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HOW FINANCIAL INSTITUTIONS CAN PROTECT THEIR ONLINE ACTIVITY FROM HACKERS

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As working from home becomes the new normal, senior leaders of financial institutions need confidence that their company information will remain secure when employees are discussing work matters online.

A recent survey by PwC, as part of its Cyber Security Strategy 2021, found that 50% of UK organisations said cyber security would be baked into every business decision. The research, presented as an ‘urgent business priority’, highlighted how organisations will seek to improve their cyber resilience in 2021. Only 36% of the UK respondents said they were very confident that they were getting the best return on their cyber spend although 56% said they had plans to increase their cyber budgets in 2021.

When taken into consideration with a recent survey conducted by Forcepoint in partnership with WSJ Intelligence, which revealed that 71% of global CEOs said they were losing sleep over the prospect of their company’s next security breach, it comes as no surprise that effective cyber-security is high on the corporate agenda for 2021 and beyond.

So, what is the risk of a security breach when discussing sensitive and confidential financial reports, strategy and information in cyber space? How can organisations protect themselves against hackers and malicious threat actors?

Hackers listen in to conversations and can see and read data – information which can be very useful to a competitor, criminal or some other nefarious entity. If a hacker succeeds it can be hugely costly to the company which falls prey through a data breach fine, as well as being commercially damaging in terms of productivity and reputation.

Financial institutions must be acutely aware of the potential threats that hackers pose to their business and reputation, the security issues they need to consider when choosing an online video, calls, messaging and file sharing platform, as well as the practical measures they can take to protect their company and its interests.

The problem is real, and it’s one that is on the minds of those responsible for protecting not only internal company data, but also that of their complex chain of suppliers and clients. With the Forcepoint and WSJ Intelligence survey also revealing less than half (46%) regularly reviewed their cyber security strategy – coupled with more and more companies relying on video technology for remote working – the likelihood, and therefore the risk, of a security breach is significantly higher.

When it comes to technology to keep us connected, there are many different platforms available that those in the finance industry could use for remote working with some having been around for a long time, but how many of them are as secure as they need them to be? As hackers become increasingly sophisticated, it’s crucial companies check that the systems they use have moved with the times, and that they continue to review and improve the security of the technology they rely on to communicate.

Here are my top tips to consider when choosing a secure videoconferencing, calls, messaging and file-sharing platform to facilitate remote working for businesses in the finance industry:

 

Avoid allowing the use of ‘unofficial’ social media platforms

A simple step here is to have policies in place to insist your employees use systems approved by their employer, rather than using popular social media messaging platforms for business communications. These platforms are inherently risky and despite claims about encryption, are often compromised, providing a gateway to other data on your computer or mobile device.

 

Keep everything to one application

Use a supported enterprise system that meets true end-to-end Advanced Encryption Standard (AES) 256-bit encryption. This might sound costly and overly ‘techy’, but in reality is very cost effective, especially when compared to the potential reputational and financial costs of a data breach.

Ideally, choose a system where all features are integrated within one application (app), so that messaging, calling, video conferencing and file sharing stays within one eco-system. As soon as users need to go ‘outside’ the system, the risk from hackers opens up.

 

Keep things simple

Remember, not all your employees will be tech experts. Staff productivity will benefit from having easy to use platforms that work in a similar way to those employees are used to using every day on their computers and mobile devices. Even better, look for a system that works on their own devices without the need to install sophisticated new software.

 

Invest in training

It is vital that companies working in the financial sphere implement cyber-security training for all its staff to make them aware of the risks and gain their buy-in for its online security policies. Consider extending this training to all companies and individuals in the supply chain, including contractors and clients. These interdependent supply chains can be undermined through ransomware attacks and service disruptions. Your company may have state of the art cyber-security, but if your interdependent supply chain doesn’t, then you have a weak link.

 

Consider the costs

Think about the cost in terms of productivity, reputational damage and even potential fines rising from data protection breaches. Do your homework before choosing a platform; where will your communication be routed? Where are the servers based? Are they trusted and do they directly support your business needs? Some systems offer features that are better suited for social use, but the development costs are often recovered through charging business users.

Aim for a system that is designed for your business needs and don’t pay for features you don’t need. Security standards can never be too high, and the system needs to have high fidelity in terms of video and audio quality. Go for a system that can be used via mobile devices and the web without having to be installed onto computers or local servers.

 

John Parkinson OBE is a former UK Police Chief and Senior National Counter Terrorism Coordinator. With broad experience as an international security consultant he is now president of US tech company Secured Communications, which recently launched its Mercury secure video conferencing, audio calling, messaging and file transfer platform in the UK.

