Colin Neil, UK Managing Director of Adyen
With Christmas around the corner, most shops and businesses have dusted off their decorations and braced themselves for the busiest time of year. While many bemoan how Christmas seems to come earlier every year, for some businesses it couldn’t come soon enough.
Shoppers have already taken to the streets earlier than they would normally with 52% buying gifts earlier than normal, due to fears of shortages. And for many businesses this will be somewhat of a relief – in research commissioned Adyen 53% of retailers described this Christmas shopping period as “make or break” for them. The golden period will have even more pressure on it after months of supply chain disruption, staff shortages and the continuing effects of the pandemic.
Against this backdrop, UK retailers also face an additional threat, with half anticipating a spike in fraud attacks on their businesses in the upcoming quarter, threating to dampen their Christmas cheer. For example, a recent cyberattack on Spar convenience stores, forced the retailer to accept cash only, or close their doors altogether.
So how do retailers prepare and protect themselves against this challenge?
The real risk to retailers online
The impact of the past 18 months cannot be overstated. With shop doors open only for a limited time and supply chain issues, the total retail sales volumes in 2020 fell by 1.9% compared with 2019 – the largest annual fall on record. As lockdowns eased and retailers could trade more freely once again, businesses quite literally could not afford the risk presented by fraudulent ecommerce payments and data leaks which could damage their bottom lines and reputations further in an increasingly competitive marketplace.
Retailers depend on Black Friday, Christmas and even the January sales to boost annual retail revenues, meaning any fraud attacks – whether via transactions or data breaches – can be even more catastrophic. Unfortunately, many are already feeling the pinch, with more than a third (37%) reporting an increase in fraud attempts on their business during the pandemic. Not only that, a quarter (26%) admit that they have fallen victim to fraud or data leak over this period previously, Adyen data revealed.
And with individuals and organisations reporting losses of £1.3bn to fraud and cybercrime during the first half of 2021, businesses have a responsibility to protect themselves and customers as best as possible in the lead up to the festive period.
Christmas customers are coming in-store
Fortunately for the retail industry, there remains an appetite for high street shopping to prepare for the Christmas season – forming a strong part of festive traditions and planning for the big day. This is motivating the majority of customers to carry on and not be perturbed from shopping in-store, with just less than a third planning to avoid shopping in person.
While this should be heartening for the industry, this support does not come without its underlying expectations. Wherever they are shopping, customers demand stand-out experiences in terms of being protected against fraud themselves. Not only that, but they will use it as a differentiator between competitors, as almost two-thirds (65%) said they will not shop with a retailer again if they have a bad experience. Fraud presents a real risk to both businesses’ profits and also how they fare when compared to their rivals – but it’s such a quick win for retailers to keep customers’ loyalty and trust through good customer experience.
Tech tools of the trade
With so much riding on the back of this festive season, and beyond, there is more pressure than ever on retailers and their payment providers to protect against fraud.
As fraudsters become smarter, so has the necessary technology to protect data and ensure safe transactions. Harnessing and effectively applying payments technology will be key to keeping payments experiences on track.
However, understanding the fraud landscape and the security solutions available can be a daunting aspect for retailers, especially when many of these solutions are offered in a multi-vendor, siloed approach. This leaves retailers with a number of different security platforms for their in-store, online and mobile solutions. With many retailers looking at delivering a unified commerce approach, a siloed approach can make things even more complicated as each channel brings its own risks.
Luckily, there are modern technologies that help retailers by providing a single, unified risk solution across all channels, while ensuring customers enjoy the smoothest, quickest possible payment experience. For example, AI and machine learning, featured in Adyen’s payment processing platform, are just two means to effectively help customers authenticate themselves quickly and easily. What’s more, using a single solution, payments data and customer purchase history can be taken into account across multiple platforms – ultimately helping to determine if a transaction is fraudulent.
As businesses capitalise on sales during the Christmas period, protecting profits and reputation has never been greater – in an ever increasing marketplace, where consumer expectations are high and further pandemic-induced restrictions loom.
