Ben Davis, Insurance Lead of Emerging Technologies at Digital Risks
eSports – specific insurance risks:
The video games industry will be valued at $305bn by 2025 according to GlobalData. eSports, the online gaming element of this sector, will be worth $1.8bn by 2022 alone.
Traditional insurance players however have, as of yet, failed to take the eSports industry seriously and are less likely to do so in the near future. They’ll also likely struggle to adapt quickly enough to be able to protect against the emerging risks of a new sector so quickly.
Insurtechs however, that are more agile, and can better relate to the eSports audience, due to regularly engaging in the online channel, will be well placed to protect players, businesses and manufacturers in this industry.
2020 will be a tipping point for the industry as awareness of the sector, and larger investment, continues to flood in. And as the sector continues to grow and mature, there are an increasing number of risks which stakeholders will need to insure themselves against.
The players: eSports players are effectively employees of the gaming company that sponsors them. However, unlike the ‘traditional’ employee, they also often live, travel and work together 24/7 in ‘team houses’. They also require greater protection over their physical body as this is what they use to play games. If one or more players gets sick or injured pre-tournament, sponsors could be seriously out of pocket. Cover of property and physical well-being from damage is therefore crucial.
The team: eSports teams act as the face of their business. Their merchandise and in-game skins are an extension of the brand. Protecting intellectual property is therefore crucial to ensure their ’identity’ both in the virtual and real world can’t be ripped off.
The Tech: As gaming technology such as wearables and headsets become increasingly commonplace, manufacturers will need the right cover in the case of malfunctions. Product recall as well as cover for the products themselves are an exposure that will continue to grow as esports popularity continues to rise. The eSports teams themselves, affiliated with this tech, will also need to be insured if they put their name on a product which comes with faults that leads to damage or injury.
The biggest risks of 2020:
- Natural Disasters – A bold prediction
If there’s one emerging risk that will dominate 2020, it will be the development of natural disasters and the consequential damage they impose on livelihoods across the globe. Most people think that the physical and virtual worlds are separate, but in reality the virtual world is very much affected by the natural disasters of the physical world. Physical damage to technology firms can be a trigger for a cyber-based attack as their defences and resources may be compromised dealing with the physical emergency.
Calculating insurance for businesses against climate damage has largely been built on historical data. But we’re entering a new era of global heating and climate change; with extreme weather events leading to mass damage to businesses worldwide.
Historically the large insurance players have made their money through protecting property, however as climate change increases, and disasters become more commonplace, this will become an increasingly complicated (and loss-making) sector.
2020 could be the year in which the larger insurance players look to ‘balance the books’ to better protect themselves against more claims in this sector. This could mean they could either look to provide new products that are uncorrelated with property losses or reduce their exposure in this sector.
Businesses that do not respond quickly enough to the ‘greenification’ of everything will also be hit by social pressure to change potentially harmful business practices or investment. We are already seeing insurers pull out of businesses that are deemed to be harmful to the planet. 2020 will be important for companies to take a strong stand on climate change and show the world how they’re changing to address it or risk being ostracized for failing to act.
2019 has been a bad year for cybercrime. Security specialists Symantec revealed earlier in the year that over 4 billion records had been breached, with nearly 4,000 separate incidents announced. 2020 is expected to see a continuation, or even an increase in the level of attacks, with Cybercrime Magazine predicting that by 2021 attacks will cost $6 trillion annually.
One of the main issues is that as the fraudster/hacker gets smarter, there are simply not enough trained cyber security professionals to protect every business. In a world of open APIs and shareable data, this means that one weak link in the chain can bring down an entire host of businesses.
Some of the big trends of 2020 will include an increase in ransomware attacks, with businesses happy to pay out rather than fight their way through. As well as the dominance of the ‘Deep Fake’, where scammers can create fake videos purporting to show high level members of staff requesting junior colleagues into giving up financial information/valuable documents.
Insurtechs like Digital Risks are well placed to provide cover against these emerging cyber risks, if there is evidence of clear social engineering.
- A 5G powered IoT
With 5G infrastructure projects well underway, 2020 is expected to be the year in which the technology becomes commercially viable. This greater level of connectivity means that IoT can meet its true potential, with a host of interconnected devices helping to power our cities and advance our day to day lives.
With this however comes a host of emerging risks and security concerns. Connected devices are a paradise for hackers who can access weaker technologies, such as a thermostat or smart-fridge to infect a wider network. We’re already seeing examples where devices such as printers have been hacked to siphon off the printer’s memory to access print jobs containing sensitive files, such as contracts, corporate data or patient information.
