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  • @fintechna 3:35 am on December 18, 2017 Permalink | Reply
    Tags: 5f0095, , , , , , , ,   

    Digital currencies to disrupt the payments industry 

    The US Faster Task Force received 16 proposals for faster payment solutions. Guest blogger Ginna Rodriguez takes a look at two less-traditional entries by WingCash and nanoPay. 

     

    The Faster Payments Task Force received 16 proposals for faster payment solutions using different approaches to increase the speed of payment in the United States. Some of the proposed solutions work similarly to traditional payment systems, while others involve significant changes to the way we think about cash and the roles that play in the payments ecosystem.

    Among the less traditional entries were proposals submitted by WingCash and nanoPay, which suggest creating that would enable consumers to conduct digital transactions without the need for a bank account or payment card.  While both involve the introduction of digital currency, one would replace the existing fiat currency for digital payments, while the other would be a digital exchange of value tied to the existing currency.

    WingCash

    WingCash proposes creating a digital fiat currency. Under its proposal, the Federal Reserve would own the Faster Payments Network (FPN) and issue Digital Fed Notes, similarly to its issuance of cash notes today. Each Digital Fed Note would be a unique and unchangeable URL with a single monetary value, and it would include the issuer’s URL, the current holder’s URL, a currency code and unique identifier (like a serial number). Payments would be conducted by changing the owner of the URL.

    The Faster Payments Network could be used for both in-person payments and remote payments (for example, using “digital cash” to pay for online purchases). The exchange of digital notes would occur without transfer fees, with funds immediately available, similarly to how physical notes are exchanged today.

    As with cash notes, Digital Fed Notes would not require a bank account or credit card. One of the advantages WingCash highlights in its proposal is that a digital currency solution could increase access to the electronic payments system, opening the door for users who may have been excluded from the traditional banking system. However, potential barriers to implementation include regulatory changes that would allow the Federal Reserve to issue a digital fiat currency.

    nanoPay

    nanoPay also proposes a digital currency, but the system of value would operate outside of the Federal Reserve. nanoPay proposes a good-funds, collateralized bearer-asset transfer system in which users would exchange fiat currency (collateral) for nanoPay’s MintChip (asset). The fiat currency would be stored in a pooled account, while the equivalent MintChip amount would be stored in a Secured Asset Store (SAS). Transactions completed in the MintChip ecosystem would be a transfer of value between two SASs using Value Transfer Messages.

    In the MintChip model, an Asset Manager would protect the pooled funds of fiat currency and invest the funds in instruments where the principle is guaranteed. Depository institutions would act as brokers that pre-purchase MintChip “coins” and use APIs to provide end users access to the MintChip platform. Regulated non-bank providers and larger retailers could also participate as Brokers.

    nanoPay’s proposal does not depend on the Federal Reserve’s willingness to create new monetary policy or serve as the originator of digital currency. As a non-fiat currency, however, nanoPay could face challenges of perceived trust and security, particularly regarding the management of the pooled funds that serve as collateral for the digital currency.

    As highlighted in the two proposals, digital currency solutions could increase the speed of payments while decreasing payments system costs and expanding financial inclusion. However, WingCash and nanoPay acknowledge that their proposals could pose a threat to traditional payment card revenue streams. Despite these challenges, central banks in other countries like China, Canada and the Netherlands are exploring digital currencies, and the US may follow suit.

    Summary of faster payment solutions proposals submitted by WingCash and nanoPay

    Digital currencies to disrupt the payments industry fintech

    Source: Accenture compilation of proposals submitted to the Faster Payments Task Force.

    Whether replacing fiat currencies, creating a digital exchange tied to existing currency or another idea yet unknown, payments solutions built on the faster, more efficient digital form will transform payments and banking. players need to prepare for the pending change and their role in it. To discover more about how other digital currency forms will the industry, read our report on The (R)evolution of Money.

     

    Digital currencies to disrupt the payments industry fintech

    Ginna Rodriguez, Manager

    Digital currencies to disrupt the payments industry fintechDigital currencies to disrupt the payments industry fintech

     

     

     

     

    The post Digital currencies to disrupt the payments industry appeared first on Accenture Banking Blog.

    Accenture Banking Blog

     
  • @fintechna 3:35 am on December 15, 2017 Permalink | Reply
    Tags: 5f0095, , cardnotpresent, favor,   

    Fraudsters favor card-not-present 

    Guest blogger Casey Merolla discusses credit & signature debit issuer net fraud loss decreases and migration from counterfeit fraud to Card-Not-Present fraud.

