Tony Virdi, Vice President and Head of Banking and Financial Services in the UK & Ireland, Cognizant
While the banking and financial services sector – arguably affected more than any other by the global economic downturn – has seen some setbacks as amended regulations are enforced to avoid further fallout, technological advances have been made that are disrupting the status quo. And these advances are increasingly merging communications with payments, providing increased transparency and enhancing customer experience. From being able to pay bills online or on your mobile, communicating with your bank virtually instead of in the branch, transferring cash electronically via NFC (near field communications) technology with a mobile device or Square technology, more and more options are springing up by the day, shaking up the banking industry and requiring everyone in it to keep a close eye on how these will change their business model. Banks & financial institutions faced similar disruptions at the start of the millennium when the dotcom/Internet channel opened up and they had to rethink and reinvent their “bricks and mortar” operating models. The continuing technology advancements (and hence disruptions) thus present an opportunity for banks to continue to reinvent and rethink their business, where the customer continues to be the focal point of innovations.
Ultimately, banks need to ensure they retain the customer relationship – they will do so by providing trustworthy services with an optimal customer experience. Google is renowned for wanting to own customer data, which means there is already much debate over the role Google Wallet will play in the banking world. Banks should be wary of this if they want to keep their customers close to them, otherwise they risk losing their customers to new players. It isn’t just Google they need to watch, however. There is talk of an ‘Apple Bank’ for instance, and even Vodafone considered setting up a retail bank at one point.
Change can be good and Cognizant considers itself among the companies which embrace disruption to transform businesses for the future. To be innovative and stay ahead of what the customer wants, a healthy dose of competition can be very useful in all industries. However, there is a risk that banks could become a ‘commodity or utility’ in the mobile payments industry as the communications and technology industry evolves and lures customers away from the traditional bank to embrace new payments methods, leaving the bank stagnant in its role as a repository for retail savings. And this is where banks can learn from the mobile operators who have been in this situation themselves.
In the same manner that mobile operators seek to guard their customer data and details from third parties who could potentially lure the customer away, banks do the same. This means they are often suspicious of new emerging players, such as Square or Google Wallet, and fail to work collaboratively towards a brave new world. The more banks guard their data (client confidentiality and legal requirements aside) and do not integrate their services with emerging players, as well as existing members of the chain, whether retailers, card merchants and even mobile operators, the more they risk becoming purely a facilitator for mobile payments – a delivery mechanism.
Banks are well-placed to assist with financial transactions, but what is really at stake is the customer mind share. What additional value will they bring to the table is an important question? Clearly, in the past, security and confidentiality have been important and have become even more critical. As the mobile device becomes ubiquitous in consumers’ daily lives, it will reshape the payments landscape. Banks can remain relevant to the customer by creating end to end services that add value and help keep them ahead of the competition. They should also, for example, embrace social channels to meet the needs of the millennial customer, whether promoting new products on the social networks or utilising these channels to improve brand awareness, track product feedback and leverage new technology, such as analytics, to improve the prediction rates at contact centres. New technology can also be adopted to improve customer experience and streamline process lifecycle effectiveness as a result. One example of this is that car owners can use their mobile app to capture images of motoring incidents and then manage their claims process via workflow instead of the traditional paper and telephone-based channels.
There are many considerations banks need to have front of mind but there are three key ones in my opinion. These are: whether to invest in building capabilities to support a strong mobile strategy, creating an interface between their legacy banking systems and mobile operations, and which partnerships to form. The retail world has shown what the consequences of not adapting to disruptive influences can be, with its retail outlets likely to become obsolete without an internet or mobile channel strategy. And the latter may, over time, overtake the importance of the retail outlet. The final point is particularly valid, as these could determine whether they survive the onslaught from emerging non-traditional players or not.
Disruption can be beneficial, but only if traditional players in the value chain are willing to adapt and change the way they do things. Where banks have an advantage over other industry sectors is that customers want to trust them with their money. Anecdotal evidence shows that many customers used to stay with their bank for life but that, in line with the changing world, it has never been easier to switch. The account switching regulation in the UK, which comes into force this year1, will play a big role here in potential disintermediation. If banks want to retain their customers, they need to remain relevant and offer services that foster loyalty, and this is where embracing disruption can come into its own.i
Hackers can now empty out ATMs remotely – what can banks do to stop this?
