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THE IMPORTANCE OF AUTHENTICATION IN THE EMERGING PAYMENTS LANDSCAPE

by John Petersen, Global Head of Business Development at ValidSoft

 

Changes in the payments landscape have recently highlighted the need for more secure authentication methods. The competition between traditional ‘brick and mortar’ banks and Fintech companies who are keen to break their monopoly continues unabated. Within the EU, the Payment Services Directive 2 (PSD2), which mandates open banking, is providing leverage for the new market players. This is providing potentially more competitive and innovative offerings to those who were previously denied access to account information.

 

Traditional banking challengers

The challengers,or ‘Neobanks’, are competing with the incumbents, typically providing digital-only banking services via smart-phone apps and online services. They differentiate themselves from the traditional big banks as being innovative, agile and built from the ground up on digital technology.

 

Interesting then, was the recent announcement from one of these UK Neobanks, Monzo, requesting that almost half a million of its customers reset their PINs due to a potential security breach where certain internal staff could access these PINs unencrypted. Setting aside the issue of lax data security, why is a digital challenger bank, built specifically for the digital age, using antiquated, insecure PINs to protect their customers? Whilst they might be providing advanced features when it comes to handling finances and moving funds, they are anything but when it comes to strong customer authentication, and they are certainly not alone in the world of Neobanks.

 

John Petersen

This brings me to another category of Fintechs seeking to disrupt traditional payment models, the digital wallet providers operating in an open-loop marketplace. These providers come in a number of forms, whether they are wallets linked to pre-paid cards issued by the wallet provider themselves or links to bank-issued debit and credit cards.

 

In emerging economies, the so-called unbanked and underbanked provide enormous growth opportunities for wallet providers, typically for prepaid services, where traditional cards and account services are simply not accessible to all citizens. However, where the money goes, fraud soon follows. Wallet providers are in effect leveraging the emergence of a handheld computer in the form of the smartphone, and it’s always-on communications capability. This is a digital payments ecosystem and one that cannot afford to be compromised by weak authentication solutions, such as the out of date methods that even the “old guard” institutions have largely jettisoned.

 

Voice biometrics could offer the solution

Biometric authentication, controlled by the wallet provider and not the handset manufacturer, is the way forward when it comes to making purchases, making payments or topping up cards. For those providers that allow transactions to be initiated online as well as through their app, the same level of identity assurance should be provided. And where a contact centre also exists, the traditional ‘weak link’ in many financial institutions, reliance on obsolete Knowledge Based Authentication (KBA), such as passwords, should also be replaced.

 

The only biometric approach that can satisfy strong authentication requirements on all these channels, as well as being the most accurate of all biometrics modalities, is voice. A natural fit for the smartphone app, and also able to be used directly in a web browser with no other devices or phone calls and – again – the only effective way to secure the contact center. Voice biometrics is the natural and secure method of protecting mobile wallets and their transactions. The great news is that customer experience is enhanced at the same time that fraud and operational costs are also reduced for the operator.

 

For payment providers to the unbanked in regions where smartphones are still in the minority and data network coverage is unreliable, USSD-based payment services can still be biometrically authenticated with a simple phone call.

 

Whilst some wallet providers are happy for their users to authenticate via the handset using the inbuilt fingerprint reader or facial recognition, it needs to be understood that these are not enforceable, can be bypassed and are not under the control of the wallet provider regardless. You can also not force people to lock their phones, making for a potential problem for lost and stolen handsets, or those simply left lying around. PINs can be forgotten, guessed and stolen, but your voice cannot. Even if the voices are recorded, state-of-the-art algorithms can detect such recordings.  The same is true for artificially created speech (synthetic speech). From a customer’s perspective, regardless of a payment provider’s internal security flaws or breaches, the theft of an unencrypted fingerprint, facial scan, iris scan or any other physical biometric is still the worst possible scenario for any individual. Such theft can continue to compromise the individual indefinitely.

 

Voice biometrics templates should be encrypted, in any event, since the latest voice biometrics technology can also detect replay attacks and synthetic speech, it is the only biometric modality that has inherent capabilities to counter its theft. Consequently, its theft does not represent a threat to the customers/owners of those templates or their mobile wallets and would certainly not lead to the erosion of confidence in the customer base. In the case of emerging payment technology, where secure authentication is key to its success, precision voice biometrics could provide the answer.

 

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Finance

2020: THE YEAR OPERATIONAL RESILIENCE AND CYBER-RISK TAKE CENTRE STAGE IN FINANCIAL SERVICES

Miles Tappin, VP of EMEA for ThreatConnect, explores how financial providers can build a cyber security strategy that enables operational resilience

 

Financial institutions are operating in a new digital landscape. New disruptive technologies – from Artificial intelligence (AI) to crypto-currencies and big data – have driven change and innovation. In retail banking, new fintech providers have seized the opportunity to offer personalised services and challenge existing providers. For example, Klarna, has successfully disrupted the payments sector and is now established as Europe’s biggest fintech firm. It has quickly emerged as an alternative to credit cards since bursting onto scene, allowing consumers to shop now and pay later with retailers, such as H&M, Ikea and Zara.

To compete with the rising number of fintech providers and fulfil growing consumer expectations, traditional financial institutions are developing robust digital ecosystems that can deliver omnichannel service models. However, it’s becoming clear that the pace of technological change is a double-edged sword. It enables innovation and change but it is also one of the most destructive forces in the financial services ecosystem today.

 

Financial services emerge as a hotbed for cybercriminals

2020 has emerged as a defining year for cybersecurity in the financial services industry. It started with an unprecedented attack against Travelex where hackers successfully took some of the currency providers offline for nearly a month. Then came Coronavirus which sparked a new wave of malware and phishing threats. Research from VMware Carbon Black Cloud revealed that threats against financial institutions have surged by 238% since the start of the pandemic.

