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BANKING SECTOR FAILING TO RESPOND TO CLIMATE EMERGENCY

Green banking initiatives have not changed lending and investment practices

  • The past five years have seen the creation of financial industry initiatives on sustainability, including the Taskforce on Climate-related Financial Disclosures (TCFD), Principles for Responsible Banking (PRB), the Platform for Carbon Accounting Financials (PCAF) and many others
  • Yet financing for fossil fuels continues to rise each year, totalling $1.9 trillion from 2016-2018
  • Only 60% of banks have developed exclusion or restriction policies for high-carbon sectors and just 16% of banks exclude clients involved in deforestation
  • Just 50% of banks engage high-carbon clients on transition strategies and only 12% ask high-carbon sector to adopt TCFD guidelines

new report from Boston Common Asset Management (BCAM) finds that, despite an explosion of risk assessment tools and green banking industry initiatives in recent years, practical change in the financial sector remains elusive.

Boston Common Asset Management, in partnership with a number of regional partners, engaged 58 of the world’s largest banks, including the likes of HSBC, JP Morgan Chase, BNP Paribas and MUFG. The research identifies some progress in terms of governance, with a majority of banks endorsing the TCFD guidelines (69%), disclosing TCFD governance reforms (71%) and carrying out climate risk assessments (78%).

However, the new research shows these tools are not impacting on decision-making, with 40% of banks failing to develop any new financing or investing exclusions/restrictions as a result of their climate risk assessments.

The result is superficial progress, where over 80% of banks have announced low carbon products and services, but financing for fossil fuels continues to increase each year. The report notes that the green bond industry has grown from just $1 billion a decade ago to over $200 billion in 2019 alone, but this is dwarfed by investment in fossil fuels, totalling $1.9 trillion from 2016–2018.

Lauren Compere of Boston Common Asset Management said that,
“The scale of the climate crisis demands a more radical transformation of the banking sector. Our findings indicate a systematic reluctance by banks to demand higher standards from high carbon sector clients, despite the fact that doing so could vastly reduce bank risk and accelerate action on climate change.”

The report calls for “a cultural shift within banks from the board all the way down to the front-line manager bringing in new business. This must include a willingness to walk away from clients or to no longer issue new financing once existing obligations are paid off.”

Specifically, the report calls on banks to:

  • Adopt a clear strategy for decarbonizing balance sheets, including clear timelines for restrictions and phase-outs of financing for fossil fuels and deforestation
  • Set explicit targets to increase the proportion of sustainable finance commitments relative to their overall financing activities, noting that 45% of banks have yet to set any such objectives
  • Publicise their definitions of ‘low-carbon’ and ‘green’ investment, noting that some green finance commitments appear to be merely re-allocations or rebranding of existing commitments.
  • Integrate public policy on climate into overarching climate strategy, engage trade associations on adopting progressive climate policies, and use the company’s public voice to promote progressive climate policy with governments and regulators.

Vincent Kaufmann, CEO of Ethos, endorsed the findings, saying,
“Financial institutions are increasingly aware of their influence in the energy transition and of the risks climate change poses to their activities. However, policies and transparency should be reinforced to make sure that general corporate loans are not used for sensitive projects that further fuel climate change.”

Laura Gossett, Senior Analyst at SHARE, noted that,
“We were encouraged to see that TD Bank, RBC and CIBC have made sustainable finance commitments in 2019, but it is extremely disappointing that no major Canadian bank has developed exclusion policies for high carbon sectors or requirements for clients to commit to no-deforestation policies.”

Stuart Palmer, Head of Ethics Research at Australian Ethical, said,
“Science based restrictions on thermal coal lending need to extend to oil and gas, as Australia faces the prospect of new unconventional gas projects which are inconsistent with 1.5 degrees. The responsible voice of banks and the industry associations they support is also crucial to promote constructive public discussion of climate issues and action.” 

 

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NEW TECHNOLOGY PLATFORM REDUCES CLAIMS PROCESS FROM WEEKS TO MINUTES

CLAIMS

New platform has potential to cut fraudulent claims by almost half Decrease claims costs by as much as two thirds

 

Pact Global, an insurtech business, has launched an Artificially Intelligent (AI) Claims as a Service (CaaS) platform to help the General Insurance market significantly reduce fraud exposure, accelerate the claims process, enhance customer insight and significantly reduce the overall cost of handling a claim by up to 66%.

 

Mark Seddon, Founder and CEO of Pact, says what currently takes days or weeks to complete, can now be managed in minutes: “Our platform is better for the customer, as it makes the claims process much faster and easier, and also much better for the insurer, as it automates the whole process and minimises the time spent on claims management, a significant cost to the business.”

 

Focussing currently on travel, motor and property insurance, all Pact’s offerings use more than 50 separate data points during the claim validation process to verify the customer’s contact details and investigate their claims history.

 

Verification is supported by the use of AI, behavioural analytics, assisted intelligence and a purpose-built, face and voice recognition program. Employed at the First Notification of Loss (via a white labelled customer mobile and web app), it confirms the customer’s identity and detects whether expressions/behaviours or variations in speech might give cause for concern.

 

Pact enables the collation of all policies and schedule information for easy customer access, importantly allowing the platform to verify the claim against the policy for the insurer.  Relevant limits and schedule information are then known to be correct before the claim progresses.

 

For travel insurance claims specifically, the platform cross-references claims like cancellations and delay, to transport information (e.g. Flights).  Across all insurance types, checking weather patterns increases the likelihood of detecting fraud and helps insurers predict possible surges in claims:

 

“The platform is so intelligent that it can detect whether any images or videos, invoices, warranties and receipts uploaded have been used anywhere else in the world,” Mark continues, “and it’s all done within a matter of minutes.”

