Connect with us

Finance

WHAT DOES THE DELAYED SCA IMPLEMENTATION MEAN FOR THE PAYMENT ECOSYSTEM?

David Orme, Senior Vice President at IDEX Biometrics ASA

 

In August 2019, the Financial Conduct Authority (FCA) announced an 18-month delay to the enforcement of the new Strong Customer Authentication (SCA) rulings under the second Payment Service Directive (PSD2). The rulings were originally introduced to enhance the security of payments and limit fraud during the customer authentication process for online and in-person contactless payments.

Online, or card-not-present (CNP) transactions, and contactless payments are two of the main routes to card fraud. Because of the lack of a PIN or authentication method, these forms of payment present a specific challenge for retailers to verify the actual cardholder and validate their payment effectively. The introduction of SCA aims to reduce high levels of online and payment fraud caused by this process, all while enhancing consumer rights.

For merchants in the European Economic Area, the SCA ruling means they must now require two methods of authentication for CNP transactions. This means when a retailer takes a payment without the card being physically present, such as for an eCommerce transaction. When the directive is enforced in March 2021, two of the below three authentication methods must be used to confirm a CNP transaction:

 

  1. Something you know – such as a PIN or password
  2. Something you have – possession of the card or a bank-issued card reader and one-time PIN
  3. Something you are – biometric data

The additional authentication process also applies for some contactless payments, with shoppers having to enter a PIN for every fifth transaction, or after a certain spending limit has been reached, currently considered to be £100.

 

Why the delay?

The SCA ruling will affect the whole payment market, including card issuers, payment providers, online retailers, in-store merchants and consumers. However, the European Banking Authority (EBA) this summer noted a significant lack of preparedness for the regulation among the payments industry and retailers, which is likely to have a significant impact on consumers.

The extension to the deadline is intended to give the industry time to prepare for the roll out of the directive. To address the industry’s lack of readiness, the FCA has created an 18-month plan which provides support and steps those within the payment ecosystem need to adopt to implement SCA.

Discussing the introduction of SCA, Jonathan Davidson, Executive Director for Supervision, covering Retail and Authorisations at the FCA, has said, “The FCA has been working with the industry to put in place stronger means of ensuring that anyone seeking to make payments is not a fraudster. While these measures will reduce fraud, we want to make sure that they won’t cause material disruption to consumers themselves; so we have agreed a phased plan for their timely introduction.”

 

The preparation timetable

So, given their lack of preparation, how does the payment market get ready for the roll-out of the ruling between now and the new deadline of March 2021?

The suggested industry solution is to use a one-time passcode (a possession factor) plus another factor (with knowledge, such as PINs only as fallback). According to the FCA, while the industry is still implementing this approach, the most important step is to start clear communication with consumers now. Retailers and banks should already be open and transparent with customers to minimise the risk of unexpected disruption to payments.

To provide this level of communication, retailers and suppliers need to educate themselves regarding the issues and requirements needed to ensure they are SCA compliant. The so-called ‘learning period for implementation’ runs up to March 2020, by which time the financial authority expect retailers to understand the regulatory requirements and have begun to take steps towards technological readiness.

By this point, merchants should be actively testing to ensure their solution will work correctly by the following year. Then by March 2021, the FCA expect to see operational readiness and a solid ‘issuer behavioural solution’ from all retailers and financial institutions, to meet the regulation deadline.

 

Biometrics: the long-term solution to secure payment authentication

While one-time passcodes are considered the interim solution, the FCA also outline that long-term, authentication through biometrics and mobile app-based solutions is the future of secure payments. Adopting biometric payment cards or using fingerprint readers on smartphones to authenticate online payments offers an important way for retailers to balance security measures that comply with the SCA regulation with ease-of use for the consumer.

Following smart fingerprint biometric payment cards, the user registers their fingerprint on the card at home through a portable enrolment device. Once the reference fingerprint is recorded, it never leaves the card so data cannot be hacked. The biometric bank card can then be used with existing payment infrastructures — including eCommerce, chip and PIN and contactless card readers — in the usual way. The sensor is placed in such a position to make it easy for the consumer to simply hold and tap their card with their thumb or finger over the sensor, meaning that even post-SCA contactless payments can continue quickly and easily, without PINs or payment limits.

