A fintech startup changed Chinese banking, and now it’s using technology to transform ancillary industries globally.
In Shenzhen’s Hi-Tech district, the fifth floor conference room of a non-descript building has plants, a large-screen television, white board, and table with bottled waters on top. The room appears ordinary, but the click of a button makes the white plexi-glass walls turn translucent, revealing WeBank’s hi-tech command center which resembles the Star Trek Starship Enterprise.
Employees pass facial recognition screens when entering the open layout room. If an intruder infiltrates, CCTV cameras recognize the alien face and sound alarms. Walls are plastered with computer monitors displaying real-time graphs and corporate figures including the number of account applicants, credit approval rates, and lending flows. Some five dozen employees are on high alert monitoring any abnormalities in banking operations.
WeBank has no branches or direct sales force, and bots handle 98 percent of customer service inquires. Robots collect applicant data, run credit checks, nudge customers to make payments, and ensure KYC (know your customer) compliance. Customer identities are certified via facial recognition over mobile phones. And according to market research company Forrester, incorporating AI into the loan application process can reduce fraud by 60 percent.
“We’re an IT company with a banking license. Or a bank with a very powerful IT infrastructure,” said WeBank’s head of regional fintech partnerships, Gilbert Yeoh Tan.
WeBank received regulatory approval in 2014, making it the first privately-owned bank and first digital-only bank in China. It is 30 percent owned by Tencent, which developed WeChat. The remaining ownership is held by Baiyeyuan Investment, Li Ye Group, and other minority shareholding enterprises.
WeBank markets SME (small- and medium-sized enterprise) loans, Wechedai auto loans, insurance, and wealth management. The core product is Weilidai consumer micro loans, which average around RMB 8,100 (USD $1,200). Applicants must apply through proprietary apps. They receive a response within five seconds and funding within a minute.
Contrasting conventional banks, WeBank offers around-the-clock services, rapid loan application decisions, and real-time transaction settlement. Additionally, given that micro-lending is low margin, WeBank was built using low-cost open-sourced hardware and software. According to the company, its per account IT operating cost is 3.6 RMB, approximately one-tenth that of Chinese banks and a fraction of international competitors.
“It’s very fast, scalable, and distributed,” Yeoh Tan said. The company plans to open a 1.1 million square foot headquarters in Shenzhen’s Qianhai free-trade zone.
WeBank launched a blockchain consortium in China to promote free, open-sourced ecosystems around supply chains, corporate finance, and real estate. Internally, the company has a blockchain research group and conducted more than 15 million syndicated loan reconciliations using the technology.
“As the economy continues to evolve, the so-called collaborative business model will become more popular,” said, Henry Ma, vice president and chief information officer of WeBank. “Open consortium chain technology will be a very important component to support that.”
WeBank simultaneously launches various marketing campaigns, technology upgrades, app interfaces, and product offerings across sample customer nodes. Technology enables real-time market feedback. Unsuccessful product launches are halted promptly, while initiatives receiving positive customer feedback are introduced company wide.
China’s tech behemoths including Baidu, Alibaba, Tencent, JD.com (the BATJs) see fintech opportunities. “[BATJs] have massive amounts of data,” said Forrester research analyst Meng Liu. “Compared to the rest of the world, they can use many real-world customer data to power their technology testing and technology development. That’s why they’re very aggressive in emerging technologies.”
According to WeBank’s 2018 annual report, the company has more than 100 million active customers. In 2018, WeBank’s total net profit reached RMB 2.47 billion (USD $359 million), a 70.8 percent year-over-year increase. The private enterprise has long-term plans to go public, but not imminently.
Last November, Beijing officials released a plan to promote financial technology, specifically artificial intelligence, big data, mobile internet, internet of things, distributed technologies, blockchain, cryptography, quantum technology, and biometrics. Ma said regulators generally support innovation, but they do require transparency. “Working with regulators for technology is very important,” he said.