 

Alongside this, Pact has automated and simplified the process of dealing with third parties to obtain quotes, instruct workers, update claims status and verify job progress prior to invoicing, all accessible to both customer and claims handler through the app.

 

The platform can integrate into existing networks or be used to find local tradespeople or garages, supporting local communities. The open communication between worker, claim handler and customer reduces complications and allows the customer and/or claims handler to easily flag and resolve potential issues.

 

To further improve customer service, the mobile app features a Machine Learning Chat Bot called Ollie, which is designed to advise, assist and simplify the user experience. It delivers real time notifications, keeping claimants informed of their claim’s status improving customer service by 65%. It stores all policy information and T&Cs and can identify policy cover and limits. This increases customer awareness and creates upsell opportunities for insurers, buying or renewing with a single click.

 

Mark says that Pact has been built to deliver customer transparency and improve the experience with their insurer, ultimately building and cementing trust: “It is designed to significantly reduce the time and cost of handling claims for insurers, delivering real savings to the bottom line.  It’s win-win for company and customer.”

 

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CORONAVIRUS PANDEMIC, STORE CLOSURES, SHIFT CONSUMER BUYING BEHAVIOUR LEADING TO ACCELERATED DIGITAL TRANSFORMATION FOR MERCHANTS

CORONAVIRUS

Forter Issues First In A Monthly Series of Coronavirus Special Reports 


Forter, the leader in e-commerce fraud prevention, today announced the release of the Forter Special Report on the Impact of Coronavirus on Consumer and Fraudster Behaviour. The report provides merchants across industries with insight into trends seen within the $150B in transactions that Forter processes annually.

As the Coronavirus pandemic sweeps across the globe, government responses have included enforced social distancing and financial support to beleaguered economies. Merchants who sell non-essential goods have responded by closing physical stores, and in some regions also their online operations. Consumers have begun to shift their purchases, even those of essential items such as groceries, online.

The Forter Special Report tracks trends and spikes in consumer behaviour as well as innovative methods that opportunistic fraudsters take to prey on consumers during this unprecedented and unpredictable time.

“Merchants are scrambling to cut costs, reduce the impact of fraud, scale efficiently, and deliver a consistent customer experience to meet rising consumer online buying behaviour,” said Michael Reitblat, CEO and co-Founder of Forter. “The aftermath of the pandemic will accelerate digital transformation among merchants as consumer shopping habits adapt.”

Covering industries including travel, fashion and beauty, food and beverage, marketplaces, and more, The Forter Special Report uncovers consumer buying trends such as:

  • The travel industry has been extremely hard hit. Regional variations are appearing, in particular an increase in purchases of inbound international travel to China in the weeks before the country closed down inbound travel on 26 March. Data in the last month points to “optimistic travel” in which the travel date is 120 or more days following booking. Such bookings now account for 65% of travel purchases.
  • The food and beverage industry has seen a dramatic increase in online purchases. New accounts now represent 15-25% of all customer volume, compared to 5-7% prior to the pandemic. As merchants struggle to manage the increased volume and meet expectations of new customers, we are seeing an increase in service chargebacks.

Fraudsters are exploiting confusion and uncertainty caused by government and corporate policies:

  • As people adjust to working from home, Forter sees a marked increase in social engineering fraud, associated with fake emails purporting to be from HR and corporate addresses. Here fraudsters invite people to click for more information, instead taking victims to malicious sites.
  • With a shift to online shopping in Apparel and Accessories, we see an increase in gift card purchases. While a higher number of legitimate buyers usually means that fraud rates drop, gift card fraud rates have not. Fraudsters have noticed an increased demand of the completely virtual merchandise that is easy to monetise.

In its recent report, “Mitigate Coronavirus (COVID-19) Business Impacts With Digital Commerce (March 2020),” Gartner asserts that “the COVID-19 outbreak will negatively impact business performance in the short term as offline activities are cancelled and online orders overwhelm delivery capacities. Application leaders can mitigate the impact and ensure continuity of operations by accelerating digital commerce initiatives.”

 

“With more consumers experiencing buying online, we expect merchants who hadn’t considered e-Commerce as a viable platform to now try it,” continued Reitblat. “Merchants that had already adopted e-Commerce struggle to meet this increase in demand. Working collaboratively from home and hiring to meet the volume create obstacles for those who manually review transactions for fraud.”

Forter’s integrated fraud prevention platform delivers real-time decisions at every point of the customer journey from account sign up and login, to purchase, and to returns. The system is tailored for each merchant based on its unique business requirements, pairing merchant feedback with Forter’s expertise.

Forter’s growing Global Merchant Network includes over 620 million consumers globally and 97% of online US consumers. Links among known consumers and those new to the network allow the platform to infer trust, resulting in higher accuracy without the need to manually review transactions and interactions.

With the Forter platform merchants can expect an up to 90% reduction in false declines, recapturing otherwise lost revenue and delivering the best possible buying experience to their consumers, with an up to 90% decrease in chargebacks due to fraudulent activity. Forter allows merchants to scale and accelerate their digital transformation strategies even in an uncertain time.

“Rules based systems by their nature look at the past and adapt to it,” said Reitblat. “New consumer behaviours, which we’re seeing across industries, as well as new fraud behaviours, are missed by these systems until they can adapt. Forter’s identity-based system authenticates the buyer, not just the behaviour.”

Together with the Special Report, Forter has also issued its Eighth Fraud Attack Index, highlighting industry trends and innovative fraud vectors, showing the evolution of fraud, comparing H2 2019 to H2 2018. The report features the continued evolution of fraud attack vectors across all customer touchpoints, demonstrating the need to protect merchants’ digital offerings at all interactions in the customer journey, from account abuse to payment abuse to policy abuse.

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