 

Dynamic verification

For online payments, biometric payment cards offer further possibilities to strengthen the security and SCA compliance for e-commerce retailers. The addition of a digital dynamic Card Verification Value (CVV) number on the front of the card would present a new code whenever the card owner’s fingerprint is presented on the card.  This means that the traditional payment card would be transformed and consumers would be protected against both the theft of static card numbers for fraudulent online transactions and physical card theft.

The implementation of biometric fingerprint payment cards across the payments market would ensure that card issuers, payment providers, online retailers, in-store merchants can all meet the SCA requirements for online and contactless transactions.

Therefore, fingerprint biometric smart cards are a way of putting payment security firmly in the hands of the consumer in line with the SCA requirements. As the payment ecosystem works to meet these guidelines it should look towards this biometric innovation to provide secure authentication with the convenience that consumers expect and demand.

 

Fail to prepare, prepare to fail

During the delay, it is the responsibility of the payment ecosystem to ensure they understand the new regulations and implement methods to protect consumers from fraud. Security measures must be put in place to comply with the SCA requirements sooner, rather than later.

If the payment ecosystem fails to prepare, or comply with this new ruling, it will open consumers up to a significant threat of card fraud, whether from shopping online, or in store. Therefore it is imperative that card issuers, payment providers, online retailers and in-store merchants act now to prepare for the new regulation. Biometric fingerprint payment cards offer an opportunity for banks, retailers and merchants to embrace payment innovation that will help them meet these new secure forms of authentication with confidence and ease.

 

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Finance

THE OUTPERFORMER’S APPROACH TO FINANCIAL PROCESS AUTOMATION

By Michelle Trapani, Director of Product Marketing at Kofax

 

Achieving more with less is the mantra of our times. C-suite leaders demand greater efficiency. CFOs are looking to reduce costs. Customers and employees expect stellar experiences. The ability to outperform these expectations hinges on your financial operations, a vital area impacting every facet of your business.

For instance, if vital master data is incorrect, it’ll have a negative impact on service level quality, as well as the reputations of the finance and purchasing departments. Without accurate and timely visibility into processes, transparency is reduced, and it’s more difficult and time-consuming to manage compliance. The combination makes it harder to please executives, CFOs, customers, and vendors.

That’s why financial process automation is the key to operational efficiency and the overall success of your business. Even small- and medium-sized businesses are investing in process automation to optimise the financial processes within enterprise resource planning (ERP) systems, such as SAP.

For many, accounts payable is the first financial process to be automated. Like many other financial areas, Accounts Payable (AP) is mired in paper and consumed by highly manual tasks. For these reasons, once AP is automated, the benefits become quickly apparent, leading firms to immediately consider which other financial processes they can optimise. However, outperformers know the approach that yields the greatest return is automation of the entire purchase-to-pay process chain.

Why? Let’s consider what benefits can be gained from automating document-driven and transactional processes tied to an SAP ERP system – in AP and beyond.

 

Why a high-level of automation is an advantage

We don’t have to look far to see how end-to-end automation eliminates labour-intensive work, reduces costs, and increases process efficiency. Organisations with high levels of automation provide indisputable proof of the advantages of the outperformers’ approach.

According to research by Shared Services Link and Kofax, just 12 percent of organisations with high levels of automation manually process their invoices compared to 74 percent of those with low levels of automation. In addition, only 41 percent of highly automated companies experience problems with purchase orders, 24 percent have poor visibility into spend, and 8 percent fail to capture early payment discounts. By comparison, those with low-level automation report these same problems significantly more often: 68 percent, 23 percent, and 24 percent, respectively.

In an age when process automation has become table stakes, there are clear advantages for organisations that optimise processes across the business. “Best-in-class” firms – those with high levels of automation – don’t only become more competitive, they save time and resources as well.

