2023

David Orme, SVP, Sales & Marketing, IDEX Biometrics ASA

The coronavirus pandemic has changed consumer behaviours and attitudes towards digital payments. While previously, consumers were happy to punch in a PIN, or even provide a signature for a purchase, they are now familiar with more convenient and safer touch-free methods, and this is unlikely to change following the pandemic.

Since the beginning of lockdown, when the World Health Organization encouraged people to not use cash, touch-free authentication has played a pivotal role in helping to reduce the spread of the virus. However, as shops and restaurants across the world begin to reopen, we are seeing an increasing number of people making payments via touch-pads. As we return to the ‘new normal’, the global payments industry must now consider how we can protect consumers from the pandemic and reduce the risk of another outbreak.

During the pandemic, touch-free payments began to gain international traction across the world, changing behaviour during the payment process. Contactless payments has also continued to grow since the reopening of the economy. In Europe, high street stores have rapidly shifted to contactless payments, often refusing to accept cash. Meanwhile in the USA, levels of contactless payments have rocketed since the pandemic, after a slow initial adoption of the service – US banks only adopted contactless cards in 2019 compared to 2007 in the UK. According to Visa, overall contactless usage in the USA has grown 150% year-on-year as of May 2020.

Even mega-retailer, Walmart, has recently introduced contactless options for in-store shopping and delivery to protect its customers during the pandemic – showing there is growing demand for a touch-free and convenient way to pay across the world. This has raised awareness of touch-free payments among consumers looking to reduce contact-based interactions and time spent at the checkout during the pandemic.

Tapping into the future of mobile payments

Mobile payments are continuing to grow in popularity, again, showing the desire for touch-free authentication among consumers. According to Forbes, the US mobile payment market – currently only sixth in the world – has increased 41% and is worth more than $98 billion.

To respond to the growth of touch-free payments among small vendors, PayPal has launched a new QR code-based payment app that allows market stall holders or businesses without a PoS machine to accept payment through a code. This means even the smallest of merchants, from small stores and farmer’s markets to craft sales, can now go cash-free and use touch-free payments for everything.

Meanwhile, China has long been using QR code-based apps, such as WeChat Pay from tech giant TenCent and AliPay from Alibaba. The apps are so widely used that street vendors display QR codes for payments and together the two fintech giants control about 90% of China’s digital payments market.

Payment cards remain king

At the same time, payment cards are still consumers preferred way to pay. Of course, we only need to look to Apple and Google, who recently have launched physical payment cards despite running mobile payment apps for further proof that payment cards are far from dead.

So why aren’t cards on their way out, given the growth of mobile payments?

We know that consumers still look to payment cards for security and a sense of familiarity while shopping. According to IDEX Biometrics’ research carried out in the UK, only 3% of consumers choose to use mobile payments, while nearly two-thirds (65%) state that carrying their debit card provides a sense of security. And when it comes to touch-free payments, only biometric payment cards can provide the most secure level of validation with an easy digital experience for shoppers.

Despite the popularity of WeChat as a payment app, China’s biggest card provider China UnionPay has recognised that its customers aren’t ready to give up on physical payment cards either. China UnionPay has recently certified the first biometric fingerprint card technology in the country as they look to the use of biometric technology in cards to provide an extra layer of security, with added convenience and hygiene during a payment transaction.

Touch-free card payments – the key to securing data

Biometric fingerprint payment cards allow the user to authenticate their ID by touching their finger to the card’s sensor while holding it over the contactless Point of Sale. Therefore, the shopper only has to hold their own card over the PoS system, making the entire transaction process free of public PIN pads or checkout counters. Not only does touch-free payment technology provide consumers with the convenience of contactless or a mobile payment but the process offers far greater security, as the card is personally tied to the owner.

With biometric technologies like fingerprints, facial and voice recognition, and even iris recognition becoming popular in smartphones, consumers are becoming familiar with the technology. It is only a matter of time until biometric identification in payment cards will become essential to help consumers navigate the shopping and transaction process safely, speedily and securely.

