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From bitcoin baffled towards crypto for the masses – Superbowl or bust?

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James Ross, head of media, SYZYGY 

 

Arguably, it was crypto rather than sport which emerged as the star of this year’s Superbowl, with high profile ad slots dominated by the sector.

In the days that followed, featured companies released download stats which would impress any CMO. Coinbase alone, with its deceptively simple and now famous ‘bouncing QR code’ ad, saw its website crash during the game due to demand, and app installs spike by 309% in its immediate aftermath.

Obviously the landscape of a Superbowl advert blitz is a once a year event. It is also the kind of ‘one-off’ scenario which is hard to replicate in the UK – crypto Christmas ads wouldn’t gain the same kind of one-off ‘event’ platform. And yet, it has demonstrated a willingness for more mass audiences to engage with crypto, even while actual investment dealings in the digital asset are relatively low. According to the Pew Research center in the US, just 16% of Americans have ever invested or traded in crypto, while the UK numbers are marginally lower at 12% of adults aged 45 or younger, according to Boring Money.

Although there’s vast headroom to expand into, the crypto market is still facing challenges. In recent weeks, the space has been dogged by accusations of fraud, not to mention its potential use by parties in Russia to circumnavigate financial sanctions. Beyond these issues ripped from the headlines, while it is appealing as an asset for young investors in particular, affordability can be an issue with almost half of young investors securing their investments with debt. And it still remains a high risk, highly volatile investment class, with stories abounding about significant investments fluctuating in value from day to day.

For crypto to overcome these problems and evolve into a long term, sustainable asset, it needs a combination of factors. Ease of use and adoption, information for those interested but requiring more detail into specifics, and finally, brand’s market differentiation. For example, our own analysis of peak crypto adopters in the US shows a predominantly male millennial set of investors, who rate security digital services and transparency from their financial providers. They also see crypto as a hobby as much as an investment.

However, the market for potential buyers is much larger due to crypto’s rapid evolution and a range of different access points. Likewise, current market conditions of low interest rates and high potential returns from this investment type are combining to intrigue the crypto curious. For example, saving enthusiasts, with the right level of information provided to overcome their low market awareness, could provide a valuable new audience. The biggest hurdle in gaining their interest is trust. Coin brands or businesses may need to lean into more trusted financial brands to get the bitcoin ‘hesitant’ over the line. Our research found that in the UK and the US there is growing demand of between a third of American and almost a half of British consumer audiences for banks to offer current accounts in crypto. People recognise the potential upsides of the digital asset; the sticking point is accessibility and using existing and trusted brands and financial services to deliver it.

While the Superbowl may have snagged all the headlines, digital spaces are where most interested parties are turning to for more information. Early adopters of crypto are heavy digital media consumers, and online spaces especially for this form of investment have become primary sources of research when it comes to self education on financial issues. It makes sense therefore that it is online where crypto brands can and will grow their audiences too. The issues of trust and education are not easily or quickly countered. Yet, by coordinating media strategies across search (information), social (peer influence), app stores (access), display (awareness) and affiliates (recommendation), brands in this space can work to educate and build trust across multiple levers at once. The Superbowl QR code promotion is a neat trick, but a trick which is likely to only get pulled off to great effect once, and at a point in time where the market is still in a rapid growth phase. Those looking for a more sustainable future, and to access audiences as yet untapped by the crypto surge, will do well to adopt a more multi-layered strategy to reach, educate, and engage on a deeper level.

For this space to truly mature beyond a mass market bubble, crypto has to address its perceived complexities and access easier entry points into people’s lives. Adopting approaches which consider this growth will likely prove more sustainable in the long term beyond splashing Superbowl cash on a sensational ad.To be taken seriously, crypto needs instead to play a longer game.

 

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Biometric payment card FAQs with Michel Roig, Fingerprints’ President of Payments & Access

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We sat down with Michel Roig to answer your frequently asked questions regarding biometric payment cards – their benefits, current market status, and future adoption.

Michel joined Fingerprints in 2016. Since then, he’s played a central role in managing the company’s diversification into new sectors, launching and expanding our smartcard portfolio, the payments and access strategy, and powering its strong position in the payments ecosystem.

  1. What value does biometric payment card technology bring to banks and consumers?

There are several benefits inspiring the adoption of our technology, starting with regulatory compliance and enhanced security. The recently imposed Strong Customer Authentication (SCA) under the Second Payment Services Directive (PSD2) requires banks to perform more checks to confirm the identity of a consumer at the checkout. Consumers must now take additional steps to authenticate themselves for certain transactions, such as those of a specific value or after every five transactions, to limit potential fraud use.