Comparing “best-in-class” organisations to others illustrates the sharp differences. According to Ardent Partners, a “best-in-class” organisation processes 57.1 percent of all invoices “straight-through,” in just 3.9 days at an all-inclusive cost of $2.87 per invoice. By contrast, the gap with other organisations – those with low levels of automation – is wide: Only 16.1 percent of invoices are processed straight-through, and a single invoice takes 17.1 days to close and costs $15.38. Further, “best-in-class” organisations experience 81 percent lower invoice processing costs and 77 percent faster invoice processing cycle times.

 

Why ERP optimisation?

Another reason to follow the outperformers’ approach is to increase the return on investment of Enterprise Resource Planning (ERP) software. Many organisations haven’t fully leveraged their investments in ERP software, like SAP, giving them plenty of hidden opportunities to exploit.

“ERPs are not optimised for all the complex activities occurring today, such as matching printed or electronic invoices with supplier master data, purchase orders, shipping, tax and discount data,” says consultancy The Hackett Group. “Since it can be cost-prohibitive to replace a legacy ERP, companies often augment them instead with document management systems.”

When processes are paper-driven and manual, financial teams struggle to meet the volume-based performance requirements set by their CFOs. Meeting the high bar for raw numbers of invoices and payments processed is exceedingly difficult without automation. Think back to the pain points listed above. Every time the process is interrupted because the PO number is wrong, there’s an invoice exception or an early pay discount is missed, the process slows appreciably – or breaks down entirely.

One option is to use a certified add-on solution providing a single software platform to automate a series of processes directly within the ERP system. For SAP users, this type of solution offers more than integration with the ERP system; it provides the exact same look and feel as any other SAP transaction. It can be presented inside of the SAP GUI, providing non-SAP users an intuitive interface, and offering a real-time view of workloads, pending tasks, document inflow, ongoing transactions, and up-to-the-moment validation against SAP data. Solutions like this are proven to help users become more cost efficient, improve control over financial processes and shorten total processing times.

 

How to dominate your financial process

As the examples above show, expanding process improvement from AP to the entire purchase-to-pay process chain allows you dominate your financial processes in SAP, realise maximum efficiency and take your current ROI to the next level. Whether you’re just starting your automation journey or want to expand past AP, a full-scale strategy for end-to-end financial process automation will enable you to begin working like tomorrow, today.

 

About the author

In her role as Director of Product Marketing, Michelle Trapani delivers market positioning, strategic narratives and go-to-market strategies driving awareness, preference, and growth – bringing an increased level of insight, leadership, and overall execution discipline to Kofax’s growing business. Michelle was most recently with Cinch Connectivity Solutions where she reduced product launch times from eight months to eight-12 weeks. Previously, Michelle was with Adobe, Equinix, IBM, Infogix, iPass, Macrovision and Vision Solutions. Michelle earned a Bachelor of Arts degree at Illinois State University.

Continue Reading

Finance

SAFEGUARD YOURSELF FROM FINANCIAL STRUGGLE AND UNCERTAINTY IN THE CASE OF DEMENTIA

Despite the rising incidence of dementia globally – The World Health Organization (WHO) estimates one new case every three seconds – and the risk of losing mental capacity in old age, few individuals plan for this possibility.

Dementia is caused by a variety of brain illnesses that affect memory, thinking, behaviour and ability to perform everyday activities. The WHO estimates the number of people living with dementia worldwide will almost triple to 152 million by 2050.

September is Alzheimer’s awareness month, an international campaign by Alzheimer’s Disease International to raise awareness and challenge the stigma that surrounds the illness. Financial management is one of the first tasks which deteriorate with the condition, leaving people struggling to do simple tasks such as paying bills or managing their tax affairs.

“Most people don’t like to think about death, dying or incapacity,” says Mark Hawes, certified financial planner at Alexander Forbes. Figures from the Masters of High Courts back up this assertion, revealing that more than 80% of South Africa’s working population don’t have wills.

“If you have been diagnosed with dementia, the best way to avoid unnecessary financial burden or being taken advantage of financially, or otherwise, is to put plans in place immediately. If one day you are not able to look after yourself, you and your family should know who these responsibilities will fall to.”

Most types of dementia are progressive. Therefore, the earlier it is identified the better. In addition, the easier it is to put the necessary preparations in place. Very importantly, while our faculties are still with us we can and should be involved in the important decisions for our own future.

