By Jonathan Williams, Director of Strategic Development at Experian
Nearly fifteen years on from the Lisbon Agenda and the introduction of the Euro in 1999 – a pan-European currency which would revolutionise the use, and movement of money across the European Union (EU) – we are nearing the deadline for compliance with the logical payments extension of the Euro, namely the Single European Payments Area (SEPA).
This legislation, due to come into force on February 1st 2014, will see a unified payments landscape across the EU, bringing swifter, more efficient payments both domestically and across borders, while driving down the costs businesses incur each year across the continent in missed, delayed and incorrect payments.
However, despite repeated warnings from the multitude of institutions and government bodies responsible for the implementation of SEPA across the Eurozone – not to mention the work done by banks and other payments bodies – many businesses have failed to heed the advice and have left migration and compliance to the last minute.
Some of these businesses have assumed that SEPA may be delayed or annulled, or the deadline extended, but with the only body responsible for such a decision – the European Commission – never having made any indication this was ever likely to be the case, those who have relied upon such a shift have backed the wrong horse. SEPA is a reality, and it is one looming large on the horizon.
So, for those businesses which have not begun the journey to compliance, what options are open to them? Non-compliance isn’t one of them – SEPA is a legal requirement established by European law, and the legacy payments systems, such as the national clearing houses, which have underpinned transactions to date will be switched off. Ignoring the deadline is therefore not an option.
It is a transition which, depending on the scale of a company’s payments requirements, can take anything from six to twelve months. With just three months to go until the deadline, a bridging solution is therefore essential for any company which will not hit the deadline.
Luckily for businesses in this situation, there are contingency options available which will buy some time for the company to undertake the checks and validations needed to become wholly compliant.
On the face of it using a contingency, or conversion service, sounds like a great ‘get out of jail free’ option however ensuring compliance in this way is not without complications and implications.
The first port of call for support must be the business’s banking partner(s): many of the major corporate banks either have or will be offering contingency services. Provision of services by banks is not however uniform; indeed some, most notably Deutsche Bank, have made the decision not to provide a solution themselves. It’s hard to imagine that any bank will leave their customers completely high and dry, however where they are not providing services themselves, their strategy is likely to be to point customers in the direction of commercial solutions and of course there will be associated costs.
Where banks are offering contingency services there are important issues to be taken into account. The SEPA Regulation 260/2012, and the interpretation by the banking community, states that a bank offering such a service must make the conversion at arm’s length from the payment initiation and separately from any payment services agreement. Quite how the banks are interpreting this is yet to become clear, however a seamless conversion to payment service cannot be offered. Therefore, at the very least, employing the contingency services of a bank will add another step to payment processing, lengthening the payment lifecycle and potentially impacting cash flow.
Outside of the banks, IT providers are offering contingency solutions and indeed mandate management solutions for direct debit; these should enable the corporates to comply in time. As with solutions offered by banks, using these services will add a step to the payment process and as a commercial service there will be obvious cost implications.
A reason why so many businesses are going to need SEPA contingency plans is because the process of finding and correcting payments data containing errors takes time before it is migrated to the new formats. Data can be wrong due to a number of reasons including errors being caused by anything from customers to technical glitches. However, in a SEPA environment, businesses must accept responsibility to ensure that data is checked and corrected where necessary as the risks associated with failed payments will fall on the business’s shoulders. It is up to payment service providers to decide how they deal with incorrect data, but they do not have to accept liability for correcting any issues that arise.
Once all data has been corrected, it’s important to keep it that way. Regular spring cleaning will ensure long term SEPA compliance and avoid the need to perform a mass migration of data again in the future. An in-line data proofing process can be established to check payment data periodically so that as branches close, banks merge and accounts transfer, information will be kept up to date and the consequences of non-compliance can be avoided.
The contingency process needs to be managed by all key stakeholders in the business with a role in the SEPA compliance process – the CIO, Finance Directors, the Board, as well as HR and Marketing divisions; it really is legislation which touches all aspects of the business if handled incorrectly. However, if managed properly, SEPA will leave a lasting, positive and streamlined payments model for decades to come across the Eurozone (and beyond).
Contingency plans are a reality many businesses are going to have to face up to – they can no longer rely on hoping that SEPA will be delayed or the deadline for compliance extended; this was a misleading expectation to begin with. Instigating an interim plan can always only be seen as such – it’s a short term bridge to fill a short term necessity.
The costs and lengthening of the payment lifecycle bought by using a contingency solution means that the less time a corporate has to tackle the problem in this way the better. The deadline to get started on migration in order to hit the February 1st 2014 cut-off date for compliance has gone – there’s no point suggesting otherwise. What businesses have to do now is get prepared to bridge the gap they’ve brought about by ignoring the calls for action since SEPA was announced a decade ago. Contingency plans are the only solution now open to them.
About the Author:
Jonathan Williams, Director of Strategic Development at Experian, is responsible for innovation, working with the payments industry and strategic projects within the Identity and Fraud division of Experian. Spanning both technical and marketing disciplines, Jonathan focusses on the commercial opportunities created by market change, and how these can be turned to the advantage of Experian’s corporate customers. Jonathan joined Experian after promoting strategies for growth as European Business Development Manager for Fujitsu Telecom. Prior to this he was responsible for the product propositions which took two start-ups to IPO: Content Technologies and Virata Corporation. He has also held engineering and IT roles at British Aerospace (now BAE Systems), the University of Cambridge and Advanced Telecommunications Modules. Jonathan holds an MA in Theoretical Physics and a postgraduate qualification in Computer Science from the University of Cambridge and is the Experian representative to the Euro Banking Association (ABE) and the Payments Council.
The Psychology Behind a Strong Security Culture in the Financial Sector
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.
Has lockdown marked the end of cash as we know it?
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.
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.
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.
UnionPay increases online acceptance across Europe and worldwide with Online Travel Agencies
- 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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