As our economy gradually reopens, the financial services industry has a responsibility to protect consumers during the transaction process, whether it’s in stores, on transport systems and even in stadiums. The payment industry must adapt and adopt fingerprint biometric payment cards to ensure touch-free authentication for all, and to keep payments seamless, secure and sanitary.

David Orme
SVP, Sales & Marketing
IDEX Biometrics ASA

By Kevin Walkup, President and COO of Harmonate, a data operations firm serving private funds.

Can the confluence of three fast-moving market forces make for a perfect storm in a specific industry? Fund administers are about to find out.

First, the pandemic has driven down valuations in expectation of a recession. Asset managers are under pressure to come up with investment strategies that perform while controlling costs. They can’t waste time on anything that doesn’t clearly help.

Second, before the coronavirus arrived, margins were already dropping and fees had already fallen in large part from competition in finance. The truth is that neither will be rebounding anytime soon. The result is that asset managers can’t waste money. On the contrary, they need to make up for lost revenue.

Third, for all of the above reasons, funds were also already shifting away from internal administration before the coronavirus. Now that pace is accelerating due to the stresses arising from the pandemic.

For fund administrators, a typhoon of outsourcing is coming our way. Asset managers are still hiring data scientists to perform in-house work and develop domain expertise. But they increasingly are going to reach out for third-party partners, too. Funds will have little choice if they want to compete.

I’m going to predict that the administrators who live long and prosper in the new climate will be the ones who adopt a high-touch approach that utilizes solid data operations for funds. They’ll be the ones capitalizing on new fund administration that resembles the close collaboration that asset managers expect from their in-house teams except with more innovation.

High-touch is the ability to answer questions and react to fund managers’ needs quickly and accurately. In a high-touch relationship, speed and accuracy are key. Managers need to have information at their fingertips to respond promptly to events, to plan and to answer investor queries with confidence. Working closely at speed, however, can only come with automation that leverages the power of talented teams.

Technology is already at the center of fund administration. When asset managers talk about fund services, they mention statement processing, capital statements and other reporting. But in reality the asset managers are talking about data operations. They might not view those processes as high-tech because they don’t ask about which tools helped human administrators produce those documents. Humans can do it. But humans need data operations, mostly because speed and accuracy are the result of data operations.

The most advanced data operations for funds can take reporting from 2 weeks to 24 hours. Accounting processes can decrease from more than 100 minutes per investor to 1 minute per investor. Those numbers gain the attention of hard-pressed managers. Even if those numbers weren’t so staggering, can you imagine a leader not performing thoughtful due diligence?

New fund administrators should first start by asking managers about their needs, their challenges and the solutions that they think would improve their productivity. There’s a joke going around that a fund in a major metropolitan area was using interns and Excel spreadsheets for fund services. It probably echoes the truth, though, suggesting plenty of asset managers have not yet even considered data operations that are revolutionizing funds.

That said, as they increasingly shop around and the trends mentioned earlier, more asset managers will understand that data operations will dramatically improve their productivity. What’s more, many will eschew the mega consultancies in hopes of finding more boutique service providers who will treat their fund with extra love and care.

That gets us back to high-touch. If an asset manager is seeking new fund administration, then they are likely trying to chart a course through the storm that has been brewing in recent years but has since exploded with the appearance of the coronavirus. Fund administrators who work with those kinds of managers will need to capitalize on the most advanced machine learning and domain expertise if they want to keep up. Batten the hatches.

Kevin Walkup
President and COO
Harmonate

By Freddy Kelly, CEO and Co-Founder, Credit Kudos

The Covid-19 pandemic has profoundly impacted the nation’s finances, with millions having to borrow to mitigate the effects of lockdown. But these unprecedented economic circumstances have dramatically altered the lending landscape, making it impossible for lenders to continue business as usual while still relying on traditional credit assessments.