At the very least, it is time to ensure that your wishes are documented, understood and are willing to be carried out by all involved. Naturally the inverse is true. For the caregivers and the persons tasked with the respective areas of responsibility, making sure that you understand and are willing to carry out the wishes of the affected person (within reason) is paramount in the early days of diagnosis.

“It is therefore important to allocate someone you trust with different areas of your life. Consider your options and where you have existing policies in place, double-check what you are covered for.”

Putting your plan in place simply gets everyone pulling in the same direction. Do this for at least three areas with the help of a trusted professional:

 

  1. Set up or review your will

To ensure that this is done accurately, you need to be fully informed about what assets and other financial products you have. Importantly, remember that all retirement funds fall outside your estate and so beneficiaries should be nominated on each retirement fund respectively. In addition, bring in your trusted and professional financial adviser to make sure your legacy planning is effective, efficient and accurate to ensure that your wishes and priorities are met.

 

  1. Choose your healthcare professionals and caregivers

Understanding the expected treatment and what your lifestyle may look like in the years to come will provide insight into what facilities and care you may require. This information puts a sense of control and independence back in the affected person’s hands. It will create a great sense of comfort that the challenging journey ahead will be manageable and on your own terms. Of course, it is always recommended to include your loved ones when making the decisions – especially the ones who are expected to carry out your wishes, if only to understand if they have the capacity to do so. The cost of care for those with advanced dementia should also be factored in, as full-time nursing can be expensive. Knowing your expected care and the respective costs puts you back in control.

You can then compare your requirements with any existing insurance policies to see where you can provide the financial resources. Importantly, as cash flow may come under pressure for you and your family, you would also be able to see which policies are no longer a priority and can be cancelled. In addition, you will be able to allocate your savings and investments toward your expected expenses or make alternative arrangements with the people in your support structure – especially your family where available.

 

  1. Who will conduct your financial transactions on your behalf?

The Covid-19 pandemic has seen increased reports of fraudsters targeting unsuspecting and vulnerable people. Those with dementia who are already struggling to use ATMs or do internet or telephone banking may be more prone to being targeted or simply telling strangers their bank details. Now more than ever identity theft is a real concern.

It is therefore highly recommended that a trusted and responsible person or family member is appointed to conduct financial transactions on behalf of the affected. For high net worth people, a special trust can be set up and preferred trustees (along with an independent professional trustee) appointed to ensure the financial affairs and assets are managed effectively. Again, legacy planning is crucial to helping the affected person to rest easy.

Many people are unaware that a power of attorney is invalid if a person is no longer of sound mind, and financial institutions will not assist until the person is placed under administration or curatorship.

Therefore, it is important that this person is aware of your lifestyle and preferences. This can be simply from what groceries you buy to which financial institutions and structures your make use of. The latter should be considered together with your trusted professional’s financial adviser.

Hawes says it is important to know what policies one has and what they cover. “You need savings to cover your cost of living when you’re alive and no longer working. Understand your medical aid and what they will cover – at minimal, you should have a hospital plan and gap cover.”

Hawes also advises introducing your trusted confidant to your certified financial planner, in the event that something happens.

“Many people only bother to find out their family history after something happens to them. Find out if you have a history of cancer or heart conditions, Alzheimer’s or dementia in your family. By having these difficult discussions now, a person is better able to decide how their money should be used, and is less likely to be financially exploited at a later stage.”

 

Continue Reading

Magazine

Partner Events

Trending

Finance4 hours ago

THE OUTPERFORMER’S APPROACH TO FINANCIAL PROCESS AUTOMATION

By Michelle Trapani, Director of Product Marketing at Kofax   Achieving more with less is the mantra of our times....

Banking4 hours ago

WHY BANKS NEED TO EMBRACE WELLBEING IN THE DIGITAL EXPERIENCE

Howard Pull, Head of Digital Transformation Strategy at MullenLowe Profero   The impact of the COVID-19 crisis on the economy...

Finance13 hours ago

SAFEGUARD YOURSELF FROM FINANCIAL STRUGGLE AND UNCERTAINTY IN THE CASE OF DEMENTIA

Despite the rising incidence of dementia globally – The World Health Organization (WHO) estimates one new case every three seconds...