 

Finance

WHY THE NORDICS WILL CONTINUE TO LEAD THE WAY IN DIGITAL PAYMENTS

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By

Kriya Patel, CEO, Transact Payments

 

While the recent introduction of PSD2 — the second iteration of the EU’s Payment Services Directive — has undoubtedly had an effect on the entire continent of Europe, some regions have been in a better place to take advantage of it than others. Largely thanks to a historical willingness to foster and embrace innovation, the Nordic nations were already something of a global leader in the electronic payments space even before PSD2. Now, it looks as if the Nordics is on course to be the first region in the world to fully realise digital transformation in payments.

With a combined population of 21.39 million, the Nordic markets of Sweden, Denmark and Norway have the highest penetration of electronic transactions anywhere in the world. It’s estimated that cash is only used in 3% of transactions in Norway, with this number only slightly higher in Sweden. Given this context, it’s no surprise that there are nearly twice as many payment cards as there are people, at 41.86 million cards. These cards are used for around 7.8 billion transactions annually — worth more than £205 billion — made at just under 600,000 point of sale (POS) locations and online.

You could be forgiven for thinking that given the advanced state of play in the payments market that there would be few opportunities left for incumbents or new entrants to take advantage of. However, for those who are willing to innovate and diversify there could be market share up for grabs. And there are also plenty of things that payments players in other regions can learn from this market. In this article, we will examine what these opportunities and lessons are.

 

Highly developed market

E-commerce accounts for a very large proportion of overall electronic transactions in the Nordics at between 19 and 22%. It’s a segment that is continuing to grow rapidly, even though cards remain the preferred way to pay online and in person.

In fact, cards account for a huge 85% of all in-person transactions in the Nordics, with debit cards used for two-thirds of all purchases in Denmark, for example. In the background, this is enabled by a highly functional consumer-permissioned digital identification system known as BankID that makes Know Your Customer (KYC) compliance for e-commerce much more straightforward for vendors and customers. This scheme, which was first envisioned more than 20 years ago, is one of the key reasons why this region has made such strong advances in digital payments.

Since 2015, all three Nordic markets have embraced digital wallet solutions – Norway’s Vipps, Sweden’s Swish and Denmark’s Bankort. In the case of Denmark, their digital wallet grew from the Bankort debit card solution shared by major Danish banks. Across all three markets, these home-grown wallets have seen strong growth, with Swish reporting the fastest usage growth in the over-45 segment. These domestic wallets are currently looking to grow their functionality, with parking and bill payments being added on top of peer-to-peer (P2P) money transfers and a debit function.

 

Digital wallets to expand functionality

As digital wallets rise and cards continue to be used for a very wide range of purchases, the Nordic markets continue to seek opportunities to reduce cash use for everyday, low-value purchases such as parking and street vendors. This will create room for mPOS (mobile Point Of Sale) and soft POS systems providers, as well multi-function card products. Loyalty is also likely to be another area for growth, with players keen to ensure that they can retain existing customers and attract new ones from their competitors.

One of the most interesting areas in the Nordic region’s payments landscape is how these digital wallet solutions can expand internationally. While digital wallets are growing rapidly in the domestic space, the capacity of these wallets to be used outside the Nordic region is still very limited. Creating international links for Nordic-only solutions will certainly be an area of growth in the coming years, so providers looking to partner with banks or wallet providers should find a receptive audience in these markets.

As with other European markets such as Spain and Germany, we’re also seeing the rise of specialist banks built to meet the needs of smaller companies in the Nordics. Banks such as Norway’s Aprila are expanding rapidly by taking advantage of PSD2’s Open Banking mandate to access SME credit data and deliver innovative payment products and lending solutions. Corporate credit and debit card products will be a major growth area in the near future as SMEs will finally get the attention they deserve.

There’s a great deal that other regions can learn from the Nordics. While the combined population of the three countries adds up to only around one-quarter of Germany, for example, the relatively low population density has proved a fertile ground for digital payments. It will be interesting to see how some of the more innovative services we see in this region can make international links, or how players in other regions try to replicate them.

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Banking

THE GROWTH OF DIGITAL BANKING: WHY COLLABORATING WITH FINTECHS IS CRUCIAL TO ADAPT TO CUSTOMER DEMANDS IN LIGHT OF THE PANDEMIC

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The growing customer demand for a seamless digital banking experience looks set to transform how the entire banking industry operates. Traditional banks have been left playing catch up with the emergence of new fintech players and challenger banks. The demand for slick digitally finance solutions is led by the digital native generations, the millennials and Gen Z. However, the coronavirus pandemic accelerated the uptake of online shopping and remote working for whole swathes of the population. Even the older generations have been left wondering why accessing banking services online remains so cumbersome.