British businesses have borrowed almost £35 billion under the government’s three emergency coronavirus credit programmes, but the approval rate for coronavirus business interruption loans (CBILS) remains just 50 per cent. Critics say that these emergency lending schemes rely too heavily on old, cumbersome legacy technology and if FinTechs using Open Banking were to be involved, more loans could be paid out faster.

There is a similar issue in the consumer lending market. The Credit Kudos Borrowing Index found that 32 per cent have previously been turned down for some form of lending and I’m sure this number will rise in the coming months. In the credit card sector, which had been in growth for many years pre-coronavirus, several providers stopped offering new cards and the number of 0 per cent balance transfer deals swiftly plummeted. Many people’s financial situation will have changed due to Covid-19 and so pre-pandemic data isn’t enough for lenders; they need access to up-to-date data on an individual’s current financial situation to properly assess affordability.

We have already seen adoption of Open Banking in lending increase as a result of this need, and I’d expect to see much more innovation in credit reporting on the back of the crisis, with Covid-19 acting as a catalyst for further digitisation. From car finance, to credit unions, and unsecured personal loans, lenders are hampered by inadequate, insufficient data, reducing their ability to lend responsibly. The traditional methods used to identify creditworthy borrowers are not reliable enough, often use out-of-date information, meaning lenders are unable to understand the borrower’s current and future financial health.

Opening up new opportunities

It’s time for lenders to embrace new data sources and technologies to better understand borrowers in our rapidly changing world. Open Banking provides a reliable, timely, and compliant way of accessing a wider range of real-time transaction data for credit risk and affordability assessments. It gives lenders across all sectors the opportunity to return to growth after the pandemic.

Open Banking streamlines processes and speeds up the results offered to lenders. Adding Open Banking into current customer flows need not be a large technology transformation that takes months, as technology-forward solutions can get new businesses up and running in a matter of days.

As one of the first FCA-authorised AISPs in the UK, we have seen first-hand how the lending sector has progressed on this journey. Using the transaction data available through Open Banking, we’ve been powering brokers and lenders to keep issuing loans in these uncertain times, and as we’re starting to come out the other side we’re seeing a wider range of use cases within the organisations we work with.

Servicing the full spectrum

Open Banking is relevant to each and every lending vertical. Even credit unions, the most traditional of lenders with a model rooted in face-to-face contact, have had to digitise rapidly. We’re working with forward-looking organisations such as Serve & Protect Credit Union, which caters for service personnel and other frontline workers, to draw on Open Banking to help them extend their services.

Similarly, unsecured personal loans, Open Banking helps to uncover new opportunities, converting marginal declines to acceptances thanks to the additional data and insights available. Lenders who already had Open Banking in place have been able to mitigate the cost of Covid-19 by identifying new borrowing behaviour before its reported by the traditional credit reference agencies.

Car finance is another good example. It was a steady market before the pandemic but much of the business is done through car dealerships, which have only recently reopened. Despite the dealerships being closed, some lenders were able to carry on lending through online brokers which have an enhanced credit risk model using Open Banking data. Open Banking can highlight recent loans and missed payments, and our Income Shock Detector also helps lenders to accurately detect and account for recent loss of income.

Demand remains high

Brokers felt the impact of Covid-19. Online brokers are still getting a lot of traffic, but they’ve struggled to continue to serve the market due to reduced lending appetite. They now have an essential role in supporting lenders as they seek to safely return to the market or, for those already lending again, safely return to growth.

We’ve developed a secure onward consent mechanism which is allowing companies like Loans Warehouse to safely share credit risk and affordability insights with lenders to help better inform their decisions. As part of the Loans Warehouse customer journey, individuals will be asked to connect through Open Banking. We will then analyse a borrower’s financial transaction data and securely provide Loans Warehouse’s lending panel with an up-to-date report of an individual’s current financial situation, with the borrower’s consent. By sharing richer, real-time data, prospective borrowers will be more likely to be matched with a lender that meets their needs, increasing their chances of being accepted.