WeBank priorities align with regulators’. For example, WeBank believes that digital fiat currencies can increase financial delivery and settlement efficiency, but the bank will continue eschewing cryptocurrencies until national authorities approve. “Digital fiat currencies need to be supplied and regulated by central banks,” Ma said.
Beijing policymakers are also encouraging lending to small- and medium-sized enterprises, which conventional banks have neglected, but WeBank is now targeting. Regulations, however, do pose barriers. Lenders must meet with corporate borrowers in person, which inhibits scaling on the commercial side.
There are other challenges. China has three bank account classifications. Type 1 accounts allow large deposits and withdrawals. WeBank, however, can only manage type 2 and 3 bank accounts, which restrict account holder services, cap transaction and deposit limits, and don’t allow incoming wire transfers.
Although confronting obstacles, opportunities exist. Aggregate bank deposits, insurance products, and investments are expected to reach $23.8 trillion this year. And annual fees for managing mutual funds in China are expected to reach $42 billion by 2025, a five-fold increase from today.
Consumers spend more than two-thirds of their mobile bank time on BATJ platforms, according to Forrester. Liu said consumers seamlessly transition from reading the news, chatting with friends, or buying goods online to accessing financial services through these dominant portals. “These platforms are changing and educating the customer’s behavior in China,” Liu said. “They provide very approachable and social financial services.” WeChat alone has more than 1 billion daily active users.
Given regulatory complexity with distributing financial services directly and the higher margins associated with technology offerings, the BATJ fintechs are offering solutions to third-parties. WeBank has partnered with more than five dozen banking partners within China, and is now exploring opportunities with international partners. “We are trying to export our know-how.” Yeoh Tan said.
The most lucrative opportunities, however, may exist outside financial services. Through the cloud, WeBank provides turnkey solutions to other industries. “We really want to work with a lot of other industries, so it’s not just banking. Banking plus retail. Banking plus manufacturing. Banking plus medical. And be able to form these cross-industry collaborative initiatives,” Ma said. WeBank solutions help clients administer loyalty buying programs, corporate finance departments, supply chain financing, and B2B payments.
In 1823, Piào hào (draft banks) were established in Shanxi province. These banks expanded throughout the country by facilitating remittances. Two centuries later, one of China’s most preeminent banks doesn’t have branches and is more of a technology company than financial services provider.
Joshua Bateman is based in Greater China. He can be reached @joshdbateman.
Bank fraud prevention in a post-COVID-19 world
By Pierre-Antoine Dusoulier, Founder and CEO, iBanFirst
Fraud on the rise
According to recent research from a leading UK retail bank, there was a 66 per cent increase in reported scams in the first six months of 2020 compared with the last six months of 2019 – due to the COVID-19 pandemic.
Across the summer months, Action Fraud UK reported a total financial loss of £11,316,266 by 2,866 victims of coronavirus-related scams.
The rise in fraud rates is a warning that banks, building societies and other financial providers need to be as alert as ever in identifying fraud.
So, what do banks need to do to ensure their customers are protected from fraud in a post-COVID-19 world?
Educate your customers to safeguard against fraud
On the customer level, banks need to be informing their customers on the types of common fraud to ensure that they are protected for all eventualities.
Authorised push payment scams are one of the fastest growing types of fraud. According to the FT, £354 million pounds was stolen this way last year. It is where a company or individual is tricked into paying money into a criminal’s account. Emails come from a genuine email address but are then intercepted by a criminal, so it’s imperative that businesses have end-to-end email encryption, and the customer double-checks the account details with the supplier on the phone prior to making a payment.
At the same time, scammers can also exploit the company’s invoicing process, where criminals create a bogus invoice for a small amount and send it to a company’s accounting department. If the finance team does not identify this as fraudulent, it can result in the business losing a considerable amount of revenue over a long period of time.
Supplier fraud is also a widespread scam. This involves the fraudster taking on the appearance of a supplier that has changed their bank details. The fraudster will have collected information on the suppliers of the targeted company, in order to pose as an official supplier. This can be prevented by ensuring that the supplier is contacted to confirm the legitimacy of the communication. It’s important not to call or email the supplier using the details provided on the suspected fraudulent correspondence. Instead they must check the original details of the supplier and speak to them on their official telephone number or email on file.
