Adrian Jones, CEO at Swivel Secure
Whether it’s through a bank’s website or mobile application, consumers can check their balance, pay bills and have instant access to their money 24/7. This convenience has caused NetBanking to boom. Since 2008 we’ve seen the percentage of people in the UK using online banking nearly double – from 35% in 2008 to 69% in 2018.
But the rapid adoption has outgrown policy, leading to a lack of standard cybersecurity regulations in NetBanking, with a huge opportunity for fraudsters. According to UK Finance, 76% of fraud losses in 2018 were gained through remote purchase payments. Therefore, it’s critical that the growing issue of cybercrime in NetBanking is addressed – something which the European Union Payment Services Directive (PSD2) partly aims to do.
What is PSD2 and SCA?
Launched in January 2018, PSD2 is a set of regulations for payment services and providers in the European Union and European Economic Area. It is a revision of the regulations set out in the original PSD, which established a single market for payments with a view to creating a more efficient and secure service.
One of the major revisions in PSD2 is the introduction of Strong Customer Authentication (SCA). This is a set of technical standards, outlined by the European Banking Authority, which define the security measures that payment services must comply with to enhance the security of online payments.
The standards come into force this September, so the race is on for banks and payment service providers to put the necessary security procedures in place.
Regulatory Technical Standards
Payment service providers need to employ technology that guarantees user authentication and minimises fraud risks. But to comply with SCA, there are three key technical adoptions that payment service providers should consider.
1. Authentication: One-time codes
The first aspect of the SCA technical regulations is to implement strong authentication, by utilising authentication one-time codes (OTC). Each time a user actions a payment, the payment service provider must supply them with an OTC. The user then inputs the code to confirm their identity, and validate the payment.
To ensure the authentication code is secure, it must include two or more of the following elements for two-factor authentication (2FA) or multi-factor authentication (MFA):
- Knowledge – something which only the user knows, like a PIN. The user might then extract a one-time code, using their PIN as a positional indicator
- Possession – something the user owns, such as a mobile phone application or a hardware token
- Inherence – something which is associated with the user, including biometrics
Additionally, payment service providers need to ensure that these elements can not be deciphered if the code is revealed. Therefore, the OTC shouldn’t follow a sequence or be based on the information the user has supplied, to prevent fraudsters gaining personal information about users or guessing a future code.
2. Dynamic Linking
Secondly, payment service providers need to adopt measures to link the payer, transaction amount, and payee for each transaction in a standard known as dynamic linking. The payer can see the transaction amount and payee at all stages of authentication, and the authentication OTC will be unique to that transaction. Should any element change, the authentication code will be invalidated.
3. Transaction Risk Analysis
Finally, payment service providers need to implement risk-based analysis in real time. Every remote payment needs to be monitored and adequate authentication should be applied. Most banks have implemented some sort of risk algorithm and process already but the Regulatory Technical Standards set out specific criteria for remote payments. This uses risk-based analysis to provide a combined score based on particular parameters, including: the locations of the payer and payee, plus any abnormal spending or behaviour from the payer.
What does SCA mean for you?
In addition to the technical changes required to comply with SCA, the regulations may pose some initial obstacles for the banking industry and users.
1. User experience
There’s some concern that the extra steps for strong authentication will have a negative effect on consumers NetBanking experience. To counter this, there are some exemptions to SCA and transaction risk analysis will determine the level of authentication required.
Despite this, Barclaycard’s Director of International Payments, Paul Adams suggests one in ten transactions will need to go through two-factor authentication. So, it’s essential to implement user-friendly two-factor authentication methods which cause minimal disruption whilst securing users’ funds.
Another concern is finding a way to implement SCA at a low cost. Ecommerce sites especially will be keen to find a low-cost solution without negatively affecting users’ checkout experience. It’s important for payment service providers to work with any third parties to find a solution that balances those concerns because cutting costs in the implementation stage could be crippling later down the line, with some predictions estimating SCA to cause €57 billion in abandoned carts if the process isn’t easy enough.
3. NetBanking architecture
Another concern in the industry is how to implement secure authentication across the carefully balanced banking architecture. Bank networks experience surges of traffic in busy periods and this can cause pressure on the service.
One way to mitigate this is by having a layered network which is load balanced for resilience. With this banks can implement two-factor authentication so that each of these layers require separate authentication. This would help keep the layers separate to enhance security, but also ensure the network architecture can withstand both authentication capability and load on the system.
The Deadline Approaches
With the SCA deadline approaching, the banking industry will be looking to implement technology to comply. But it’s crucial that any technology can be flexible and secure for each unique network. This will not only help overcome some of the concerns about SCA but also encourage users’ trust in NetBanking and create a more security-aware consumer base.
While SCA is a step forward for cybersecurity in the banking industry, the criteria for certain features may not be secure enough to deter the cybercriminals who are constantly finding new ways to infiltrate the NetBanking architecture.
HOW TO MANAGE YOUR CASH FLOW IN UNCERTAIN TIMES
While the world is constantly changing, probably at a faster pace now than ever before, businesses need to manage cash flow and costs to drive success in uncertain times, says Matthew Thorpe, partner at Haines Watts Essex.
Managing people and expenses
There are certain costs that you just can’t avoid as a business – to keep your operation running seamlessly, but scrutinise the detail and cut down on any non-essential expenses. Check things like your SaaS subscriptions and look out for costs that auto-renew and if you do cancel, remember to also cancel your direct debits too.
You might want to put a freeze on hiring new people, but ensure that other roles and responsibilities are clearly and efficiently assigned across your team. The Coronavirus Job Retention Scheme (CJRS) has been introduced by the Government to help UK employers access support to continue paying part of their employees’ salary to avoid redundancies. Affected employees are classed as “furloughed workers”.