Consumers can authenticate themselves by using their PIN, however, biometrics can streamline this process. Using their unique physical characteristics to pay essentially guarantees a consumer’s identity, so they can make SCA-compliant payments of any value that effectively reset the transaction counter every time they pay. This kind of strong authentication has the potential to drastically reduce various types of fraud (and all associated costs), and it provides added convenience for consumers since they may never have to use their PIN again.

Adding biometrics to payment cards also helps issuing banks to bring some needed energy to their cards, helping them promote their brand and build consumer loyalty whenever it’s taken out to pay. This brand exposure is not as strong with other payment methods, such as mobile payments where the card is hidden inside the phone. Given the innovative nature of biometric payment cards right now, it also shows that the bank is leading the curve – not falling behind it.

Finally, thanks to smartphones, consumers are now used to authenticating with a ‘touch’ and actively want to use biometrics in their everyday lives. By capitalizing on this trend for physical cards, banks have a timely customer acquisition and retention tool. A study we recently ran found that 62% of consumers would switch banks to obtain a biometric payment card, indicating a high consumer demand for the security and convenience these cards provide.

  1. What is your best advice to banks which may be considering launching a biometric payment card?

This might not be surprising… but my advice would be not to wait. At the time of writing, we’ve conducted 24 pilot tests and eight commercial launches. We’re now in the second generation of cards, and we’ve repeatedly met the increasingly stringent certification requirements from the card schemes. Essentially, the technology is out there and starting to add value for your competitors. Don’t wait until your cardholders begin to turn elsewhere.

Since we also found that 43% of consumers are willing to pay to get hold of a biometric payment card, banks can use them as a new revenue stream and expect a return on investment when offered as a value-add or premium service to cardholders.

  1. What are the lingering concerns or misconceptions from issuing banks?

As with all new technology, there are apprehensions with being an early adopter. One question that banks often ask is: “Where is a consumer’s biometric data is stored?”. Are images of fingerprints stored in the cloud or on-prem by the issuer, creating a privacy and compliance nightmare? The answer is no! The card doesn’t store an image of your finger. When you enrol, a template is saved and stored securely as encrypted data on the card and never leaves it.

I was also recently in the Middle East and someone asked me whether the card would break if it was kept in their back pocket as they sat down for a coffee. Fingerprints has run rigorous testing to ensure the card’s biometric sensor can endure the same wear and tear as a normal card. This is an industry requirement, in fact. Our sensors have also achieved Mastercard and Visa certification – a process that ensures the sensor is robust, scratchproof, and doesn’t dislodge during the life of the card.

Card scheme certification also requires strict anti-spoof measures. These make the attack vector so small that the effort and cost required to hack one card is pointless for fraudsters. All of this comes together to make the biometric payment card much more secure than a card which only has a PIN for security.

Another common apprehension surrounds the cost of the technology. Cost of sensors has come down dramatically in the last few years, and this cost will reduce further as deployment volumes increase over time.

  1. What have been some of Fingerprints’ key accomplishments over the past year?

Earlier in the year, we were pleased to see Fingerprints’ second-generation T-Shape® sensor module and software platform for biometric payment cards achieve compliance with Mastercard’s new Fingerprint Sensor Evaluation Process. This technology enables cost-effective biometric payment cards to be produced and integrated using standard manufacturing processes. Having passed the previous specifications last year, we proactively secured this updated approval to simplify the process for card manufacturers to launch the next generation of biometric payment cards.

As mentioned earlier, we’ve supported a number of commercial launches and have several other banks in pilot testing right now. In January 2021, we also proudly announced a large-scale commercial launch with BNP Paribas in France. This was widely published with commercials running on French TV and cinemas.

  1. What’s next for Fingerprints?

Interest in biometric payment cards has been piqued, with the market now burgeoning. As a result, we expect many more launches this year, including the first Fintech companies. We’re also excited by activity brewing beyond our current key markets – Europe, Mexico, and the Middle East – with launches recently announced in Africa and India.

Following on from our latest compliance with Mastercard’s Fingerprint Sensor Evaluation Process, more card level certifications will be announced by our manufacturing partners as these are secured throughout this year. More partnerships will also come, adding to the already announced partnerships with Thales, G&D, Infineon, and STMicroelectronics.

Along with this, we’ll be working more intensively with partners to ensure a shorter time-to-market, lower barriers to entry, and easier integration time – either direct or through partnership. This is supported by our latest Mastercard compliance which is an important milestone for the deployment of biometric payment cards at scale.

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Corporate Social Responsibility practices hold no malice for shareholders

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Are corporate social responsibility (CSR) initiatives a costly distraction or a source of increased profit? Although social and environmental objectives have become an established norm in the business world, shareholders may still worry about financial performance – but they shouldn’t, in fact they should be reassured, as evidence from multiple studies demonstrates.