Amidst the mayhem created by Covid-19, Open Banking is a cause for genuine optimism. Lenders across the spectrum are already accepting the digitisation of credit reporting, and I expect this to continue – even in more traditional sectors like banking as they endeavour to quickly embed Open Banking into their strategy further. There is no way back – Open Banking is already well on the way to creating a new lending landscape that will be characterised by innovation and collaboration; a fertile environment for increasing responsible lending and driving growth.

Freddy Kelly
CEO and Co-Founder
Credit Kudos

By Daumantas Barauskas, COO at Genome

Some things change the world so rapidly and drastically, that no amount of statistical data and research can predict it. The COVID-19 pandemic proved to be one of such things. Due to it, the global economy may shrink by 5,2%, as shown in The World Bank’s recent report, meaning it would be the biggest global recession since World War II. The forecast is based on the assumption that the countries would lift domestic mitigation measures by the mid-2020, and global spillover effects would be mostly dealt with in the second half of 2020. And in a worst-case scenario, the global economy is to reduce up to 8%.

Now, when we have a global picture, let’s turn to the banking sector. In 2018, global payments revenues reached $1,9 trillion and were expected to hit $2.7 trillion by 2023 with continuous growth. Needless to say, the pandemic had a devastating impact on the revenue, as the industry can lose from $165 billion to $210 billion, even though before the pandemic it was forecasted to gain $2.1 trillion this year.

In the middle of March, the average global bank stock prices underperformance grew to a rate of the industries that are most vulnerable to the lockdown. If we use our baseline of 100% for bank stock prices on 19 February, then by the third week of March the prices dropped to 60%. At the end of April, the situation has improved a bit, as the index passed the 70% mark.

European banks might suffer one of the worst impacts of the pandemic, as the Eurozone economy is forecasted to decrease by 9,1%. The muted-recovery scenario, which will result in GDP shrinking by 11% across the Eurozone, is what every third executive believes will happen. The scenario may result in the banking sector revenue drops as severe as 40%, prompted firstly by increased margins and government stimulus packages, and ultimately by the rise in risk costs. Thus, the negative effects could be more damaging than during the 2008 financial crisis, and the European banking industry will need four years to recover.

Right now, some of the countries are reducing the lockdown regulations with businesses and shops opening and employees returning to their offices. However, it doesn’t mean that the world is ready to return to its previous state, as most of the companies need to adapt to a new reality, and financial institutions are no exception.

First of all, businesses need to be ready for another possible wave of the coronavirus outbreak. For instance, doctor Anthony Fauci, director of the American National Institute of Allergy and Infectious Diseases thinks that the COVID-19 will not be eradicated due to its widespread. Meanwhile, the director of the Centers for Disease Control and Prevention Robert Redfield voiced the concern that the second wave, which is expected to hit this fall or winter, will be even more dangerous, as it might coincide with the start of flu season.

Secondly, a lot of people have changed their day-to-day habits to protect themselves and their families: they use e-commerce services to buy products, minimize cash payments, and want their banks to provide online services. A survey conducted in April showed that more than half of customers prefer digital channels for banking with 52% and 54% using mobile and online banking during the pandemic accordingly. The attendance of bank branches, which wasn’t even high pre-pandemic, dropped from 22% to 15% during the lockdown.

Now, when we have covered the bleak economic forecasts for financial institutions, as well as the new preferences of banks’ clients, we can point out the main changes that banks and PSP are expected and required to make and strategies they should implement in the second half of 2020 and beyond that.

The need for digitalization is as strong as ever. Without a doubt, banks should bring at least some of their services online, as the demand for internet and mobile banking grows. Otherwise, traditional banks will face the sad reality of their clients switching to digital FinTech services. According to the Capgemini Consumer Behavior Survey, around 30% of customers are going to start using FinTech companies instead of banks after the pandemic, if the latter won’t be able to deliver proper customer experience.

