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What can banks do to prevent younger customers falling foul to cybercrime?

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What can banks do to prevent younger customers falling foul to cybercrime?

By Karen Wheeler, Vice President and Country Manager UK, Affinion 

It’s fair to say that a stereotype of cybercrime victims has been formed in recent years. Through the media we hear lots about unsuspecting elderly people who aren’t very tech-savvy handing over their personal details to con artists or investing their life savings in schemes that don’t exist.

If this sounds familiar, then you may be surprised to discover that it’s actually young adults aged 18-25 in the UK who are the least aware when it comes to cybersecurity risks and how to protect themselves according to the government’s Cyber Aware campaign.

Karen Wheeler

Karen Wheeler

Although young people are generally more tech-savvy and spend more time online, it seems that this can sometimes be detrimental to them in terms of protecting their details in the digital world.

Online passwords are one of the most common areas of concern. The Cyber Aware research revealed that 52 per cent of 18-25-year-olds are using the same password for multiple online accounts due to naturally having more of an online presence than older generations. This means that if a hacker has just one password, they can easily hijack a victim’s entire personal and financial data. There’s an argument to be had here around convenience overshadowing caution.

Then there are the situations where fraudsters target victims by contacting them directly, often through social messaging platforms where there are very few measures in place to prevent unsolicited contact from strangers unless the user is prompted to review their privacy settings. This method is on the rise, so much so that fraud prevention agency Cifas recently reported a 30 per cent increase in the amount of victims of identity fraud under the age of 21 in 2017.

WhatsApp is currently leading the fight against identity fraud on its software. It’s currently trialling its peer-to-peer payments system in India, which allows users to securely transfer and receive money with their contacts using UPI (unified payments interface) without having to disclose bank details.

It’s encouraging to see the government and other large organisations taking control on cybersecurity, but in terms of education and raising awareness amongst young people, banks also have a large role to play. So what more can they do and where does their specific responsibility lie?

The ups and downs of contactless

It’s no secret that the introduction of contactless to debit and credit cards has revolutionised the way we make small payments and heightened that all-important convenience that young people value so much.

But as we’ve already established with passwords, with convenience comes risk, and a problem that has plagued young consumers in recent years is the rise in contactless fraud. This works in two ways – through bank cards being stolen and used for multiple small purchases by the thief, or by devices scanning the details of bank cards using the contactless technology through the owner’s pocket. These card details are then sold on the dark web.

Recent figures from UK Finance show that contactless fraud has overtaken cheque scams for the first time in the UK, as £5.6m was stolen in the first half of 2017. As the provider of contactless cards, the onus should be on banks to advise customers on how to use it safely and protect themselves from fraud.

Reaching out to young adults

In terms of directly reaching out to people with cyber awareness and training, Barclays has led the way thus far with its Digital Eagles rolling outStaying Safe in Cyberspace workshops to communities and families. The workshops cover various topics including how to spot phishing scams, advice on downloading software, effective password practice and being more aware of tricks that fraudsters will use to target individuals with the intent of poaching bank details.

Other banks can take a leaf out of Barclays’ book and adopt similar initiatives for young adults specifically, tailoring the content for their needs and lifestyle habits. Simple advice on contactless fraud would need to play a huge part in this, such as not keeping contactless cards in trouser pockets or keeping them in a wallet lined with protective material that blocks fraudsters’ attempts to download details.

As the drivers behind contactless payments, banks could also encourage young people to switch to mobile payment systems like Apple Pay and Google Pay, which are more secure against thieves as the user’s smartphone must be unlocked for it to be used for a payment. MoneySuperMarket recently revealed in a report that 23 per cent of Generation Z predict that physical cards will soon become obsolete with the rise of mobile payments, which could result in a significant decline in contactless fraud.

Dark web scanning and customer support

There are tools available to banks that can help young people more broadly online with increasing their cyber awareness. Affinion works closely with banks to provide ID theft detection services that can scan the public and dark web and warn customers in advance of possible threats.

For customers that do fall victim to an attack, banks may be the first port of call, perhaps to cancel a debit card or transfer money elsewhere. Banks can up their game in this regard, going above and beyond to offer things like an ID theft helpline, legal assistance and a resolution process as a value-added service. Not only does this help customers in a time of need, but it also improves the customer engagement journey and the customer’s perception of the bank.