The IoT enables botnets which are comprised of thousands or millions of infected internet-connected devices to be used to deny access to a victim’s website. With the amount of IoT devices coming online, this means that botnets could become even more powerful and commonplace. For the insurance industry, it is important to protect our clients from denial of service attacks formed from botnets, but also protect our customer’s devices if they are used in a botnet. Digital Risks insures both.
Businesses will need to be sure that they have comprehensive cover that means their entire network is protected, and that any device installed in their network is verified beforehand. This can be as simple as remembering to change the manufacturer’s default password already installed on the device. Individuals looking to take devices into shared workspaces/offices will also need cover, in case it’s their device which starts a widespread data breach.
More about Digital Risks:
Digital Risks is an insurance provider for the digital age, with pay-monthly subscription cover, proprietary technology and customer experience that reflects the fast-changing needs of small and medium-sized businesses.
With an understanding of the evolving risks and threats facing SMEs, and partnerships with the UK’s best underwriters, Digital Risks uses cutting-edge technology and leverages multiple data points to deliver a personalised experience giving customers the exact protection they need, and the service they deserve.
Digital Risks was founded in 2015 and launched in late 2016 by two friends; Cameron Shearer, CEO, an accomplished marketer, entrepreneur and tech expert, and Ben Rose, chief underwriting officer and all-round insurance specialist. Since then, Digital Risks has been on a mission to reinvent the business insurance industry for the better, creating a competitive, flexible and trusted safety net enabling SME leaders and their business to thrive.
WHAT DOES 2020 LOOK LIKE FOR P2P LENDING?
By Roberts Lasovskis, Investment Platform Lead, TWINO
It’s a new year; time for resolutions and forward planning, positivity and drive. But the peer-to-peer industry would do well to engage in a bit of introspection as well; a look back to the year gone by, which serves as a more than useful reminder of what can happen in less propitious times, even for the well-intentioned.
2019 saw two major failures in the European peer-to-peer market, with both Lendy’s collapse in May and FundingSecure in October putting investor capital at risk. Between the two, a combined £240m of savers’ money was put at risk, leading to the inevitable questions of regulators. On top of the two lenders failing, the well-established Funding Circle came into difficulties with its new withdrawal processes raising investor concern. But in all three stories from last year is a sign of how peer-to-peer can succeed in 2020, providing last year’s lessons are learnt.
There is one aspect of the two peer-to-peer collapses last year that stood out for much of the criticism from both media and investors. Both Lendy and FundingSecure came advertised as ‘approved by the FCA’, yet in collapse, both displayed structural faults and warning signs that should perhaps have been noticed earlier. Managing credit risk is an expensive learning process, but should be taken very seriously, and using as many data sources and as much testing as possible. Inevitably, these high-profile failures will cause a tightening of regulation across the industry, which should be welcomed.
The industry should embrace the ongoing development of its regulation – it is not something to just be tolerated and survived. Higher levels of scrutiny from administrators lead to better industry structures and more robust business models that generate greater trust from consumers. This is an inevitable step for a maturing industry, and now is the time for peer-to-peer to ensure its regulations are fit for purpose, and that investor money is not put at unnecessary risk.
But regulation is about more than just stopping the high-profile failures and helping to build consumer trust in the sector. When implemented properly, regulation encourages the development of better products; companies are forced to innovate and adapt to meet the new challenges, eliminating the number of shortcuts or ‘easy options’ that are taken when developing a product for consumers. Ultimately, this creates safer and more sustainable returns for investors.
Transparency is key
One of the major lessons the past year has taught us is the importance of transparency, particularly when communicating with investors. But whether it’s investors, borrowers or other industry partners, transparency and clear communication are key to rebuilding trust in the P2P sector, and even as specifically as in individual products or companies. Take Funding Circle as an example. It is undoubtedly one of the most successful businesses in the sector, and yet has been suffering a recent crisis in trust, which has been largely caused by customers not fully understanding what procedural changes are going to mean for their money.
The changes in question are not necessarily the full problem. The model is no less safe, and the business is no less high-profile. Nor do investors automatically object to the idea of a delay before they can access their money (look at fixed-term savings accounts for example). As with all peer to peer lending platforms, it is simply a question of understanding risk – customers misinterpreted the changes as a sign that their money was under threat and understandably rushed to protect it.
The customer is king
Fintech exploded as a sector in the wake of the 2008 financial crash, as a reaction to bad practices in the financial services industry. The industry was created with a promise of ‘customer-first’ products; solutions to fix the shortcomings in finance and financial services, and to pivot them back to a consumer-focus. From product development to marketing and communications, peer-to-peer must remember where it came from and ensure that the customer always comes first.