By Elida Policastro, Regional Vice President for Cybersecurity, Auriga
In 2010, the late Barnaby Jack famously exploited an ATM into dispensing dollar bills, without withdrawing it from a bank account using a debit card. Fast forward to the present day, and this technique that is now known as jackpotting, is emerging as a threat and is growing as an attack on financial services. Recently, a hacking group called BeagleBoyz in North Korea have caught the attention of several U.S. agencies, as they have been allegedly stealing money from international banks by using remote hacking methods such as jackpotting.
The reality behind jackpotting
Jackpotting is when cybercriminals will use malware to trick their targeted ATM machine into distributing cash. As this criminal method is relatively easy to commit, it is becoming a popular tool for cybercriminals, and this trend will sure continue in 2021, unless financial organisations implement policies to prevent this and protect consumers.
During this difficult time, when access to cash has never been more important to banking customers, it is imperative that banks give their customers reliable ATMs that work, 24/7, 365 days a year. However, due to the sensitive data that ATMs possess, such as credit card or PIN numbers, they have now become a profitable object for cybercriminals to manipulate. As cybercriminals have been evolving in their efforts of attacking the IP in ATM machines, we will definitely see more jackpotting stories emerge in the coming months, especially with the large return on investment.
How criminals exploit the vulnerabilities found in ATMs
Since ATMs are both physically accessible and found in remote locations with little to no surveillance, this gives an opportunity for criminals to carry out jackpotting, especially with the software vulnerabilities that may exist in many ATMs.
ATM machines have been easily manipulated due to the outdated and unpatched operating systems that they run on. If banks wanted to resolve this issue and update these systems, it would take large amounts of time and money to do so. However, some banks do not have such resource and because of this, cybercriminals take advantage by penetrating the software layers in ATMs and exploiting the hardware to dispense cash.
How can banks tackle this?
As the sector has a complex technical architecture, banking organisations will have to make sure that they have control over the transactions that take place, and this includes the management of security when it comes to communication between various actors. When financial organisations are reviewing their ATM infrastructure, they will also need to protect their most vulnerable capabilities within their cybersecurity. Banks, for example, can encrypt the channels on the message authentication, in the event bad actors try to tamper with their communications.
Because ATM networks need to be available 24/7, banks not only, need to implement greater protection over their systems, but they need to do so with a holistic approach. One action that banks can take is to implement a centralised security solution that protects, monitors and controls their various ATM networks. This way banks can control their entire infrastructure from one location, stopping fraudulent activities or malware attempts on vulnerable ATMs.
Another way for banks to reduce the risk of jackpotting attacks is to update their ATM hardware and software. To do this, they will need to closely monitor and regularly review their machines in order to spot any emerging risks.
What the future holds for the banking industry
As confirmed by the warnings from the U.S. agencies, jackpotting remains a very serious threat for financial organisations. Evidence has also emerged, which shows hackers are becoming more innovative in their tactics. It was reported last year, for example, that hackers stole details of propriety operating systems for ATMs that can be used to form new jackpotting methods.
The emergence of jackpotting highlights the need for banks to actively work to protect their customers’ personal information and critical systems now and for the foreseeable future. In order to stay secure and reduce the risk of attacks, they will need to put in place the aforementioned solutions, which include updating their ATM hardware and software as well as closely monitoring and regularly reviewing their ATMs. As cybercriminals continue to become more innovative in their ways of attacking the machines, the issues mentioned will only continue to rise if they are not addressed. Although the method of jackpotting requires little action from cybercriminals, if financial organisations can implement a layered defence to their ATM security, they can stop themselves from becoming another victim to this type of attack in the future.
SoftBank Vision Fund set for new portfolio champion with Coupang IPO
By Sam Nussey and Joyce Lee
TOKYO/SEOUL (Reuters) – SoftBank’s $100 billion Vision Fund is poised to have a new number-one asset in its portfolio with the upcoming floatation of top South Korean e-tailer Coupang, furthering a turnaround that has seen the fund yo-yo from huge losses to record profit.
The $50 billion target valuation that Reuters reported this month would likely see the decade-old firm surpass recently listed U.S. food deliverer DoorDash Inc on a roster of assets that also includes stakes in TikTok parent ByteDance and ride-hailers Grab and Didi.
The Vision Fund built up its 37% stake in Coupang for $2.7 billion, mostly at an $8.7 billion post-money valuation, a person familiar with the matter said. The fund is not expected to sell shares in the initial public offering (IPO) that Coupang filed for in New York, the person said, declining to be identified as the information was not public.
SoftBank Group Corp and Coupang declined to comment.