Consumers’ growing desire to access financial services through digital channels has already led to a surge in various new banking technologies which are reconceptualising the banking industry. Consumers have rapidly moved to adopt payment solutions such as those offered by apps like Revolut.

Manoj Mistry

Retail banks continue to launch platforms in the Banking as a Service (BaaS) space, in an effort to remain competitive. An example of this in the UK is how NeoBank (Starling) used to only offer business to consumer (B2C) retail banking services. However, once it launched its BaaS platform, Starling was able to rapidly diversify to include consumer services.

New technologies like blockchain and artificial intelligence (AI) continue to evolve, and look set to have an enormous impact on banking over the next three to five years. The type of cryptocurrencies that we have seen to date look set to be far more tightly regulated, given significant governmental concerns about their potential for misuse in cybercrime and money laundering.

In the blockchain space, the transformative development which will accelerate the rise of digital finance is the advent of central bank-backed digital currencies. The US Treasury has described the creation of a digital dollar as a high priority project. China is already trialling its digital Yuan. Meanwhile, the ECB is actively pursuing its plans to launch a digital Euro. The launch of stable, highly secure digital currencies, underpinned by major central banks, looks set to ensure that digital finance will permeate every area of our lives in the not too distant future.

How we use digital finance is also set to change radically. We are used to seeing new technology emerge from Silicon Valley. However, an analysis by KPMG Australia suggests that a new breed of apps which prefigures the future of digital finance has already emerged in the East. The report notes that “super apps” are “already encroaching on traditional financial services territory”.

Super apps are defined as apps which “essentially serve as a single portal to a wide range of virtual products and services. The most sophisticated apps – like WeChat and Alipay in China – bundle together online messaging (similar to WhatsApp), social media (similar to Facebook), marketplaces (like eBay) and services (like Uber). One app, one sign-in, one user experience – for virtually any product or service a customer may want or need.

“Due in large part to their versatility, super apps have quickly become ingrained into users’ daily lives. It is not unusual for a WeChat user in China to set up a date with a friend via instant messaging, make dinner reservations, book movie tickets, order a taxi and pay for every transaction along the way, all using one single app.”

We are already beginning to see trends in this direction in the Western world, with Facebook launching a marketplace and even a dating service within its social network. Facebook also attempted to launch its own digital currency, Libra, but this move stalled when it ran into significant governmental opposition. However, Facebook hasn’t given up, and it is determinedly pursuing the launch of a revamped stablecoin, Diem, which has been redesigned to address regulatory concerns.

A group of Citi analysts recently wrote an interesting research paper, which predicts that “the story of digital money in the 2020s will be the growth of tokenised money”. Noting that both Big Tech and Central Banks “are building new payment formats and rails,” they say that “while stablecoins such as Diem await regulatory approval, they could benefit from the huge network effects of their Big Tech sponsors. In fact, Diem could be an effective tokenised payment format inside the Facebook universe.” The paper predicts that “Stablecoins, such as Diem, could benefit from the huge network effects of their Big Tech sponsors”. With 3.3 billion monthly users, Facebook certainly has remarkable global reach.

The idea of an integrated tech platform which enables people to interact and purchase goods and services – including financial services – is now being pursued by many major players.

Amazon has long been rumoured to be planning to launch its own bank. Yet, research by CB Insights concludes that, “from payments and lending to insurance and checking accounts, Amazon is attacking financial services from every angle without even applying to be a conventional bank.” This is perhaps not surprising. After all, tech companies rarely replicate existing models. They usually find disruptive new ways to achieve the outcomes that consumers want. Even the messaging service, WhatsApp, has recently moved into financial services with the launch of WhatsApp Pay.

As money becomes digitised and tokenised and ever more areas of our lives move online, the distinction between an online marketplace, a social network and a financial services provider will continue to blur. How traditional financial services companies react to these developments remains to be seen. Some may partner with tech companies in creating new services. For example, Visa and Mastercard were involved with Facebook’s Libra stablecoin project. Visa also responded to the popularity of peer to peer payment services such as Revolut by launching Visa Direct, which enables users to make payments directly to another account in 30 minutes. Most major banks now support Apple Pay, which enables users to authorise payment by scanning their face or thumb.

Banks can also collaborate with tech companies in terms of data sharing, in order to better understand what their customers want. A company like Amazon knows what books people like, what music they listen to and what they purchase. By combining such data with wider financial data, remarkably predictive Big Data models could be created. Some banks might increasingly pursue opportunities to monetise data, while others might make privacy their unique selling point.

The banking sector fundamentally deals with money. Yet, the very nature of money is set to change, as it becomes digitised. Banks are no longer merely competing with each other, but they are both competing and collaborating with tech companies and social networks. Looking ahead, the only certainty we have is that we are in for a period of remarkable change.

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