This is particularly important should another economic downturn materialise, as many are predicting within the next couple of years. Fintech businesses emerged as the success stories from the last downturn by creating solutions that focused on their customers. They should do so again.
For all the perceived problems in the P2P sector, the fundamental market for the products have not changed; investors who want to generate good returns still need to be connected with those seeking convenient loans. By remembering where it came from, and the problems it set out to solve, the sector can still thrive in 2020, even if the predicted economic downturn does transpire. To avoid the pitfalls other providers have fallen into, peer-to-peer must embrace regulation, communicate with transparency and focus on leveraging their expertise to provide trustworthy customer-centric solutions.
WHAT ARE THE PAYMENTS TRENDS FOR 2020?
By Sunil Dixit, VP of Product, Adyen
There are some big changes in store in 2020, some obvious, some less so. In the payments landscape, it’s all about user convenience and customer experience, whether that’s through increased security for card users, or new ways to pay. Fragmented payments systems and services, from online to in-store, will move towards a unified centralised payment stack. We think there are a few trends to watch in 2020.
Ecommerce is continuing to expand and it’s supporting the rise of the subscription economy and innovative platform business models. With more sensitive card data than ever being shared to complete payment at the checkout, protective steps must be taken to secure this information by all parties. To combat the rise in fraud, tokenisation will become an increasingly common way to protect payment details. In the first half of the year 140,344 fraud attacks were recorded by RSA’s Fraud and Risk Intelligence (FRI) team. That represents 32 attacks every hour and is an increase from 86,344 in the last six months of 2018. So, what is tokenisation, and how can it help?
Tokenisation is used to safeguard a card’s payment card number (PAN) by replacing it with a worthless, unique string of numbers – a token. Payment tokens are generated per card, per merchant. This means that the customer’s sensitive PAN is substituted by a token and not transmitted during the transaction, making the payment more secure. The beauty of network tokenisation is that it helps protect businesses and customers from the financial hits of data theft. Even if hackers manage to steal tokenised data, they cannot use the stolen tokens to pay online since they are unable to link the token to payment information stored securely by the payment partner. Furthermore, network tokens are always up-to-date. If your payment card changes after a loss or theft, the token can still be used to pay, ensuring you can continue to enjoy streaming services without disruption.
Strong Customer Authentication (SCA)
The implementation of the second Payment Services Directive (PSD2) will continue to roll out across Europe in the new year, with certain transactions requiring authentication for purchase. 3DS 2.0 uses the full capabilities of mobile devices to create a more secure way to identify the customer, without adding friction to their checkout experience.
Some banks are expected to launch SCA in a gradual fashion over the course of 2020, with others not going live until the end of this year. This is due to the European Banking Authority announcing a delay in the deadline of PSD2 enforcement to 31st Dec 2020. There is still a lot of ambiguity for merchants looking to ensure they are able to support the new directive. With the possibility of EU regulators enforcing PSD2 at different times, businesses will need technology that can dynamically apply SCA to ensure payments aren’t declined due to SCA not being active.
Biometrics take centre stage
2019 saw the first biometric fingerprint credit card issued by a UK bank – expect 2020 to see more of this kind of payment innovation. With smartphones unlocking themselves through facial recognition and fingerprint scanning, biometric security is already ingrained into most of our lives. As payment providers look to increase security, both in response to PSD2 regulations and the increasing sophistication of fraud tactics, biometrics data is going to become an incredibly important tool for purchases. Beyond the UK and Europe, Australian and Brazilian banks are getting on board with 3DS 2.0, ahead of the decommissioning of 3DS 1.0 over the coming years.
Transactions through 3D Secure 2 already incorporate biometric authentication such as fingerprint and voice recognition or facial scans into the process. Even better, 3DS 2.0 can use data collected in checkout to authenticate a transaction without intervention from the customer. This creates an improved customer experience for mobile transactions that require strong authentication.
Expect to see your personal features becoming a more secure way to pay as banks and merchants look to step up their fight against fraudsters.
The payments landscape moves fast to support on-the-go customers carrying smart mobile devices. Self-service kiosks in quick service restaurants, endless aisle inventory in retail, apps that can be a hotel key card as well as a mode of booking and paying for an overnight stay. All these experiences offer exciting possibilities for improving customers’ lives and provide unprecedented levels of data and insights for businesses. Make sure your payments stack is ready for 2020 to deliver the experiences your customers deserve.
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