Achieving a $50 billion valuation would add to good news for the fund which is bouncing back from an annual loss in March. This month, it announced record quarterly profit, driven by the listings of DoorDash and home seller Opendoor Technologies Inc and share price rise of ride-hailer Uber Technologies Inc.
The fund has written big cheques for late-stage startups to fuel rapid growth, with two-thirds of the value of its portfolio concentrated in 10 assets including Coupang.
The 10 include 25% of British chip designer Arm – to be sold to Nvidia Corp pending regulatory approval – but not stakes in high-profile stumbles like office-sharing firm WeWork.
The fund’s largest assets include its 22% stake in DoorDash, whose share price has doubled since the firm’s December IPO, sending its market capitalisation to $65 billion.
FACTBOX: Vision Fund’s investment hit parade
SoftBank initially invested in Coupang in 2015, adding it to a stable of e-commerce hits that included 25% of China’s Alibaba Group Holding Ltd, before placing it under the fund.
The e-tailer has grown rapidly during stay-home policies while the COVID-19 pandemic has forced other portfolio firms like Indian hotel chain Oyo to scramble to preserve cash.
Analysts see Coupang’s $50 billion valuation as feasible given its first-mover status and as it expands beyond replacing brick-and-mortar retail with a rising number of online channels.
It is the biggest e-tailer in South Korea that directly handles inventory, with 2020 purchases at about 21.7 trillion won ($19.62 billion), showed data from WiseApp.
“The market’s assessment isn’t exaggerated,” said analyst Park Eun-kyung at Samsung Securities. “Coupang’s market leadership is a premium factor.”
($1 = 1,106.1800 won)
(Reporting by Sam Nussey in Tokyo and Joyce Lee in Seoul; Editing by Christopher Cushing)
Five things to look out for in HSBC strategy update
By Alun John
HONG KONG (Reuters) – HSBC Holdings PLC will update its “transformation” plan announced a year ago on Tuesday, when the Asia-focussed lender also reports annual results.
As part of its latest strategy, the bank said in February last year it would shrink its investment banking operations and revamp its businesses in the United States and Europe resulting in 35,000 jobs being cut.
HSBC’s pretax profits for 2020 is expected to fall 38% to $8.3 billion, according to analysts’ estimates compiled by the bank, because of the impact of the COVID-19 pandemic.
Here are five key things to look out for in the new plan to revive its growth —
1. How will HSBC boost fee income?
The bank has promised details of its plans to make more money from the fees it earns from selling products to customers than it does by pocketing the difference between the interest rates it offers savers and charges borrowers.
This could involve selling more products to wealth management clients, charging corporate clients in different ways, and maybe even charging retail clients for basic banking services.
2. What do the plans to double down on China and Asia mean?
HSBC intends to refocus resources from elsewhere on what it calls its “high returning Asia business”, but investors want to know what this means in practice for markets and business lines.
Politics could make this harder. HSBC has been attacked by British lawmakers for assisting Hong Kong police with investigations into pro-democracy activists, including freezing some bank accounts.
CEO Noel Quinn said last month the bank had to comply with police requests and he could not “cherry-pick which laws to follow”.
3. Will HSBC resume paying a dividend?
HSBC has not announced a dividend since the third quarter of 2019, on instructions from the Bank of England. This angered retail investors in Hong Kong who tried unsuccessfully to have the policy changed.
The regulator has since lifted the ban, and British rival Barclays said Thursday it would pay a dividend of one pence a share. However, despite beating analyst expectations with its 2020 results, Barclays shares fell as a vague outlook without profit targets left investors underwhelmed.
HSBC investors will be looking beyond the day’s numbers for concrete commitments towards improved returns and a more positive outlook for key economies.
4. How will HSBC shrink its U.S. and European footprint?
HSBC’s French high street banking operations are up for sale, but it has had trouble finding a buyer.
The market is due an update on whether HSBC has managed to find a buyer on terms it will accept, or whether it will seek to wind the business down more gradually.
HSBC will also give details of how it will accelerate its existing efforts to shrink assets, staff and branches in the U.S., which accounted for 0.5% of the group’s pre-tax profit in the first half of last year.
5. More job cuts on the way?
HSBC employed 307,000 people at the end of 2010. The bank’s management said last year it was aiming to reduce the headcount of 235,000 closer to 200,000 by 2023. Investors want to know whether the new plan will mean deeper cuts. Nearly every new strategy launched by HSBC in the past decade has resulted in fewer people being employed by the bank.
(Reporting by Alun John; Editing by Sumeet Chatterjee & Shri Navaratnam)
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