While sustainability has been on the corporate world’s agenda for decades now, there’s still a bit of fear attached to it. It’s all very nice for firms to implement initiatives in response to environmental emergencies and to support social development, but isn’t all that green, touchy-feely stuff going to weaken the bottom line? And, in turn, make a dent in shareholder wealth? After all, it’s fair to wonder whether, for example, investments to reduce greenhouse gas emissions during the production process incur higher costs. Or whether more expensive biodegradable packaging materials will harm sales. And what about impact investment instruments – how long will their boom last?

Wioletta Nawrot

I answered all these questions in detail in my impact paper titled “Should Shareholders Be Afraid of Sustainability Practices?” and published as part of ESCP Business School’s Better Business: Creating Sustainable Value series. Drawing evidence from a whole raft of studies, I examine the links between corporate sustainability and financial performance on the one hand, and corporate sustainability and shareholder wealth on the other hand.

 

Companies that aim for durable value perform well

I first took a look at the effects of corporate sustainability on financial performance. Indeed, profit generation in firms is of high importance as it is the source of income for its shareholders, materialized as dividend payments. While certain sustainability initiatives do result in increased costs in the short run – for instance, shifting to ecologically-sourced materials – the effect on sales revenue is more complex. Will consumers’ personal values drive them to explicitly make a choice of buying or increasing their purchases from sustainable firms? Will company efforts result in customer loyalty?

The answer seems to be a clear “yes”. The research carried out by Deloitte into the changing patterns of consumer buying behaviour revealed the growing influence of sustainability among consumers of all ages, especially Millennials. This study demonstrated that 2 out of 3 consumers have reduced their usage of single-use plastics, 43% of consumers are already actively choosing brands due to their environmental values and 34% of consumers choose brands based on their ethical credentials. The effect depends on a variety of factors; the nature of the sustainability initiatives, market and industry factors, income and level of economic development of a country, cultural factors, ethical factors, and more.

Still, the evidence seems overwhelming. A large majority of the more than 2,000 empirical studies carried out over the past four decades, including meta-studies combining the findings of some 2,200 individual studies, found a positive correlation between robust sustainability practices and operational performance.

 

A booming market for ethical financial instruments

I analysed the effect of sustainability on market capitalization, positing that the objective of shareholder’s wealth maximization is achieved when the market value of the company increases in the long run at an expected annual rate. The assumption is one of efficient capital markets, whereby the market value of a company closely reflects the company’s fundamental value: the one generated by the sale of goods and services.

What has been observed is that the market for Sustainable, Responsible and Impact (SRI) Investing has demonstrated an exponential growth over the last decade, in several markets on average, exceeding the growth of the whole market within the same asset classes. Not only have SRI investing instruments been outperforming other assets in the same class, the increased attention of investors is expected to accelerate in the next years. A recent investment survey by BlackRock, based on responses from 425 investors in 27 countries representing US$25 trillion in Assets Under Management (AUM), revealed that investors are planning to double their sustainable AUM in the next 5 years.

I also found that over the past decade, the proportion of SRI Investment relative to all AUM has increased to one third in the U.S., close to half in Europe, and nearly two thirds (63% in 2018) in Australia and New Zealand, according to the Global Sustainable Investment Alliance. The orientation toward long-term SRI investing, towards seeking to target the instruments issued by firms with robust sustainability practices, brings an effective alignment between creation of the long-term financial return for investors and shareholders as well as the broader objectives of society.

 

A now standard business practice

Taking a broader perspective, sustainability has become an integral part of the new ethical, social and corporate order. Such global and national yardsticks as the UN-backed Principles for Responsible Investment (2006), the Corporate Human Rights Benchmark (2013) and the UK Companies Act (2006) have turned corporate sustainability into a “normal” business practice. This trend is likely to accelerate in the future, with backing from influential business associations and major asset managers.

I encourage shareholders to not be afraid of sustainability practices, as they are not incompatible with financial performance goals. On the contrary, over the past ten years, the wealth of shareholders in businesses involved in sustainability initiatives has grown, so they should actively support these practices.

 

BIO

Wioletta Nawrot serves as Assistant Professor in the Law, Economics and Humanities Department at ESCP Business School, delivering courses in Economics and Capital Markets. She is also the Local Academic Director of BSc in Management on the London campus. Wioletta is author of 6 books in the field of capital markets and has published numerous articles in academic and business journals and newspapers. She received her PhD in Economic Science from Université Paris 1 Panthèon-Sorbonne in 2002. She also spent two years as Post-PhD Economics and Finance Scholar at IESE Business School in Barcelona and participated in economics and capital markets programmes at the US universities: University of Chicago and Purdue University. Wioletta is affiliated with CASE – Centre for Social and Economic Research, a leading Eastern European economic policy and research think-tank. She also worked a number of years in financial audit, capital markets, and as an economist.

 

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