The risk of young people falling foul to cybercrime is increasing as technology continues to advance, so to safeguard customers’ money, banks must be at the forefront of empowering them to protect themselves.

Banking

Former BOJ executive calls for ‘genuine’ review of central bank stimulus

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Former BOJ executive calls for 'genuine' review of central bank stimulus 1

By Leika Kihara and Takahiko Wada

TOKYO (Reuters) – The Bank of Japan must abandon the view it can influence public perceptions with monetary policy and conduct a “genuine” review that takes a harder look at the rising cost of prolonged easing, said former central bank deputy governor Hirohide Yamaguchi.

The BOJ will conduct a review next month to make its monetary policy tools more sustainable, nodding to criticism its policy is crushing bond yields, drying up market liquidity and distorting stock prices.

But Yamaguchi, who was deputy governor when the BOJ first began buying exchange-traded funds (ETF) in 2010, said the costs of the bank’s stimulus programme have become too large to mitigate in the review in March.

“It’s unlikely the BOJ can come up with an outcome that has a substantial impact on the economy and markets,” he told Reuters in an interview on Monday.

“The review will probably be just a show of gesture that it’s doing ‘something’ to address the cost,” said Yamaguchi, who retains strong influence on incumbent policymakers.

Under its yield curve control (YCC) framework, the BOJ guides short-term interest rates towards -0.1% and 10-year bond yields to around 0%. It also buys risky assets such as ETFs to fire up inflation.

Ideas floated in the BOJ, which could be discussed at the review, include allowing the 10-year bond yield to deviate more from its 0% target, and making its ETF buying nimble so it can slow buying when stocks are booming.

Tolerating bigger yield swings, however, could undermine the feasibility of YCC by highlighting the limits of the BOJ’s control over the yield curve, Yamaguchi said.

“It’s hard to control long-term interest rates within a tight range for a long period of time,” he said, calling for an overhaul of YCC – something the BOJ rules out as an option.

Yamaguchi also called for halting the BOJ’s ETF purchases, as the bank could “end up using monetary policy to prop up stock prices” if the programme continues.

“At the very least, the BOJ must end as soon as it can the current situation where its ETF holdings keep accumulating.”

When the BOJ began buying ETFs in 2010, it used a pool of funds to ensure purchases remain at a manageable level, said Yamaguchi, who was involved in the decision.

That cautious approach was replaced by Governor Haruhiko Kuroda, Yamaguchi said, after he took over as head of the BOJ in 2013. Kuroda ramped up purchases dramatically with his “bazooka” stimulus deployed that year under a pledge to deploy all available means in a single blow. Eight years on, inflation remains distant from the BOJ’s 2% target.

“It’s impossible for the BOJ to guide public perceptions at its will,” Yamaguchi said. “It’s time now for the BOJ to conduct a ‘genuine’ policy review and use the findings to modify its policy framework.”

(Reporting by Leika Kihara and Takahiko Wada; Editing by Ana Nicolaci da Costa)

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Banking

Metro Bank expects defaults to rise as COVID-19 support measures fade out

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Metro Bank expects defaults to rise as COVID-19 support measures fade out 2

(Reuters) – Metro Bank posted a much bigger annual loss on Wednesday and said it expects defaults to rise through the year in line with its provisions as government support measures set in place due to the COVID-19 crisis are wound down.

The mid-sized company, part of a breed of challenger banks set up to take on the dominance of bigger and more conventional lenders in Britain, said underlying pretax loss was 271.8 million pounds ($385.58 million) for the 12 months ended Dec. 31 compared to 11.7 million pounds a year earlier.

“The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix, bringing higher yield and improving net interest margin, as evidenced in the second half,” Chief Executive Officer Daniel Frumkin said.

Metro, which relieved some of the pressure on its capital levels last year by selling one of its portfolios to NatWest, estimated impact from the coronavirus pandemic to be 124 million pounds.

The bank, whose net interest margin fell to 1.22% from 1.51% in a low interest rate environment, said provisions to cover loan losses amounted to 126.7 million pounds at 2020-end, compared with 11.7 million pounds a year earlier.

The company said the increase in expected credit losses was driven by deteriorating macro-economic scenarios that have increased the probability of defaults.