     

    Issuer fraud rates have remained fairly constant across payment card products following the Europay, Mastercard and Visa (EMV) liability shift. Yet, issuers’ net fraud losses for credit and signature debit have decreased and the long-predicted migration from counterfeit fraud to Card-Not-Present (CNP) fraud is becoming visible, according to Accenture’s annual survey of US major card issuers.

    Survey results¹ show slight changes in reported payment card fraud (“Gross Fraud”) from year-end 2016 to first quarter 2017:

    • Average Gross Fraud rates for credit and signature debit declined slightly, from 23.1 bps on purchase volume to 22.6 bps, and from 17.3 bps to 16.3 bps, respectively.
    • Gross fraud rates for PIN/ATM increased slightly, rising from 10.7 bps to 11.3 bps (Figure 1).

    This is the first year in which the issuer study did not show a material rise in Gross Fraud rates across all transaction types.

    Figure 1. Gross Fraud Ranges
    Fraudsters favor card-not-present fintech
    Figures quoted in basis points on applicable volume
    Source: Accenture Card Fraud Study, July 2017

    Despite modest changes in total reported Gross Fraud, issuers experienced a decrease in Net Fraud Losses on credit and signature debit cards due to higher recovery rates. The largest change was in recovery rates for counterfeit fraud, which increased to nearly 55 percent post-EMV, up from single-digit recovery rates in prior years. While average Net Fraud Losses for credit cards declined by 1.5 bps and average Net Fraud Losses for signature debit declined by 1.3 bps, Net Fraud Losses remained steady for PIN/ATM debit (Figure 2).  We expect the recovery rates for PIN/ATM to increase significantly following the Visa ATM EMV liability shift in October 2017; some Mastercard debit issuers have already seen a significant increase in recoveries following that network’s ATM liability shift in October 2016.

    Net Fraud Losses for credit and signature debit are significantly lower in this sample than in 2015, when average credit Net Fraud Losses were above 13 bps and signature debit Net Fraud Losses averaged nearly 7 bps (recognizing that the survey participant list varies from study to study).  Average PIN debit Net Fraud Losses are more than a basis point higher than reported Net Fraud Losses in 2015.  This increase is likely due to more frequent ATM and Automated Fuel Dispenser (AFD) skimming incidents and the delayed Visa EMV liability shift for ATM transactions.

    Figure 2.  Net Fraud Loss Ranges

    Fraudsters favor card-not-present fintech

    Source: Accenture Card Fraud Study, July 2017

    Across the sample, most issuers reported that EMV migration efforts were almost complete for credit (for example, +95 percent of active cards were EMV-enabled); half of the issuers reported the same level of adoption for debit. Only one credit issuer indicated it was below 90 percent EMV enablement for credit, while three issuers reported lower than 75 percent completion of debit migration.

    As issuers have migrated to EMV, have moved away from the card-present environment, and CNP fraud has become the most common type of fraud. CNP fraud (with an average case size of ~US$ 175) accounted for 55 percent of Gross Credit Card Fraud reported in Q1 2017, up from 49 percent in 2016 and 39 percent in 2015. Counterfeit fraud (with an average case size of US$ 200) constituted only 23 percent, down from 29 percent in 2016 and 50 percent in 2015. Meanwhile, Lost/Stolen and Application fraud—with average case sizes of US$ 2,000 and US$ 5,700—have increased to 10 percent and 9 percent, respectively, a significant increase over prior periods.

    In a post-EMV world, US issuers will continue to see fraud shift to areas that are more difficult to detect. Application channels and remote/digital servicing channels are prime targets for sophisticated fraudsters using ID theft and synthetic IDs to hit issuers for high-dollar losses on Account Take Over and Fraud Application cases. While issuer investment continues to focus on the core “blocking and tackling” of fraud management (such as alert engines, back-office efficiency and reporting and so forth), all issuers must be aware of these evolving threats to the card business.

    Beyond EMV, card issuers must stay vigilant around their defense measures. They can continue to tap new technologies—from geolocation data and acoustic analyses to biometrics—to more tightly secure payments data and other assets, and outpace sophisticated fraud.

    ¹Findings are based on July 2017 survey responses from 6 major credit issuers averaging $ 14 billion in annual purchase volume and 8 major debit issuers averaging $ 7 billion in annual purchase volume. Issuers provided full-year data for 2016 and Q1 data for 2017.

     

    Fraudsters favor card-not-present fintech

    Casey Merolla, Senior Manager, Payments

    Fraudsters favor card-not-present fintechFraudsters favor card-not-present fintech

     

     

     

     

     

    The post Fraudsters favor card-not-present appeared first on Accenture Banking Blog.