With the means to safeguard against fraud so easily available, and often already on hand, there is little excuse for the retail industry to not properly prepare themselves this season. However, with the right tech and processes in place, this Christmas season can be as merry and bright as those before.
Why indirect tax continues to cause headaches for the finance, IT, and tax teams
By Roger Lindelauf, Director, SAP Centre of Excellence, Vertex Inc
Businesses across Europe continue to navigate a complex tax landscape as they attempt to automate their indirect tax determination and calculation requirements. However, many tax professionals use the limited functionality offered by their organisations’ ERP systems, or the in-house software developed by their IT departments to perform the task.
Unfortunately, these solutions are just not sophisticated enough to keep up with the frequent changes to the tax rules and regulations businesses are often subjected to across Europe.
Companies need to deliver accurate and timely finance reports to avoid being fined by tax authorities or being ear-marked for an audit. As a result, tax teams are under increasing pressure to make sure their calculations are right first time, every time. But with organisations typically reliant on the solutions available to them to automate the process, errors are all too frequent and leave businesses wide open to compliance failures.
To look in more depth at the raft of challenges experienced by tax, finance and IT professionals across Europe who use SAP to manage their indirect tax automation process, we recently surveyed their views. The research showed that one of the biggest challenges for 38% of our respondents, is managing tax requirements for multiple geographic jurisdictions, and for a 30%, it’s staying on top of legislative changes to tax and ensuring they’re applied effectively within the solution. And if the tax landscape wasn’t already complicated enough, 30% of respondents cited managing disruption caused by COVID-19 as an ongoing issue, closely followed by Brexit for 29%. Managing accounts payable (AP) determination was also highlighted as a painful task for 29%.
Another cause for concern flagged in the research is the lack of connection between the needs of the tax team and IT’s ability to understand and act upon these requirements using their tax automation solutions. Almost 30% of respondents admit that IT’s lack of knowledge in recognising how to keep up with the solution updates is a real issue. When asked about the limitations of their current indirect tax solutions, 41% agree that there are insufficient internal skills within the business to manage them effectively.
Joining forces for a future-proofed tax automation
The frustrations felt by tax and IT when it comes to tax automation are made abundantly clear in the research. Along with finance, tax and IT need to work together to find a better way to manage their indirect tax calculation and determination needs. They also need to agree on a future-proof solution capable of managing whatever changes are likely to be applied to tax rules and legislation further down the line.
When asked about their key requirements from a third-party indirect tax automation solution, tax and finance pointed to reliability, usability, and efficiency for integration as their key priorities. APIs are another future requirement to help build system implementation processes that are more streamlined and create scalability throughout all business and global operations.
Increasingly, we’re seeing more and more businesses across Europe turn to more sophisticated third-party tax automation solutions, accelerated by the adoption of SAP S/4HANA. There’s been a real shift towards organisations opting for a solution that integrates into SAP, improving accuracy for VAT applications on transactions, automatically.
Joining forces with key stakeholders is a crucial step to finding an approach that works successfully for all. However, with tax regulation complications showing no signs of diminishing any time soon, can businesses really afford to stay as they are and take a chance on tax compliance or is it time to invest in a new, more reliable, efficient, and future-proofed approach?
A study carried out by independent market research specialist Vanson Bourne. 420 finance, tax and IT decision makers were questioned across Europe.
Cryptoassets and the European Central Bank’s new “PISA” Framework
Alpay Soytürk, Chief Regulatory Officer Spectrum Markets
The European Central Bank has published a new oversight framework for electronic payment instruments, schemes and arrangements: “PISA”. In doing so it is further expanding its supervisory portfolio and entering into an area of significant public interest as the framework includes crypto-assets.
The PISA framework will cover crypto-asset-related services but only to the extent they are relevant to the task of promoting the smooth operation of payment systems, which is as central an element of the ECB’s mandate as the definition and implementation of monetary policy, foreign exchange operations or the management of the euro area’s foreign currency reserves.