Banking malware is the least commonly cited type of fraud but has a greater financial risk attached to it. Malware is sent by email redirecting the recipients of the message to a fake banking interface, as a way of transferring funds to offshore accounts.
Remodel processes post-COVID-19 to keep customer data safe
To fight cyber fraud and scams, banks must also play their part. In a world where entire workforces are working from home banks must remain vigilant with customer data. COVID-19 has created a change in working habits and banks need to carry out the right level of training for its employees to protect customer data. Virtual team meetings and remote data sharing poses a threat to exposing sensitive information to malicious actors, and banks need to put the necessary safeguards in place.
All virtual meetings should use the banks’ private company network, and file sharing should be carried out through secure, encrypted company drives. Meanwhile, banks need to provision for all employees to receive regular software updates that will keep customer data safe, and ensure that they are aligned with new and existing data processing regulations.
Monitoring suspicious payments
A vital element to fraud detection is through monitoring customer transactions in real time, and harnessing emerging technologies such as artificial intelligence and machine learning to spot the signs of a scam or fraud before it is too late.
One way that banks protect businesses from fraud is through keeping a log and examining regular transactional history. Any transactions which appear suspicious based on location, amount, the beneficiary, and the method will be alerted to the business customer, to mitigate the immediate and future financial risk to the business.
Know your transaction
To understand financial flows better, every bank has a Know Your Customer (KYC) engine. This is a payment infrastructure that supports onboarding processes and risk-based transaction monitoring. This system is already well known and we don’t need to elaborate on this further, as it is the fundamental building block to ensure the highest level of traceability across all transactions – including remittances and receipts of funds and foreign exchange transactions internationally.
However, KYC is limited and doesn’t include real-time analysis. What can be overlooked is a KYT engine – Know your Transaction. The aim of KYT (Know Your Transactions) is to identify potentially risky transactions and their underlying unusual behaviour for detecting money laundering, fraud or corruption. An automated concentration of transactions with accurate and relevant information directly from the original data sources is essential.
Finally, banks and payment companies need to implement anti-fraud modules to defend against cyberattacks, based on the latest algorithms capable of analysing transactions issued in real time and detecting anomalies or suspicious behaviour upstream, strengthening the security and transparency of payments and building a network of trust between issuers and recipients of payments.
In a post-COVID-19 world it’s clear that scams will become more common place. Within this environment there is a shared responsibility when mitigating the risk of financial fraud. The bank must educate and inform customers to enable them to protect themselves, while ensuring a robust technological infrastructure and ways of working are in place that protects customer data; their finances, and fundamentally their business and livelihood.
How One Bank Successfully Responds to Sophisticated Threat Actors
By Robert Golladay, Strategic Accounts Director, Illusive Networks
Cybercriminals and hacktivists have a special fondness for financial institutions. Continuous business innovation, complex ecosystems, merger and acquisition activity, fintech, cloud adoption and a growing consumer-driven attack surface multiply the problem for financial organizations. Despite the vast resources financial institutions devote to cybersecurity, one challenge has been especially difficult to solve – that of detecting and stopping APTs before real damage is done.
Securing cloud-based banking
An active lender in the UK sought a new way to protect its customers and the valuable assets it holds. The bank needed to:
- Defend customer and employee information from compromise
- Detect and thwart sophisticated attacks
- Effectively defend cloud-based operations across accounts and instances
As a cloud-first company, the bank’s preference is to always invest in next-generation technology for operations and security infrastructure. In May 2016, with the help of Amazon Web Services (AWS), it became the first bank in the UK to be fully cloud hosted. The bank also uses AWS to deliver a financial technology service that helps lenders make informed decisions through data and automation.
Security is always a priority, which is one of the reasons the company chose AWS, conducts regular penetration testing, and performs advanced attack simulations. To maximize effectiveness of its layered security infrastructure, the company continually trains its employees and reinforces data security best practices.