The renewed interest from cyber criminals comes at a time when regulators are paying close attention to the resilience of the sector. After a string of IT failures and breaches, financial organisations in the UK have been given a mandate from regulators to improve operational resilience. This means ensuring business models can withstand disruptive events from hackers or adversaries and quickly recover to protect the stability of financial systems.

In December 2019, the UK’s financial regulators published a series of consultation papers outlining their proposed approach to achieving greater operational resilience. The proposals suggested that financial institutions will be required to map out the systems and processes that support business services in order to identify any potential vulnerabilities that would pose a risk to the stability of the UK financial system or the firm’s standing.

 

A mandate for change

Where cybersecurity used to be a classic back-office concern, it’s now a central part of digital strategies and a key pillar of both reputation and customer retention – financial legislation leaves no room for failure. All financial institutions need to ensure they have full visibility of their systems and can detect any potential threats.

The challenge for financial institutions is making the security tools they have purchased separately work together in tandem. Security teams buy a firewall, an email filter, threat intelligence feeds, antivirus software or enhanced endpoint protection, and whatever else they need individually. Each of them does a good job but they don’t talk to each other and valuable time is lost tending to individual systems that become a burden to run. At the same time, running multiple security systems is expensive. The more systems you have, the more highly skilled staff you need to manage them, and they’re few and far between.

 

Improving intelligence sharing across borders and communities

To reduce complexity and simplify decision making, financial organisations need to unify processes and technology to harness the security intelligence that comes from across their own security programmes and external sources to drive down risk. However, no financial institution can tackle the problem alone. Experienced threat actors using advanced techniques are constantly targeting the financial sector. The industry needs to come together as a whole to foster a sense of collaboration and data sharing.

In the same way that financial institutions have introduced open banking to deliver a fairer service to customers, the same needs to apply to security – all parts of the financial ecosystem need to unite and share information to learn from one another and succeed in the fight against adversaries that operate across borders.

By sharing alerts on cyber hazards and risk across financial institutions and with law enforcement, government agencies and other relevant authorities, it’s possible to build industry specific insights into cyber security threats and quickly pivot to gain more information on those specific threats and threat actors. By working together, a picture can be painted on threats coming from all manner of malicious activity, from malware to ransomware, to phishing and software vulnerabilities.

 

Breaking down barriers

Having the right intelligence is not enough to ensure that intelligence is turned into action. Breaking down information and process silos across security teams allows financial organisation to analyse and act on the most pertinent information. Everyone has access to the risk and threats that matter most, and orchestration and automation of response helps overwhelmed security teams prioritise response plans and improve efficiencies in their security programme.

Integrating internal security tools and technologies, while also connecting to external sources of intelligence, creates a single source of intelligence that feeds operations and enables organisations to direct action against the threats that matter most. The outcomes of those actions further feed intelligence, providing the ability to further refine the efficacy of the entire security lifecycle.

This approach provides a continuous feedback loop for the people, processes and technologies that make up the security programme. It allows financial institutions to keep up with threat actors that have consistently adapted their methods to profit at the expense of the financial industry. Something that won’t stop anytime soon.

 

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Finance

GROWTH OF FINANCIAL MARKETS AND TECHNOLOGY

Ashish Jain,CEO, Future FX

 

The economic development of any nation completely depends on its financial structure both in long term and short term. The financial system and its efficiency determines the success of the nation in terms of economic growth.

As most of the sectors are taking advantages of the technology evolved since 1980, financial sector has also transformed immensely.

The Bombay Stock Exchange (BSE), dating back to 1875, started as a broker’s forum under a tree on Dalal Street, and is Asia’s oldest stock exchange. For over a century, registered brokers have made trades happen.

The National Stock Exchange (NSE) came up in 1994 to provide screen-based electronic trading. It gave fibre-optic access to brokers in other cities who could join the trading in the centralized exchange located in Mumbai.

Dematerialization of shares started in the late 1990s and online trading began at the turn of the millennium where investors could buy and sell shares through electronic brokers such as ICICI Direct and Sharekhan.

As more and more elements of the stock market get digitized, it increases its potential to attract a new generation of investors.

Online financial services company Zerodha brought “discount broking” to India in 2010, applying a flat fee of ₹20 on a trade whatever its size. This attracted young investors who could do a trade in less commission. Now, we have all the marketing and trading apps on our phones and we can easily make trades.

The insurance sector has eliminates the role of broker and now anyone can buy insurance through mobile phones. Some such apps are HDFC ERGO insurance, Insure, Caringly Yours, etc.

Trade has always been shaped by technology but the rapid development of digital technologies in recent times has the potential to transform international trade profoundly in the years to come.

From the moment we wake up to check how the markets performed overnight until the time we go back to bed before doing another check of how the market is set to open on the other side of the globe, technology now plays a critical role in everything we do and the way we do things.

For the financial markets, the coming of advanced technology has been the key factor behind the transformation in the way things are done. Technology is also at the core of how companies operate and maintain their competitive edge in this vicious environment.

While forex trading and trading in general used to be the domain of institutional and corporate players, today even retail and private investors consider forex an essential component of their overall portfolio. And this is no doubt due to the ease of access and price transparency offered on the electronic platform.

Nowadays, providers need to have the latest technology all the time. They need to add new and build more features to their platform to attract and retain clients.

Traders are now able to monitor their trades from anywhere as long as there is an internet connection. This gives traders more freedom, mobility and flexibility.

The trading in global markets has thus become easy and convenient like never before.

 

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