Finance

Facilitating open finance through secure services

Published

1 year ago

August 29, 2022

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Travis Spencer, CEO of Curity

Open banking has revolutionized financial services forever and this is thanks to the integration of third-party financial institutions. This proposes a wealth of new opportunities to businesses and customers alike. Transparency and innovation – two words not traditionally associated with banking – are now at the forefront of the industry. Europe’s onboarding of PDS2 regulations, the UK’s OBIE, and more recently Brazil’s efforts, represent a global change in traditional banking attitudes. The tides have now turned towards progress, paving the way for different technologies to enhance financial processes. APIs are a great example of this, and are at the heart of the open banking movement. They have enabled an environment where “platformification” is happening all around us, and it is happening now.

Naturally, the prospect of moving financial data around is always something to do with care. The consequences of this information falling into the wrong hands have the potential to be disastrous for consumers, businesses and banks. That’s why financial-grade API security is paramount when it comes to the exchange of data and financial information between institutions and third parties such as fintech vendors and other partners.

With security being of such importance, there are a raft of measures that financial services companies should adopt to set themselves up safely for success.

Authentication First

In a highly regulated system, it is important to have strong confidence in the users’ identity. This requires a Strong Customer Authentication (SCA) method, which usually translates to a high Level Of Assurance. This is achieved in part by using multi-factor authentication. Equally essential, users must prove their identity as part of the registration process and authentication process. To achieve this, the regulators require standards-based proven methods that ultimately result in a token (i.e., a ticket or memento) that is cryptographically bound to the bank and codifies the identity of the user, their authentication method, and the bank’s assurance level that the user represented by that token really is who they claim to be.

Always ask for consent

Authentication is important, but, alone, it isn’t enough. Open Finance regulations are clear that users must consent to a business accessing certain data or performing an action such as creating a transaction. But it must also be possible for users to manage and even revoke their consent through an easy-to-use user management service(https://curity.io/product/).

Protect data at all costs

Protecting users’ data can be a challenging task, but it’s a critical one. It takes a long time to build up trust – particularly when finances are involved – and it can be slashed in seconds if users lose confidence in a business’s ability to look after their users. As well as costing customers time, money and frustration, this can ruin a business’s reputation.Consequently, the safety of user data must be prioritised.

A combination of different techniques, frameworks and processes can be introduced to mitigate the risk of fraud, leaking or manipulating data and violating privacy. This is an opportunity to ensure standards are implemented across the board. Standards and directives such as PSD2 are designed to protect user data, as well as securing bank services. Businesses need to ensure they are investing in the right technology to adhere to these standards. By choosing solutions that automatically implement these specifications, businesses can reap the benefits of a secure customer database and improved customer relationships which they are exposing via APIs.

Skills are a priority

In order to do this, businesses must also invest in their teams. It’s not enough to simply put protocols in place. Design and execution requires a specific set of skills which, unfortunately, are high in demand and low in supply. Recent research commissioned by the Department for Culture, Media and Sport found that half of UK businesses (approx. 680,000) have a basic skills gap, lacking staff with the technical, incident response and governance skills needed to manage their cyber security. Meanwhile, a third (approx. 449,000) are missing more advanced skills, such as penetration testing, forensic analysis and security architecture.

Despite being essential – even more so as services are increasingly digitalised, cyber security skills are often poorly understood and undervalued by both management boards and within IT teams. This can lead to a lack of investment in training, mishiring, and poor retention of staff in security roles. This only exacerbates the challenge of building a team that possesses the requisite skills.

Hiring can be hard when there’s a shortage of skills, so businesses need to be creative. This means considering new recruitment avenues and, importantly, breaking free from the traditional model of what cyber security professionals look like. Curiosity is key, so, for more junior roles especially, attitude should be a key qualification. Businesses should trust that many skills can be acquired on the job if the candidate has the essential fundamental knowledge and drive. To aid in this, employers should provide training and mentorship.

We are seeing a dramatic shift in the financial services sector; something that has not been seen for a very long time. It is an exciting time to be in banking and to be involved in major changes to the sector. There are many opportunities to come with this, but also unforeseen challenges as well. This is the same in cyber security, with prior measures no longer sufficient to guarantee the security of user data. This future requires a financial grade security architecture, implementation of valid user authentication protocols, and the developer competence to maintain such a system. The skills gap in security needs addressing for this future to become a reality. A joint effort is required – a solid, functional team paired with a secure product, and no less.

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Finance

How technology can help win the war on financial crime

Published

1 day ago

December 2, 2023

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By Andrew Doyle, CEO of AML compliance software, NorthRow

Financial crime is on the rise and the stats are alarming. In the UK alone, 64 percent of businesses (according to data from the Global Economic Crime Survey) have experienced fraud, corruption or other incidents of financial crime within the last 24 months, while ONS stats show there were 3.7 million incidents of fraud in England and Wales in the year ending December 2022.

So it’s no surprise that financial institutions and other regulated firms are under increasing pressure from regulators (and the ever-evolving legislation they must adhere to) in the battle against dirty money. Regulators are imposing crippling fines for any compliance breaches, not to mention the significant reputational damage that comes with non-compliance.

Historically, financial firms have employed large numbers of staff to combat money laundering, but regulators are now expecting to see digital solutions in place to counter the risk of financial fraud, and with good reason. Technology can be the deciding factor in the war on financial crime and here’s why:

Better risk detection

Technology platforms can analyse historical data to predict potential incidents of money laundering, enabling organisations to take preventive measures, while also identifying unusual patterns or changes in customer risk profiles, which may also indicate suspicious activity.

