New Payment System Operator (“NPSO”), the organisation charged with delivering the UK’s New Payments Architecture (“NPA”) and the “End User Needs” services dependent upon it, seems to be backing away from its sense of responsibility towards “Confirmation of Payee”, or “CoP” for short.
The CoP service is where a payer confirms that the payee they already stated in their payment order is the payee that should receive the money and not someone else entirely.
Leaving aside firstly the nonsense as to why the payer has to repeat part of their payment order and secondly the fact that CoP is a sticking plaster over an entrenched vulnerability within the Faster Payments system, CoP has been a core part of all the project stages since 2014 that led to NPSO’s creation, and has been endorsed by NPSO executives multiple times along the way, albeit wearing a series of hats as the project progressed.
NPSO’s stance bears out an intrinsic flaw in the “layered market model” of which NPA is an example: market actors can point at one another, in the same layer, or in other layers, to shift responsibility for failure. They can CoP-out of commitments which, if not explicitly made, were strongly inferred and – most important – were accepted by others as commitments.
CoP has been sold by the Payment Systems Regulator (“PSR”) to the Treasury Select Committee as a 2018 deliverable to solve Authorised Push Payment fraud (“APP fraud”). It is therefore unacceptable that NPSO take any other stance than that they must deliver it, soon, and as written.
This imperative is belied by the NPSO Board Meeting of 6th June 2017. It is recorded in the minutes under para 135, “End-User Council Report”, that the Board first noted the summary report and the minutes of the 16th May meeting of their End-User Advisory Council.
On CoP, Matthew Hunt – NPSO’s COO–then went on to say that the manner in which this regulatory initiative interacted with another regulatory initiative – called “the liability model” – was the root cause of some of the complexity around CoP. Then a portion was redacted on the grounds of commercial sensitivity. Finally there is a bald statement that “The Board agreed that a way forward was required but that it was not NPSO’s responsibility to come up with the solution, it could only create the standard on which the industry would build”.
It is unacceptable that NPSO should term CoP a “regulatory” initiative. This is the first element in the CoP-out. CoP was born and lived for 3 years as a commercial initiative and has only become “regulatory” since November 2017 when the PSR quoted CoP as one of “their” initiatives onAPP fraud, in apparent desperation to dredge up some credible response to the Which? super-complaint on this subject and to demonstrate that they had not been asleep at the switch.
Which? lodged their super-complaint in September 2016. The PSR’s first emission of substance came under a press release of 16th December 2016 which was misleadingly entitled “PSR kick-starts industry-wide effort to tackle payment scams”, as if the PSR had taken the first initiative. The PSR laid out a programme of proposed work and then reported on it 11 months later. An action plan of 11 points was set out in a chart on p5 of its report published under a press release of 7th November 2017. CoP featured as one of the “Prevention” measures and was labelled as “Starting 2018”.
The presentation of this list of actions inferred that they were both new actions and had been framed as a direct response to the Which? super-complaint. In fact, the 11 actions were a compendium of pre-existing work undertaken for a variety of reasons, with just one or two actions specific to this topic. 6 out of the 11 streams – including CoP – had already been underway for some time within the Payment Strategy Forum (“PSF”) and were not directly triggered by the super-complaint. The PSR behaved much like Valerie Singleton when cooking for “Blue Peter”: “Here’s one I made earlier” and then “Here’s another one I made earlier”, followed by another and another.
One wonders whether the PSR seriously believed and believes that CoP will be “Starting 2018”. On 23rd January 2018 Hannah Nixon of the PSR gave oral evidence to the Treasury Select Committee in answer to Qu 35 from John Mann: “When will confirmation of payee be brought in?”.
The answer was: “The standards are being worked up as we speak. They should be in place by mid-year. We want to see banks starting to use that functionality later this year”, and John Mann said: “Later this year we should expect to see it and you will be taking action if that has not happened”.
Hannah Nixon’s statement would surely be taken by the committee members as meaning CoP would be in production in 2018, and yet this does not square with CoP being an “overlay service” on the back of NPA, as Hannah Nixon must have known: the PSF was the PSR’s creature and the PSF drafted NPA with this interdependency. NPA is a multi-year project and will probably not exist in stable production before 2021, only after which the “overlay services” like CoP can come into being.
The CoP timeline fits with this relationship between CoP and NPA.