In particular, the bank sought additional safeguards from sophisticated threats that evade other security measures, such as advanced persistent threats, as well as gain insight into attacker tactics and techniques. The new layer needed to be cloud-based for high scalability and flexibility, and it had to defend the company without time-wasting false positive alerts. The security team looked at deception technology and chose a solution that allowed them to gain real-time verification of anomalies and lateral movement in the network.
The deception solution enabled the bank to focus on attackers’ behaviour and perspective. The solution’s expertise in attacker methodology augmented the bank’s internal capability to detect novel attacks, while enabling rapid and adaptable coverage in its cloud-based environment.
The bank’s deception solution uses agentless, intelligence-driven technology that creates a dense web of deceptions and effortlessly scales across the infrastructure. Featherweight deceptions on every endpoint look exactly like the bank’s real data, access credentials and connections. When an attacker is confronted with deceptions, this deceptive view of reality makes it impossible to choose a real path forward. One wrong step triggers an alert to the bank’s security team.
The bank’s CISO found it invaluable to be able to deploy a solution that creates doubt and confusion in an intruder’s mind. When attackers can’t distinguish between real and deceptive assets, the security team can collect information and apply intelligence to patterns that it has observed during that time period of activity. The solution simultaneously sharpens the bank’s investigative process and constrain the attacker.
The lender easily deployed deception technology across its complex environment, scaling it across AWS instances and accounts. The IT security team now has continuous visibility and confidence that these defences enable them to thwart sophisticated threat actors.
The bank gained proactive threat response and the assurance that an alert represents a real issue. These alerts are only triggered when an attacker engages with a deceptive asset. At that point, the deception technology immediately begins capturing forensic data from the system where the attacker is operating, presenting real-time forensics and a quantifiable measure of potential business risk. It uncovered, for example, malicious processes trying to operate on an endpoint.
The deception solution enables the lender to be much more proactive. It detects and analyses attacks in real time to produce actionable alerts, directing the security team to relevant and valuable conclusions. The technology provides exceptional, innovative coverage for malicious pivoting and lateral movement. It uncovers the in-depth, sophisticated actors who evade other countermeasures and gives security analysts direct visibility into targeted attacks, which they find invaluable.
A laser-focused approach
The financial sector remains a perennial favourite of the cybercriminal crowd. As networks become more complex, their perimeters all but disappear, creating the need for stronger and more comprehensive security than ever previously imagined. Advanced persistent threats are a particular concern, as they are notoriously difficult to detect before significant damage is done. For financial institutions, the reputation damage alone may be insurmountable.
Banks and other financial services organizations pour resources into cybersecurity, but one option that needs further exploration is deception technology. This method of security monitors for lateral movements toward critical assets and thus provides a powerful alternative or enhancement to traditional monitoring approaches. Security teams can see attackers’ proximity to those crown jewels early in the attack cycle, buying time for careful response. As the lender above learned, deception technology cuts through the noise of alerts to deliver the intel financial institutions need to act quickly and safeguard their high-value data.
Why banking and finance need to move qualifications online
By Rory McCorkle, Senior Vice President, PSI Certification and Education Services
The global banking and finance sector often presents a strange contradiction when it comes to technology. On one hand, the sector is leading the way in blockchain technology, big data and Artificial Intelligence. On the other hand, many large financial institutions are falling behind in their digital transformation efforts, with internal processes as well as the moving the customer experience online. Particularly when compared to fintech and new challenger banks.
A report last year by Accenture found that just 12% of large traditional banks surveyed have fully committed to digital transformation and 50% of banks made little progress. The remaining 38% are in the midst of their transformations, but their digital strategies lack coherence.[i]
One area of digital transformation that has been particularly slow is access to qualifications and certifications. Many exams in the banking and finance sector continue to use Paper Based Testing (PBT). However, COVID-19 has accelerated the transition from PBT to Computer Based Testing (CBT), proving irrevocably that change is possible – regardless of the size of your organisation, number of candidates or security requirements.
