Banking
WHAT DOES EMV AND TOKENISATION MEAN FOR BANKS?

By Bob Graham, Senior Vice President – Banking and Financial Services, Virtusa
The rash of data breaches at major retailers over the past year has spurred the banking industry to take action against fraud. EMV (Europay, MasterCard, Visa), which had struggled to gain adoption in the U.S. for years, has suddenly become the touted saviour to all the fraud issues branches are experiencing. Tokenisation is now a new buzzword in the industry. However, confusion persists on what these advancements mean and more specifically, whether they solve fraud and the retailer’s data breach challenges.
First, a little background. Most reports suggest that retailer data breaches were caused by malware that allowed hackers to access card holder data from retailer systems. The EMV standard for using a microchip to store encrypted card data combined with a PIN requirement, is aimed at reducing fraud at the point of sale by preventing the use of counterfeit mag-stripe cards. This technology has been used in Europe for nearly 20 years and has successfully reduced counterfeit cards being used at point of sale (POS) terminals. The U.S, on the other hand, has resisted the deployment of EMV for years. This is because EMV does not satisfy PCI compliance; it is not clear who would fund the cost of the chip based infrastructure, and the EMV standard does not solve the problem of online fraud, which by far is the bigger problem facing the industry.

Bob Graham
Most industry experts agree that EMV failed in preventing data breaches at Target, Neiman Marcus and others, because EMV still relies upon merchants receiving and processing the same account numbers that are used today. Contrary to popular belief, there was no skimming happening at POS terminals, so consumers were not in danger of having their card data stolen at the point of sale. The theft occurred in the retailer’s systems, which stored account data. Additionally, even with EMV, online fraud is still possible once someone has stolen your 16 digit account number (known as PAN), expiration date and three digit security code.
This is where tokenisation comes in. Tokenisation is where random, digital representations of the PAN and security code are created and distributed by the card account issuer (i.e. your bank). Let’s use Apple Pay as an example. Apple Pay is facilitated by your smartphone communicating a digital token via NFC to the merchant POS terminal. This token is routed from the merchant POS to card account issuer, who is then able to decode the token and map it to the account holder and authorise the transaction.
Tokenisation’s biggest benefit is the non-exposure of the account holder’s credentials in the transaction process, therefore nullifying the possibility of data breaches and resultant fraud, allowing the retailer to no longer have to store account credentials.
There are two major implications for banks; one is that they need to get on the tokenisation bandwagon. As of January 2015, there were over 30 banks listed on Apple’s site as having their credit cards available on Apple Pay, and reports from Visa/MasterCard indicate that there are over 500 banks waiting to on-board. Banks need to work with their processors, Visa/MasterCard and Apple/Google, to get their tokenisation approached, certified and deployed. It is important to note that this is an effort and expense for banks that does not have any direct revenue correlation.
The second implication is more subtle but perhaps a bigger challenge for banks. Banks need to combine EMV and tokenisation, to reduce the amount of sensitive cardholder data held by merchants to make them a less valuable target for hackers. According to a recent report released by the Identity Theft Resource Center (ITRC) and sponsored by IDT911™, the number of U.S data breaches hit a record high of 783 in 2014. The report indicated that 42 data breaches were carried out against banks in 2014, of which the largest known one was at JP Morgan Chase.
While card holder and account number data continue to be targets, new risks focus around account takeover and new account openings. Hackers use confidential information to either take over existing accounts and get new cards mailed to them, or they use that information to open up new accounts and use them for online fraud. The UK saw a major rise in both of these factors when it adopted only EMV. So, to conclude, Banks need to implement both EMV and tokenisation in order to ensure their processes for account opening and issuing new cards employ the highest levels of security processes, and protect customers’ data as robustly as possible.
Banking
Commerzbank to lose 1.7 million clients by 2024 – Welt am Sonntag

FRANKFURT (Reuters) – Commerzbank expects to lose 1.7 million customers by 2024 as part of its current restructuring, resulting in a 300 million euro ($364 million) hit to revenue, weekly Welt am Sonntag reported, citing sources close to the bank.
The lender hopes to offset the drop by growing its loan business as well as by expanding its business with corporate and very wealthy clients, the report said, without giving any further detail of why customer numbers were expected to decline.
It also didn’t say if any specific category of client was most likely to be lost.
Commerzbank declined to comment.
According to the bank’s website it serves around 11.6 million private and small-business customers in Germany and more than 70,000 corporate and other institutional clients worldwide, so the reported loss of customers would suggest a drop of around 15%.
The bank earlier this month reported a $3.3 billion fourth-quarter loss, sinking further into the red as it continued a major restructuring and dealt with the fallout of the COVID-19 pandemic.
The bank’s restructuring plan involves cutting 10,000 jobs and closing hundreds of branches in the hope it can remain independent.
($1 = 0.8253 euros)
(Reporting by Christoph Steitz and Tom Sims; Editing by David Holmes)
Banking
Citigroup considering divestiture of some foreign consumer units – Bloomberg Law

(Reuters) – Citigroup Inc is considering divesting some international consumer units, Bloomberg Law reported on Friday, citing people familiar with the matter.
The discussions are around divesting units across retail banking in the Asia-Pacific region, the report https://bit.ly/3pD57WP said.
“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy,” a Citigroup spokesperson told Reuters.
“Many different options are being considered and we will take the right amount of time before making any decisions.”
The move, part of Fraser’s attempt to simplify the bank, can see units in South Korea, Thailand, the Philippines and Australia being divested, the Bloomberg report said.
However, no decision has been made, according to the report.
Revenue from Citi’s consumer banking business in Asia declined 15% to $1.55 billion in the fourth quarter of 2020.
The divestitures could be spaced out over time or the bank could end up keeping all of its existing units, the Bloomberg report said.
The firm is also reviewing consumer operations in Mexico, though a sale there is less likely, the report said, citing one of the people.
Last month, New York-based Citigroup beat profit estimates but issued a gloomy forecast for expenses. Finance head Mark Mason said the lender’s expenses could rise in 2021 in the range of 2% to 3%, weighing on its operating margins. (https://reut.rs/2ZwXRB1)
(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)
Banking
European shares end higher on strong earnings, positive data

By Sagarika Jaisinghani and Ambar Warrick
(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.
The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.
The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.
Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.
Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.
But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.
“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.
“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”
Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.
The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.
The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.
London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]
French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)