández, Managing Director at Destinia Group said: “We believe that this is the beginning of a really strong relationship.  Our discussions with UnionPay in reaching this partnership have demonstrated their understanding of the needs of major online merchants and their ability to deliver the highest quality systems.  We look forward to working together on further partnership as we move forward.”

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