By Ian Bradbury, CTO – Financial Services at Fujitsu UK
Even before the impact of Covid-19, the financial services landscape had been changing. The shift away from legacy systems in favour of innovative, agile systems continued to change the customer experience. It completely changed expectations as well – smooth, convenient and easy-to-use interfaces are now an expectation in almost every part of our lives.
The proof is there for us to all see – three quarters (75%) of global consumers now use a money transfer and payments fintech service. What Covid-19 has done is change not only how everyone purchases basic daily goods like groceries but also other non-essential services and items. The desire for businesses to become ‘cash-free’ to curb the virus spreading has played its part.
Safety becomes the top priority
In our report last year, we found that 77% of British consumers only bank with “traditional” high street banks – with just one in ten consumers using a challenger bank only. But thanks to the pandemic, this is now changing.
Covid-19 has forced all organisations and consumers to operate with a digital-first mindset. Payment companies are experiencing a particular resurgence because they not only provide convenience but can be used as a safe way to pay for items; the increase in the value of contactless payments to safeguard people was a smart digital tweak.
The reality facing all governments now is a ‘new normal’ where the impact of the coronavirus lasts for years. And while this could be the final push that fintechs need, one other likely outcome is that this leads to a lack of support for older and more vulnerable consumers in society who traditionally find it harder to access and use modern-day electronic payment services.
The forgotten customer
Last month, Age UK shared an open letter to the FCA asking for better guidance to banks and building societies on how they can support their older customers. And traditional financial organisations can learn from digital banks that model their services on ease and availability to consumers. Digital player Starling offers a 24/7 in-app chat and, more specifically in relation to Covid-19, various resources to support savings accounts, prevent fraud and even provide tips on how to work from home effectively. It shows us that the benefits of a cashless society are too strong to ignore yet thought must be given to consumers of all ages, backgrounds and experiences.
Now more than ever, one of the likely outcomes of Covid-19 in the long term will be a falling reliance on traditional methods of payment. This will mean a move away from cash to chip and pin, as well as an increase in apps.
Innovation shouldn’t stop, far from it. But the financial sector – regulators, companies and governments alike – must work together to understand that different customers and businesses want different things, and they need to be flexible and adaptive enough to support this.
Innovation requires balance
In theory, it’s likely that, as consumers age, today’s generation will become more comfortable in relying on digital services and using physical money less. Yet until that point is reached there is no guarantee that cash will disappear completely from our society. Only by education – and therefore understanding – will consumers of all ages become more comfortable in using digital apps and payment services.
Everyone from traditional banks like NatWest RBS to digital entrants Monzo need to look at how innovation can drive a positive conversation in the financial services sector, especially as the world starts to recover and remerge from the coronavirus pandemic.
In an increasingly crowded market, organisations that can put the customer at the very heart of everything will triumph. Technology can enable change, but it is not the be all and end all. Ultimately, it’s down to the business itself to deliver services to all of society that improves the quality of life. Only then will financial institutes gain the support of the public in the short- and long-term.
ENLISTING TECHNOLOGY TO HELP FIGHT FINANCIAL CRIME
By Rachel Woolley, Director of Financial Crime Fenergo
Million-dollar properties, private jets and parties on luxury yachts with celebrity friends. Although it might sound like the plot for a new reality series, this is what corruption, illicit funds and political connections can buy at the expense of ordinary citizens.
Following an investigation by the International Consortium of Investigative Journalists (ICIJ), thousands of leaked documents, known as the Luanda Leaks, suggest that the daughter of Angola’s former president, Isabel Dos Santos, acquired her enormous wealth through favourable access to lucrative deals. These activities were often to the detriment of Angola’s poorest citizens.
We’ve also started to see the application of unexplained wealth orders (UWO) in the UK, with the first UWO issued in 2018. The latest UWOs relate to the grandson of Kazakhstan’s former president, Nurali Aliyev, is currently being investigated by Britain’s National Crime Agency (NCA) to explain where he got the money to buy a £80 million house in one of London’s most expensive neighbourhoods. It is thought that the funds used to buy the property have criminal origins.
But these aren’t isolated stories. There have been countless examples in recent years of how corruption, fraud and political connections has resulted in billions of dollars being stolen worldwide in countries such as Brazil, Malaysia, Gabon, Russia and many more.
A recent report by Fenergo found that regulators have issued over $36 billion in AML/KYC and sanctions-related fines (and rising) since the financial crisis. This staggering number shows that related financial institutions had inadequate policy, processes, procedures and systems, in addition to poor governance and oversight in many cases. Interestingly, a similar report found that the vast majority of these regulatory costs were associated with an AML/KYC-specific labour force.
Not surprisingly, the methods used to hide the illicit wealth are pretty similar; invoice fraud, suspicious transfers, offshore companies and complex ownership structures to disguise beneficial ownership of assets and property. Another commonality is the detrimental impact this has on some of the poorest citizens in these countries and the global economy.
But what can we learn from these scandals? And perhaps more importantly, what can be done?
For financial institutions, the importance of leveraging technology to unwrap complex hierarchies, related parties and identifying individuals with political connections cannot be understated. Understanding the ownership and control structure when onboarding entities is critical, along with robust screening practices to enable sufficient oversight of the relationship, accounts and transaction activity. Enhanced due diligence measures must be applied to politically exposed persons (PEPs), their immediate family members and known close associates. Relationship patterns are also significant, as the same service providers are often used, as was the case with Mossack Fonseca in the Panama Papers scandal.