Advanced analytics can help companies identify complex patterns across large datasets, making it easier to detect networks of fraud. It is also possible to assign risk scores to transactions or entities based on their likelihood of being associated with money laundering. This helps in prioritising high-risk cases for investigation.

Andrew Doyle

Enhanced customer due diligence

Automated software platforms can analyse customer information, public records, and other data sources to perform thorough due diligence on clients, identifying potential risks or suspicious behaviour before they are signed up.

RegTech automates the process of verifying customer identities and conducting enhanced due diligence on individuals and on companies, ensuring compliance with Know Your Customer (KYC) and Know Your Business (KYB) regulations, both vital components of anti-money laundering efforts.

More accurate identity verification

Biometric verification is a powerful tool in enhancing anti-money laundering and fraud detection. It involves using unique physical or behavioural characteristics of an individual to verify their identity. Traits like fingerprints, facial features, iris patterns, and voiceprints are unique to each individual and are nearly impossible to replicate or forge. This makes them highly reliable for verifying that clients are who they say they are.

Biometric verification can also reduce the number of false positives in fraud detection by providing a highly accurate means of confirming the identity of a customer. This leads to more reliable results and lessens the need for manual intervention.

Continuous and real-time monitoring

Real-time alerts allow for immediate action when suspicious activity is detected. This can prevent or minimise potential financial losses and damage to a company’s reputation. By identifying and acting upon suspicious activities in real-time, financial institutions can reduce the risk of financial losses associated with incidents of economic crime.

Continuous monitoring with real-time alerts can also help refine the accuracy of anti-money laundering systems over time. This reduces the number of false alerts and decreases the need for manual intervention.

To the future

According to data from Capgemini, 68 percent of UK institutions are already looking into real-time anti money laundering monitoring systems to stay ahead of potential threats while 86 percent, says Refinitiv, agree that innovative digital technologies have helped them identify financial crime.

So the data tells us that companies are already heading in the right direction when it comes to fighting fraud, but as the landscape of financial crime continues to evolve, financial firms must ensure they do the same.

By leveraging the right technology, businesses can ensure they not only meet regulatory requirements and safeguard their operations, but also protect their reputations and crucially, maintain that all important customer trust.

Finance

In 2024, payments will evolve to broaden accessibility

Published

2 days ago

December 1, 2023

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Attributed to Roy Aston, COO at Paysafe.

As we look to 2024 and beyond, businesses will need to adapt experiences to changing consumer needs and demands, working with payments providers to increase accessibility, offer broader choice, and more.

We break down some the forces driving evolution in payments over the coming years.

Payments need to be available to everyone, everywhere

Regardless of their location or situation, consumers do not want to wait when it comes to payments. The proliferation of smart devices has given users access to everything, all at once, and this is also expected when making transactions.

In 2024, banks and financial institutions will continue to push ahead with this journey to offer smooth, secure payments to everyone, everywhere, delivering services at the lowest possible barrier to entry. This also means ensuring consumers, even those that are unbanked or underbanked, have access to remittances and cross-border payments.

The first step in achieving this goal will be to improve reliability, security and availability, which may see traditional payment methods like debit and credit cards – still the most popular payment methods – become less dominant, while alternative payment methods (APM) like eCash and digital wallets will grow.

This is because, with the right payment provider, merchants can ensure these APMs are available anywhere in the world – eCash, for example, does not require a bank account to use. In addition, digital wallets and online cash can offer swift, secure transactions, helping users overcome security issues by not requiring them to enter their financial details.

Financial companies will embrace collaboration in 2024

While businesses can address consumer payment concerns using APMs, they must also look to bolster their own defences as the threat landscape changes. Increasingly advanced technology, like AI models, are now accessible to far more people, including threat actors.

To combat this escalating threat, it’ll be no surprise to see more financial companies collaborate in 2024 as they seek to improve cyber risk mitigation. This makes perfect sense – and would be a positive step for the industry – though it is easier said than done.

Businesses must share data legally, while aimed toward a positive purpose, rather than for pure profit. For example, if a financial organisation gains intelligence on a cyber group, they could share this with other companies to protect against bad money movement.

Ideally, collaboration could help improve anti-fraud, anti-money laundering, and cyber security measures, and more broadly reduce risk for businesses and consumers alike. But first, thinking around data governance may need to change.

Existing trends will evolve

While exciting new trends will emerge in 2024, we’ll also see the evolution of some that have yet to reach their full potential.

Embedded payments, for example, will continue to develop, with more businesses bringing together financial products with features like loyalty schemes to offer more added value to consumers.

Decentralised finance, too, should continue to build momentum in 2024. While decentralised finance, and specifically NFTs, have faced challenges this past year, it will be no surprise to see companies get to grips with changing regulatory requirements and continue to build in this area.

Open banking could also see a big 2024, with more APIs becoming available, and companies starting to develop new solutions to enhance customer experience and reduce friction in the payment ecosystem.

And while evolution rather than revolution is a necessity in technology, it’s always exciting to look ahead to the big trends that could shape the future – perhaps not in the year ahead, but beyond.

The future is quantum

Quantum computing is a trend that is as exciting as it is potentially frightening. Able to perform computations that are exponentially faster than ever before, quantum computing represents a new frontier and it will be thrilling to see how it is used in the years ahead.

Combined with AI, for example, quantum computing could optimise processes at a speed and scale never seen before – with serious benefits passed onto consumers.

In the nearer term, however, ensuring payments are available and accessible for everyone must remain the focus in 2024.