As an example of the scope of crypto-payments subject to the PISA framework, the ECB has highlighted the acceptance of crypto-assets by merchants within a card payment scheme and the option to send, receive or pay with crypto-assets via an electronic wallet. There seems to be a clear focus on payment tokens that does not include utility tokens, security tokens, Initial Coin Offerings or Security Token Offerings.
Out of scope
PISA excludes services where the transfer of value has only an investment focus. It also excludes services for which the transfer of value is executed solely in banknotes and coins, paper cheques, paper-based bills of exchange, promissory notes or similar. Paper-based vouchers or cash card issuance are also not in scope. The latter refers to cards that are issued for the purpose of depositing funds on it at the disposal of the receiver of a payment.
In other words, PISA focuses on all mechanisms that are based on electronic payment instruments with a general purpose, i.e., whose value transfer function is not limited to a single type of payment recipient or specific use, including instant payments and payment mechanisms in the B2B-sector, plus the usage of electronic payment instruments to place or withdraw cash.
The ECB defines electronic payment instruments as (sets of) personalised devices, software or procedures agreed between the end user and the payment service provider to request the execution of an electronic transfer. In practice, this covers payment cards, credit transfers, direct debits, e-money transfers and digital payment tokens.
Consequently, there are overlaps with the PSD2 rather than with the MiCA or the DLT Pilot Regime proposals. As such, the ECB is expanding the scope of definitions to take into consideration the technological progress of recent years.
For the ECB, all representations of value backed by claims or assets denominated or redeemable in euros are in scope as well as other digital assets that are accepted under the rules of a scheme for payment purposes or to discharge payment obligations in euros.
Oversight and enforcement
The ECB maintains a Crypto-Assets Task Force, and it was this body’s analysis that led to the conviction that there are potentially material financial stability risks, and risks to the safety and efficiency of the payment system as a whole, should payments via stablecoins remain unregulated.
Following a 2020 public consultation, this finally led to the establishment of the PISA framework. However the ECB lacks the infrastructure to perform all the relevant surveillance and enforcement tasks to ensure the very highest levels of governance.
Consequently, for oversight purposes, i.e. the collection and assessment of information and implementation measures, the ECB assigns primary oversight responsibility to the national central banks within the Eurosystem.
The ECB has explained that, in this assignment, it emphasises proximity to the entity subject to oversight (e.g., the country of incorporation, national laws attributing specific oversight responsibilities to central banks concerned, subject to any Treaty-based requirements).
“Schemes” and “Arrangements”
PISA aims at the governance bodies of so-called “schemes” and “arrangements”, ensuring they behave in compliance with the ECB’s oversight expectations.
A scheme is defined as “a set of formal, standardised and common rules enabling the transfer of value between end users by means of electronic payment instruments”, managed by a governance body – while in practice, the governance body and the payment services provider are identical. Examples of schemes are card payment schemes, e-money schemes, digital payment token schemes, credit transfer schemes and direct debit schemes.
The ECB defines an “arrangement” as “a set of operational functionalities which support the end users of multiple payment service providers in the use of electronic payment instruments”. An example of an arrangement is an electronic wallet. The definitions, which are cryptic in the most literal sense, are designed to cover the entirety of the relevant area which would be difficult with classic categorisations where a service is provided organisationally and physically decentralised.
Looking to 2022
PISA was approved by the ECB’s Governing Council on 15 November 2021 and becomes applicable as of 15 November 2022 for schemes that are already subject to oversight by a national central bank within the Eurosystem. New schemes and arrangements have to abide by the PISA rules within one year after being informed that they fall within its scope.
 Directive (EU) 2015/2366, the “Payment Services Directive (PSD2)”
 Regulation on “Markets in Crypto-assets”
 Regulation on a “pilot regime for market infrastructures based on distributed ledger technology (DLT pilot regime”)
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