    Accenture Banking Blog

     
  • @fintechna 3:35 pm on December 13, 2017 Permalink | Reply
    Tags: 5f0095, , engine, fleet, , Revving,   

    Revving the fleet payments engine 

    Driving ’ future forward, Frank Martien discusses 3 key trends: specialist transformation, fleet card globalization and disruption.

    Over the last several years, fleet payments have seen significant evolution with quickly expanding use of electronic payments, mobility management and other value-enhancing paradigms. And the journey has just begun. Driving fleet payments’ future forward are three key trends with significant industry implications: specialist transformation, fleet card globalization, and technology disruption.

    Specialist transformation

    Fleet payments have been an attractive market for specialists, particularly in the US where they have increasingly built scale and synergies with partnerships and acquisitions. The two largest providers have rapidly grown their businesses, and Accenture anticipates just three specialists – FleetCor, US Bank, and WEX – will generate US$ 3 billion or more in US purchase volume in 2017. While down from seven in 2012, these remaining providers’ portfolios have grown more sophisticated with enhanced functionality in serving fleet fuel, and increasingly non-fuel, spend needs.

    Figure 1. US Fleet Card Provider Consolidation

    Revving the fleet payments engine fintech

    Source: Accenture market observations and market news

    With high large fleet (greater than 100 vehicles) penetration, small-to-medium-sized fleets are attracting greater industry focus. Accenture estimates these fleets (fewer than 100 vehicles) make up roughly 90 percent of the incremental North American vehicle opportunity. While continuing to build revenue per vehicle with existing fleets, fleet card specialists could position themselves for near-term penetration of this segment and long-term value through the expanded base.

    But the small-to-medium segment is different. Like other small-to-medium businesses, these fleets prefer competitive pricing and fees, fast implementations, DIY configurations, and interoperability with other vehicular technology investments which can provide that “Uber-like” experience to which small-to-medium fleets are so close. This new experience requisites a reexamination of provider business models across many different drivers to fit customer and internal needs while aligning with relevant shifts observed from global interactions.

    Fleet card globalization

    The recent price environment has left integrated oil companies in the US and globally looking for ways to streamline operations and release tied-up capital, particularly as they move towards major legacy technology decision points. Moreover, US and Canadian fleet card partnerships, in many cases, have proven beneficial to major oils and to their fleet customers, unlocking value for all involved. This could catalyze new waves of fleet card globalization.

    Building on US and Canadian successes, FleetCor and WEX (the two largest global fleet card specialists) have penetrated similar markets (such as Australia and the United Kingdom), expanded value chain presences, and won major programmatic deals in Europe with Shell (FleetCor) and ExxonMobil (WEX).

    Figure 2. Snapshot (Non-Exhaustive) of Fleet Card Transactions outside North America

    Revving the fleet payments engine fintech

    Source: Accenture market observations; FleetCor and WEX press releases

    Considering global commercial vehicle fleets, fuel demand and revenue yields that frame the fleet payments universe, Accenture analysis suggests potential for at least US$ 7 billion in revenue outside the US and Canada, with global fleet card specialists having reached just a fraction (roughly one-tenth) of that opportunity.

    The key architectures to maximize cross-border efficiency are moving closer to readiness, and if executed effectively, several new avenues of growth may result. As examples, FleetCor is progressing its second-generation Open Loop solution; WEX and others are enhancing fleet management technologies; and providers of all sizes are experimenting with more open approaches inspired by liquid consumer expectations. But globalization will require much more.

    Overseas markets are each distinct, with complex economic dynamics and entrenched local and regional market participants. Current participants weave a complicated web for new entrants; and while new entrants, including global fleet specialists, have started to gain share, they have a long way to go to create conditions closer to those in the US market.

    To drive timely global fleet payment transformation, providers of all sizes will need to focus, message and execute effectively to receive the trust of potential customers and partners in the value chain while protecting against being disrupted themselves.

    Technology disruption

    To keep pace with market expectations and remain competitive, providers are embracing disruptive technology. Digital and mobile are among many technologies helping companies better manage their fuel and vehicle-related expenses and have become increasingly popular in the past few years.

    Figure 3. Mobile Technology Advances in Fleet Card Management

    Revving the fleet payments engine fintech

    Source: Accenture market observations

    Mobile applications allowing fleet card drivers to find fuel locations have been around for several years; however, mobile functionality for fleet managers is relatively new. EFS (an affiliate of WEX) recently announced its CarrierControl Mobile app which allows fleet managers to load cash onto driver cards, view real-time card transaction details and activate/deactivate driver cards in real time. Others are investing in similar on-the-go fleet card management features, expecting that the vast capabilities available online (for example, setting daily transaction limits) will increasingly become available on a mobile phone.