Once furloughed, the employee cannot work or they will not qualify for the scheme. For businesses that perhaps need to go further, there may be some roles they don’t need any more, but businesses should work sensitively with people to manage this.
Cash is king
In uncertain times, owner managers will need to keep operations going to ensure financial stability. You should look to manage debt more efficiently by negotiating extended payment terms with creditors. You could also renegotiate loans for longer repayment terms to give yourself a lower monthly payment, helping the business to set some cash aside each month.
As a business owner, you need to create a cash flow projection and update this regularly if you are to improve things. You can do this using financial information to create a picture of how the business will look in the next 12 months. The forecast needs to show revenue sources and expenses, which will show the ups and downs of business income and can be used to make sure that enough finance is in place.
While banks and other finance providers recognise that the cashflow of a business may be disrupted by the impact of Covid-19, they are still going to want to see that you are viable and continue to trade in these uncertain times. Make sure your business is organised and don’t let disorganisation cause unnecessary issues. You can evidence this by having detailed forecasts; current order books and projections (as best as possible).
Having instantly accessible, accurate financial information allows you to plan effectively, spot issues before they become problems and manage your money in the most efficient and rewarding way.
Software is now incredibly user-friendly and accessible from anywhere. For a business owner embracing the technology, this means:
- Invoicing can be done instantly when a job is complete, emailed to the customer with an easy to use link to a payment platform.
- Comparison websites can automatically monitor and help maintain lowest cost for things such as light & heat, insurance etc.
- Technology can be used in place of face-to-face meetings. It can also enable them to adapt production lines to different demands.
All of these things and more, used properly, can make managing your business finances quicker, easier and often cheaper. You will also be able to bring clarity to where your business stands and prepare for the next steps.
HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK
By Alex Saric, smart procurement expert, Ivalua
UK businesses have never been more dependent on their suppliers to help them deliver goods and services to their customers. Be it retail, manufacturing or financial services, suppliers have a vital role to play when it comes to innovation and meeting customer expectations. However, as supply chains become increasingly global, businesses are potentially exposing themselves to more risk than ever before.
This is especially true in financial services. Whether it’s the impact of geopolitical events like Brexit or global tariff wars, supply shortages, security or the businesses impact on the environment, an organisation’s failure to identify and mitigate risk could see millions wiped off its share price, and its corporate reputation left in tatters. Risk can present itself anywhere and at any time, so financial services firms must be ready to address it. However, many simply don’t have the ability to evaluate suppliers for risk factors, leaving them wide open to business operations being hindered, or being slapped with financial penalties.
More suppliers, increasing risk
One reason why financial services firms aren’t able to evaluate suppliers is the breadth and scale of today’s supply chains. For example, French oil company Total said in in a recent human rights briefing paper that they work with over 150,000 direct suppliers worldwide. This is just one example of how large and varied the roster of partners has become. Research from Ivalua has found that financial services businesses on average are working with around 3,600 suppliers annually, which is evenly split between UK-based and international partners. That number is expected to rise, with 60% expecting the number of suppliers they work with to rise.
The expanding nature of suppliers is only going to expose financial services firms to more potential risk than ever before, yet 78% say they face challenges gaining complete visibility into suppliers and their activities.
A lack of supplier visibility leaves businesses unable to identify and mitigate against supply chain risk. In fact, almost three-quarters (73%) of financial services firms have experienced some type of risk during the last 12 months. These include; supplier failure (43%), environmental impact, such as pollution or waste (35%) and supply shortages (45%). Supply shortages can be among the most damaging to a business, as seen by both the KFC chicken shortage which closed stores, and the summer 2018 CO2 shortage which caused companies such as Heineken and Coca-Cola to pause production, impacting supply across Europe during the World Cup.
Businesses unprepared for the worst
One way financial services firms can better prepare for risk is to ensure they know what to plan for to reduce the impact. However, whilst some say they have a contingency plan in place to deal with risk, many of them are unprepared. Financial services firms admitted to not having comprehensive and deployed contingency plans in place to prepare the supply chain for risk such as; natural disasters (68%), supply shortages (67%), geopolitical changes (65%), environmental impact (63%), supplier failure (62%) and modern slavery (50%).
In order to effectively prepare for these types of risks, it’s vital that financial services businesses fully understand their suppliers, their business environment, global variations in regulations, geopolitics, and a host of other factors. But for many, there are multiple challenges when it comes to gaining this understanding. A prevailing factor is an inability to gain visibility into all suppliers and activity because supplier management data is stored in multiple locations and formats, making insights difficult to access. This leaves teams unable to review supplier activity and assess compliance.
Making supplier management smarter
It’s imperative that financial services businesses are able to respond or prepare for supply chain risk. Clearly, much more needs to be done to ensure they have complete visibility of suppliers, especially in an era where regulators can levy heavy fines for GDPR breaches and scandals spread in minutes over social media. These types of risks can be reduced in the future if procurement teams have a 360-degree view of suppliers which will help with contingency planning and risk management.
For example, in the instance of supply shortages, plans could be put in place that identify alternative suppliers to ensure any shortages do not impact end users. This type of supplier collaboration is paramount when it comes to managing and mitigating against supplier shortages. When it comes to regulations, financial services firms can’t allow a lack of visibility to limit their ability to ensure all suppliers are compliant.
To do this, teams must take a smarter approach to procurement that gives complete visibility into suppliers throughout the supply chain. This will allow financial services firms to identify and plan for risk, reducing the potential damage, and ensuring they are working with and awarding business to low-risk suppliers. Supply chain risk is rapidly becoming an overarching concern for financial services firms, but by providing the ability to assess suppliers, they will have all the insights they need to mitigate the impact on business operations.
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