($1 = 0.7049 pounds)

(Reporting by Muvija M in Bengaluru; Editing by Vinay Dwivedi)

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Banking

As We Get Back to the Future of Work, Banks Must Embrace WhatsApp

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Smarshop-ed –Banks need to embrace whatsApp

By Shaun Hurst, Technical Director, Smarsh

If you had told me a year ago that the world’s major financial services companies would all be operating almost entirely with a remote workforce, I would have broken out in a cold sweat.

Straight away my mind would have jumped to the severity of the compliance issues that such a move would involve. Then I’d worry about the magnitude of the investment that banks would need to make in innovative collaboration tools – a move they had put off for so long. For nights on end, I would have tossed and turned thinking about the creaking legacy archives so many banks still held onto, already struggling to keep pace with the exponential rise in data flowing in and out of modern businesses every nano-second.

What a difference a year makes.

Coming in to 2021, banks are light years ahead of where they were at the turn of the decade. The vast majority have implemented the technology they need to enable their workforce to compliantly use the collaboration tools. Most have either moved their archives to the public cloud or have seriously sped up their plans to do so. And the ‘Future of Work’ is no longer a buzz word. It is now a reality. We will never go back to a situation where employees are only able to work in a physical office.

But there is work still to be done. There is a valuable lesson that banks need to learn from 2020: embrace technology, do not fear it. Fear of compliance issues was one of the main reasons that so many had put off fully adopting the collaboration tools that are now the lifeblood of their businesses. What they need to do now is expand their newfound wisdom and embrace all communications platforms that enable employees to stay connected and work effectively, wherever they are.

WhatsApp and Financial Services Regulations

This is most evident with WhatsApp. Many people working in the financial services industry already know that the end-to-end encryption messaging tool is ubiquitous and widely used to keep in touch with colleagues, clients, and contacts. But while company policies largely prohibit the use of WhatsApp, financial regulators have stayed away from an outright ban. Instead, they have issued guidance requiring companies to ensure that the instant messaging tools used by their employees are supervised and in compliance with already existing record-keeping rules such as MiFID II.

In 2019, the FCA stated that firms need to “take reasonable steps to prevent an employee or contractor from making, sending, or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the firm is unable to record or copy.” Similarly, the SEC issued guidance in late 2018 reminding companies of their responsibility to monitor electronic messaging and encouraged them to “stay abreast of evolving technology.”

Ensuring that these guidelines are adhered to has been complicated by the fact that many companies have brought in outright or partial bans on unmonitored instant messaging tools, while also adopting bring-your-own-device (BYOD) policies. Largely implemented to cut costs, these BYOD policies mean businesses are now less able to police which communications apps and platforms their employees are using. This means that they have now lost the oversight they need to ensure that employees are adhering to the bans.

Despite a mountain of anecdotal and judicial evidence that employees in the financial services industry have turned to WhatsApp even more since the outbreak of the pandemic, banks are still failing to adopt the compliance tools they need to ensure their employees are acting legally.

Legal Issues with WhatsApp

In 2020, there were several legal and disciplinary cases that centred upon the misuse of WhatsApp within banks.

In April, Bloomberg reported that a dozen traders at one investment bank were punished for using WhatsApp at work – one was fired and the others had their bonuses cut. In October, two senior executives working in the commodity sector quit after accusations that they had broken their company’s rules on instant messaging platforms.

While one banker was acquitted over a legal case with the FCA in which he was accused of purposefully obstructing an investigation by deleting WhatsApp messages, the UK regulator stated it would ‘take action whenever evidence we need is tampered with or destroyed.’ A clear message to banks that they will be expected to provide accurate accounts of any messages sent by their employees over WhatsApp.

The Solution: Capturing and Supervising WhatsApp Communications

The compliance challenges of the increased use of WhatsApp have been widely played out in the financial media in recent years, with multiple firms being handed significant fines due to their communications-monitoring oversights. This doesn’t have to be the case.

As I said before: We will never go back to a situation where employees are only able to work in a physical office. Companies working in regulated industries, and especially financial services companies, must embrace the tools that they know are in wide use by their employees.

Very few banks have introduced the monitoring solutions they would need to adequately manage the use of WhatsApp or other encrypted messaging tools by its employees. But encrypted messaging tools like WhatsApp and WeChat can be captured, monitored, and supervised. Firms simply need to invest in the technology in order to do so.

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