In a heavily regulated environment that is undergoing increased scrutiny, a high level of certification and compliance is a necessity for many working in the industry. And credentials that hold such significance need to be securely and fairly assessed. This is where CBT offers numerous benefits. For organisations there is security, integrity, flexible capacity, increased reach and a streamlined exam administration process. And for candidates, CBT provides flexibility, convenience, accessibility and increased choice.
Despite these benefits, some organisations still have reservations and have been slower to make the move to CBT. In more traditional professions, such as finance, there can be a greater reticence. This is likely to be based on the historic prestige of PBT, as well as a desire to stick to more traditional methods. However, with more learning completed online, and educational resources shifting to digital from primary education to CPD, expectations around assessments are changing.
Up-and-coming candidates in all professions, particularly those who are digital natives, are starting to question outdated methods. Organizations will need to adapt to stay current and relevant with their market. What’s more, technological advances have now combined with the coronavirus pandemic to increase the demand for remote business services. Meaning that a growing number of organisations in the banking and finance sector are moving to CBT.
Technology offers burgeoning options to increase test security with CBT. Linear-on-the-fly testing (LOFT) for example allows you to easily change items for each candidate, while maintaining the fairness of the exam – rather than the fixed forms used in PBT.
With LOFT, every candidate is given a unique set of items, making cheating a lot more difficult. And with no need to ship test papers around the country, there’s significantly less risk of physical security breaches with CBT than with PBT.
With the movement away from paper and pencil testing, advances in online proctoring have also dramatically increased the ability to deliver secure online assessments. Using a webcam and microphone, online proctoring provides test security for exams, while offering candidates additional flexibility and convenient scheduling.
Even before COVID-19, online proctoring was becoming far more commonplace. In 2018, there was a 10% increase in organisations using online proctoring with video/sound recording and identity authentication as part of the exam process compared to 2017.[ii] And COVID-19 has reinforced the fact that it is possible to effectively move to CBT side by side with online proctoring – and move quickly.
Testing has changed a lot during its history but the reasons for adopting CBT have remained the same for decades – fair and reliable testing delivered at scale. Nearly all tests that are completed with a paper and pencil can be adapted for CBT.
For organisations in the banking and finance sector, recent technological advances have provided many more options to reach candidates. At the same time, technology has significantly increased the security for important online assessments that will not only affect a candidate’s future, but might also impact the future and reputation of their profession.
As with any change, the move from PBT to CBT must be managed carefully and communicated clearly. And with best practice in place, it is possible for any organization, regardless of size and number of candidates, to make the move to CBT.
Return to Work Doesn’t Mean Business as Usual When it Comes to Travel and Expense
By Rob Harrison, MD UK & Ireland, SAP Concur The last few months have been an exercise in adaptability for...
Why technology is key to the future of auditing
By Piers Wilson, Head of Product Management at Huntsman Security The Financial Reporting Council (FRC), which is responsible for corporate governance,...
Staff training crucial for SME recovery post-COVID
47% of UK’s top performing SMEs provide regular, formalised training for all staff Despite this, 15% of small businesses report to...
What Is Globalization
What is globalization? Globalization, or inter-connectedness, is the ever-growing process of integration and interaction among countries, individuals, businesses, and even...
What Is Microsoft Teams
Microsoft Teams is an application and web-based collaboration tool that combines chat, videos, online collaboration, document storage, and collaboration with...
What Is Capitalism
What is capitalism? Is it a great economic system or just another economic system that is not so great? Well,...
How To Start A Youtube Channel
How to Start a YouTube Channel For Your Business: Do you have a blog or website? If you do, it’s...
What is URL
A Uniform Resource Locater, colloquially known as a URL, is an identification to a certain web resource, a directory or...
What Is Seo
Search engine optimization, also known as SEO, is the process of increasing the quantity and quality of site traffic from...
How Much Rent Can I Afford.
How much rent is too much to pay? Sometimes, apartment complexes look at an annual income that’s over forty times...