It’s critical that financial institutions are vigilant in the detection and prevention of financial crime before it’s too late. By automating KYC/AML compliance and leveraging rules-based technology, financial institutions can ensure that internal policies are fully in-line with constantly changing regulations across multiple jurisdictions. However, human input will still be necessary when red flags are identified by the system.
Rachel Woolley, Global AML Manager at Fenergo, has over 10 years’ experience in the Financial Services industry having worked primarily in the funds industry and retail banking. She has a strong background in regulatory compliance, particularly in the areas of anti-money laundering and counter terrorist financing (AML/CTF).
Rachel holds a BSc (Hons) Degree in Applied Accounting from the Oxford Brookes University and is an ACCA Affiliate. She currently holds three professional designations; Licentiate of the Association of Compliance: Officers in Ireland (LCOI), Certified Financial Crime Prevention Practitioner (CFCPP) and Certified Data Protection Officer (CDPO).
CONSUMERS ARE READY FOR BIOMETRIC PAYMENT CARDS
Lina Andolf-Orup, Head of Marketing at Fingerprints
We’ve come a long way in the evolution of digital payments. Magnetic stripe cards, chip & PIN and contactless technology have all played a role in dethroning cash as ‘king of payments’, with many countries well on their way to becoming cashless economies. As with all tech innovation, though, consumer readiness is always the deciding factor in the crowning of new payments royalty.
Now there’s a new technology on the block, ready to help contactless offer even more value: the biometric payment card. In recent years, biometric payment cards have been steadily gathering momentum, currently being trialled by over 20 banks across the world, with the first commercial launch announced last year. A mass-market roll-out is imminent.
But with all the noise from the payments world, it’s important to answer the de facto question that’s key to any technology’s success: are consumers ready?
Contactless is (almost) king
Contactless has achieved great success globally, and are now seeing a steep increase across the world.
In addition to consumers being frustrated with having to remember a plethora of PINs and passwords, the current pandemic has also brought to light the unhygienic nature of cash and PIN-enabled payments. Now more than ever, consumers are eager to use a secure, convenient, and hygienic payment method. And contactless almost fits the bill.
Although consumers want to use their contactless card more often, security worries, payment experience frustrations, and the limiting payment cap are all preventing the card from reaching its full potential usage.
The missing link
This is where biometrics comes into play: the missing element that can take contactless into the era of worriless and limitless payments, and provide consumers an experience they expect in the 21st century. With consumers clear about what they want, let’s take a look at what’s top of their checklist and how biometrics can fill in the gaps to realize their ideal payment experience.
- Smarter, safer contactless. Just for you.
Security is a primary concern for consumers when it comes to contactless, with 38% of consumers citing security as the main reason they are hesitant to use the payment method. For older generations, this number rises to almost 50%.Yet with hygiene concerns at an all-time high, many consumers aren’t eager to use PIN-pads to secure their payments either. By moving the authentication onto the card itself, biometrics secure payments in a way that allows consumers to never touch a PIN pad again.
With the rise of data privacy concerns, consumers can rest assured that their biometric data never leaves the card and won’t be shared with third parties or cloud-based databases. Everything remains securely stored on the payment card itself.
- Let’s talk about UX
Although every generation is keen to use contactless more, millennials are especially eager to take greater advantage of this convenient payment method. 87% of millennials that own a contactless card use it regularly and three quarters are set to use it more often.
Biometrics bring additional trust to contactless payments, while keeping the same level of convenience, allowing consumers to make a secure payment in less than a second. And with a unified experience so you know what to expect every time you pay; not PIN code sometime, contactless another time, it always works the same no matter where you are in the world.
Because a biometric payment card does not need to be charged – it’s powered from the payment terminal in the same way traditional contactless is – there is nothing standing in the way of efficiency-loving consumers embracing this technology.
- Contactless made limitless
To offset the lack of PIN security, traditional contactless payments are capped. In light of the current hygiene concerns, countries around the world have already raised contactless payment caps in a bid to reduce PIN entry and cash use. But without any additional strong authentication, the limit has not been lifted completely anywhere to date. This is not only frustrating consumers, but our recent research found this was the primary frustration banks felt regarding contactless.
With the touch of a finger, biometrics brings the robust security needed to remove contactless payment limits altogether. Across contactless cards, mobile, wearables – and even future payment options – biometrics can provide a strong and seamless authentication solution to however we choose to pay or whatever contactless form or shape. Limitless payments with a harmonized UX, wherever consumers are, however much they spend, and wherever they pay: the perfect companion in the age of convenience.
- Tech nation
A less pressing, although by no means trivial matter, is that consumers are simply ready for something new. Over a third of consumers want to use more modern and personal payment cards, and biometrics sits alongside metal cards, tailored designs and other innovations to do just that. Not to mention that the standard contactless card, the last great innovation in card payments, is now over a decade old!
Featuring the latest fingerprint sensors and an advanced algorithm with AI, biometric payment cards not only meet the criteria for a modern and next-generation payment card but offer the most personal touch imaginable. Your fingerprint.
- Ready to roll…
We’ve arrived at a crucial point in the evolution of payments. With the technology tested and accredited in line with the rigorous standards of the payments ecosystem, the mass market adoption of this technology is just around the corner. But most importantly, consumers have never been more ready to embrace limitless and worriless contactless.
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