NPSO has only just issued a “call for industry views” on the initial CoP logical Application Programming Interface specification. Note “initial”, not “final”, and “logical”, not “technical”. This is an early specification of the business model using Universal Modelling Language, one of the steps on the way to producing a final, technical specification in ISO20022 XML and a service rulebook.
It can take a year from this stage for the final technical specification and rulebook to be signed off, if we are only now looking at an initial logical specification. In fact, a year would be quick, given previous experience in the Eurozone (on the Single Euro Payments Area project) which used the same methodology. Then the results have to go through development, testing, implementation, conversion, roll-out and post-conversion support at many market actors before the new service can be said to exist “in stable production”. In this case testing involving multiple market actors must be on the agenda, and not just testing by individual market actors within a closed testing environment.
To roll CoP out comprehensively across the universe of the UK’s 1,400+ payment service providers (including credit unions and Open Banking intermediaries), we have to be considering a 3-year timeline from the point when the specifications are finalised, which would fit in with its being an “overlay service” on the back of NPA. Roll-out would then be in 2022.
So we are a ways away from having a service specification, and we are years away from being in production.
But it isn’t even this good: we are a ways away from having certainty that the service is even feasible from a legal and regulatory point of view.
The NPSO Board Minutes of 2nd May 2018 against point 97 contained a laundry list of issues of a legal/regulatory nature that stand in the way of CoP: “disclosure of personal data, fraud, PSD2, privacy and consumer protection”.
After 4 years of work on CoP, then, we do not know if the service is even feasible.
“…and it’s not our fault”, seems to be NPSO’s stance.
This does not hold water. CoP was conceived as part of the World Class Payments project run by Payments UK in 2014/15. There is a graphic on p10-11 of the project’s Initial Report and CoP appears on it.
The Programme Director of World Class Payments project was a Mr Timothy Yudin, who is now “NPA Lead” at NPSO. P19 of the project’s Initial Report states, “We would like to thank all the following organisations for their invaluable input” and quotes Nationwide Building Society, where NPSO’s current CEO Paul Horlock was Head of Payments, the role he occupied then and while he was member of the Payment Strategy Forum, until he switched over to NPSO in October 2017.
Mr Yudin kept the CoP flame alive during Payment Strategy Forum Phase 1 “Strategy Setting”, as a member of the “End User Needs WG”. CoP appears as one of the recommendations of this WG on p15 in the draft strategy of July 2016 (under the name of “Assurance Data”), and it appears on p32-33 of final strategy of November 2016 (named this time as “Assurance Data/Confirmation of Payee aspect”).
Under Payment Strategy Forum Phase 2 “Design and Implementation”, CoP was allocated into the “NPA Development Hub” stream, co-chaired by Paul Horlock, who was co-signatory of the NPA Project Initiation Document of May 2017. Point 3.2 on p8 makes the NPA project unequivocally responsible for the development of the rules and standards for CoP, up to and including transition but not after it.
The paper trail is completed by point 2.3 p32 of the NPA Blueprint that went out to consultation in July 2017, and finally by part 4 p38-59 of the “End User Requirements and Rules Blueprint” component of the final NPA Blueprint that was handed over by the “NPA Development Hub” to NPSO in December 2017 for implementation.
The co-chair of the “NPA Development Hub” by then also being CEO of NPSO, Mr Horlock could have saved time by just handing the documents to himself.
The chain of responsibility is clear: NPSO as owner of NPA must now deliver CoP, whether they regard it as a regulatory initiative or not. NPSO executives have framed CoP, nurtured it, recommended it, endorsed it, all the while within programmes that occupied the crease in UK payments landscape, and which – due to their wide apparent participation and claimed support – precluded any private initiatives from developing in the same market space.
Having squatted on the pitch for 4 years and queered it for others, they now have to go one step beyond framing, nurturing and so on. They have to deliver.
Washing one’s hands of responsibility for getting CoP to fly at this very late stage and making out it is the “industry” that has to deliver does not hold water. That is a prime example of a CoP-out.
Robert Lyddon is the current Director of Lyddon Consulting and former General Secretary of the IBOS Association secretariat in London. In a career in international banking spanning 17 years, Robert designed the “Connector” network for Bank Boston, and arranged numerous syndicated loans and derivatives transactions for Chemical Bank/Manufacturers Hanover and for Lloyds Bank International.
Tim Yudin as a member of “End User Needs WG”
Payment Strategy Forum “NPA Development Hub”: Paul Horlock as co-chair
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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