Technology13 hours ago

WHY TECHNOLOGY IS KEY TO THE FUTURE OF AUDITING

By Piers Wilson, Head of Product Management at Huntsman Security   The Financial Reporting Council (FRC), which is responsible for corporate...

Finance2 days ago

BOOM OR BUST: HOW THE FINANCIAL SERVICES SECTOR IS COPING

by Simon Black, CEO, Awaken Intelligence   Covid-19 has had an impact across all industries and businesses are feeling the...

Business2 days ago

BACK TO SCHOOL – CEOS NEED TO LEARN A NEW LANGUAGE, FAST!

By Simon Axon, Financial Services Industry Consulting practice lead in EMEA, Teradata   Chief Executive Officers of banks know all...

Business2 days ago

REVITALISING THE TOKEN MARKET

By Gavin Smith, CEO at Panxora   With interest rates near zero and fears that whipsawing stock markets are set for...

Business2 days ago

A SLEEPING DIGITAL GIANT WAKES? 4 KEY TRENDS ACCELERATING PAYMENTS TRANSFORMATION IN THE US

Lauren Jones, International Payments Ambassador, Icon Solutions   The US payments industry is undoubtedly ripe for change. Before the unprecedented...

Finance2 days ago

CAN ACCOUNTING DEPARTMENTS WIN THE FIGHT AGAINST FRAUD?

Magali Michel, Director, Yooz   Despite the implementation of increasingly sophisticated security systems, corporate fraud continues to gain ground: half...

Finance2 days ago

REMOTE INVOICE CAPTURE: ADAPTING TO THE NEW WAY OF WORKING

Author: James Adie, Vice President EMEA Sales at Ephesoft   When the government announced a country-wide lockdown on March 23,...

News2 days ago

GALA TECHNOLOGY SELECTS NUAPAY TO ENABLE OPEN BANKING PAYMENTS

Nuapay, powered by Sentenial, today announces it has been chosen by Gala Technology, a payment security solution specialist, to provide Open...

Top 103 days ago

THE ROLE OF OPEN SOURCE IN UNCERTAIN TIMES

Kris Sharma, Finance Sector Lead, Canonical   Financial services are an important part of the economy and play a wider...

Wealth Management3 days ago

SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS

By Dolana Conco, Regional Executive at Alexander Forbes   Losing a loved one is one of the most difficult experiences...

News3 days ago

THE EMBEDDED BENEFITS IN ESEF DIGITAL FINANCIAL REPORTING

The inclusion of a simple link delivers serious gains in transparency, trust and real time verifiability for the whole financial...

News3 days ago

YAPILY AND OZONE API PARTNERSHIP MARKS TURNING POINT IN OPEN BANKING ADOPTION FOR BANKS

Open banking leader Yapily has today announced a strategic partnership with Ozone API, the leading API standards-based platform, to enable banks and...

News4 days ago

PROGRESSIVE SCENARIO PLANNING FOR THE LIBOR TRANSITION

James Gannaway, Head of Financial Services, Board International   The Financial Stability Board have announced that disruption to markets caused...

News4 days ago

AS DIGITAL TRANSFORMATION ACCELERATES, ENTRUST DATACARD BECOMES “ENTRUST”

Entrust name and identity reflect the critical need for trust at the heart of the digital transformation – and the...

Finance4 days ago

HOW TO TAME YOUR FINANCES TO REGAIN CONTROL OF YOUR MONEY

Credit, combined with bad spending habits, means many South Africans find themselves living from payday to payday, but you can...

Business4 days ago

HOW DATA VIRTUALISATION CAN HELP THE FS INDUSTRY REGAIN COMPLIANCE CONTROL

Charles Southwood, Regional VP – Northern Europe and MEA at Denodo    In recent years, the financial services (FS) sector has witnessed a...

Finance5 days ago

HOW TECHNOLOGY IS CHANGING ACCOUNTING

Mike Whitmire is Co-founder and CEO of FloQast,   The fundamentals of accounting have been around for hundreds of years....

Trending