    Technological advancements beyond cards, such as telematics integration, are in progress and provide opportunity and threat to current providers. As technologies to integrate data from third-party systems (such as open APIs) progress into market, fleet card providers will have even more tools to offer end-user organizations.

    In the US, innovative international players such as Radius are entering the market and start-ups are offering alternative forms of payments. New mileage reimbursement technologies, meanwhile, are being marketed as alternatives to traditional fuel cards. And new partners, such as hypermarkets and c-stores, while willing to partner with existing providers, expect a certain experience for their customers in line with the retail trends they experience globally today.

    Mapping the journey

    Providers across the value chain—payments specialists, fuel providers, and fleets—have the opportunity to embrace these trends in the context of their own prisms. To build future-oriented, agile business models that positively re-define value creation, each player must consider strategic and tactical actions:

    • Understand changing customers and partners’ journeys in and beyond fleet payments activities;
    • Anticipate global forces and complex business drivers to determine how best to deploy assets and optimize globally (not just locally); and
    • Move to create experiences and underlying architectures that drive value for external and internal networks, and consequently, each player’s own business now.

    With ever-growing market sophistication, those who embrace the thematic trends impacting fleet payments can proactively chart their journey with knowledge of how to read signposts along the way. I invite you to reach out to me to find out more.

     

    The post Revving the fleet payments engine appeared first on Accenture Banking Blog.

    Accenture Banking Blog

     
  • @fintechna 3:35 pm on November 16, 2017 Permalink | Reply
    Tags: , 5f0095, , , , CISO, , , prompting, ,   

    CISO importance is prompting internal role change 

    The value of the Chief Information Security officer has never been more evident, but is the well defined and structured enough?

    have witnessed a spate of cyber breaches recently with the financial sector experiencing 300 percent more cyberattacks than any other industry. More than 75 cyberattacks against financial services companies were reported in first nine months of 2016.

    A string of regulations requiring banks to adopt a more open architecture will further expose them to heightened cybersecurity risks, and the rapid pace of digitization in banking will only add to it.

    However, the banking industry is yet to see an increased responsibility in the role of a Chief Information Security officer (). A study by Gartner showed that only 20 percent of CISOs report to the CEO with ~60 percent of them reporting to the Chief Information Officer (CIO) or an IT executive. With the growing of security in an organisation, this current reporting structure might need to more to favour CISOs reporting directly to the CEO.

    Fig 1. Majority of CISOs report to the CIO
    CISO importance is prompting internal role change fintech
    Source: Gartner- Determining whether the CISO should report outside of IT

    CISOs need to have impartiality when it comes to budget and ability to influence the CEO

    There have been instances of uneven allocation of the IT budget for spend on cybersecurity, resulting in CISOs getting a smaller piece of the pie. Studies have shown that information security takes only a tiny three to five percent of the overall IT budget.

    UK banks have seen some traction here: Barclays has merged its two security functions, with previous Chief Security Officer (CSO) and CISO roles coming together under a combined CSO. Lloyds has set up a cybersecurity advisory panel to bring an industry perspective on key cyber-related activities and threats. The panel is part of a subcommittee to the Board Risk Committee (BRC) and the Chief Risk Officer regularly informs the BRC of the aggregate risk profile of the bank.

    Decouple the CISO from IT?

    Having the CISO report outside of the IT leadership could have several advantages:

    • Direct oversight from the CEO and business leadership could ensure key security considerations are addressed in business strategy and associated investments.
    • Reporting outside of the CIO puts the CISO and CIO on more equal footing.
    • It could help organisations attract more experienced security executives who might expect to report directly to the CEO, not a CIO.

    IDC believes that by 2018, increases in cybersecurity threats could result in 75 percent of CSOs and CISOs reporting to the CEO. Some regulators are even making it mandatory: In Israel, there are laws dictating that CISOs report directly to the CEO. UK banks should take a cue and become the financial services gold standard in cybersecurity governance.

    Banks need to reconsider the CISO role for greater cybersecurity effectiveness

    The primary goal of the CISO is not to protect but to protect the business. Though the position has risen in the organisational structure to the inner circles of the C-suite, a CISO’s ability to dictate a budget and make decisions independently may still depend on where the position falls in the organisational structure. Further, the role of cybersecurity experts has become increasingly important on the board, which has translated to higher salaries and attrition as well. Empowering CISOs might help mitigate this, through increasing representation on the board, direct reporting to the CEO, independent budget allocation and a role in strategy formulation.

    The post CISO importance is prompting internal role change appeared first on Accenture Banking Blog.

    Accenture Banking Blog

     
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