Redeployment of employees and branches. The obliged relocation of staff due to the lockdown proved that bank employees can successfully work from home. And right now, not all banks are ready to allow their staff members back to offices. And considering the possible second pandemic wave, this return may be short-lived. Thus, the financial institutions better to use this situation to their advantage – some of their employees might start working from home permanently, but will need to be provided with technical and security means to do so. This, in turn, will allow to redeploy the remaining staff among the branches and, potentially, close some of the branches to cut rent and maintenance costs.

Customers’ convenience and safety are the top priorities. The lockdown led to the overwhelming number of customers using support chats, phones, and emails to communicate with their banks. The situation shows the demand for diverse usage of banks’ digital channels to always keep in touch with clients. Social media, push-notification, emails, apps, online chats, and call centers – all is fair game to keep the people informed. But to keep up with all these channels, financial institutions should make sure the support team (which can also work from home) has enough employees for the challenge.

But having digital communication channels open is not enough – banks and PSPs need to reach out to clients themselves, inform them about each new update or service, show the support to pandemic-vulnerable customers and warn people about potential COVID-19 risks.

If banks are deploying new online and mobile services, they’d better have detailed tutorials on how to use these, so that the clients will go through the process easily. And also, the online channels are great for quick surveys, with feedback allowing banks to improve the services if required.

The mutual support of businesses. Banks and companies need each other’s help to overcome the effects of the pandemic. To do this, financial institutions should analyze their clientage to determine, which groups of people or businesses require the support the most. Taking this into account, banks can make personalized offers to these groups to help in dealing with severe economic losses. In return, banks and FinTechs will get loyal clients, that are more likely to thrive again, when the pandemic is over.

For instance, Genome introduced the COVID-19 initiative in the middle of April to help all our current and potential low-risk clients. We have canceled all monthly account fees for three months, and believe that this offer will be especially beneficial for food and entertainment services, electronic and home appliance goods, toys, educational platforms. To find out more about this initiative and other services visit Genome’s website.

By Daumantas Barauskas
COO at Genome

by George Brostoff, CEO & Co-Founder, SensibleVision

The launch of the Samsung S20 phone (and the release of the new Apple phone that’s expected to come out in the fall) have once again brought facial recognition back into the public eye.

It’s one of those technologies that we all just take for granted, but how does it actually work not only for phones but for devices such as door locks, security cameras, or even automobiles? And are the common perceptions of facial recognition even accurate? Let’s look at some of the myths and facts:

Myth #1: Facial recognition is racially biased.

Fact: There has been a lot of news coverage about how facial-recognition systems only work for people with lighter skin, and some have concluded the technology is racially biased. This is has been partially fostered by what turned out to be a controversial art project collaboration between a Microsoft researcher and an American artist.

Perceived issues with racial profiling and AI are often the result of the lack of diversity in the database that occurs when developers prioritize creating a large database over a more varied one. Lighting can also play a part, as evidenced by research of Joy Buolamani. The MIT Media Lab researcher found that some cameras had difficulty interpreting the composition of facial features on individuals with darker skin tones, leading to inconsistent results. However, there are currently facial recognition solutions available that provide consistent results, regardless of the subject’s complexion, as developers learn how to work with a variety of faces and lighting conditions.

Myth #2: Facial recognition can be easily hacked.

Fact: While many implementations have proven to be insecure and can easily be hacked by photos, masks, or videos, this is not inherent to face recognition as a concept, but to the vendor’s technology and approach. Simply put, bad technology doesn’t work very well, but good systems do.

Facial recognition technology is rapidly improving to the point that many systems can detect minor changes in appearance, such as glasses, facial hair, makeup, and even partial obstructions. Advances such as “active liveness detection,” where a user executes an action such as squinting, blinking, or making a face, can render it far more difficult for hackers to spoof a facial recognition system; combined with “passive liveness detection,” which employs internal algorithms to detect imposters, it’s no easy feat for hackers to successfully bypass facial recognition systems.

In some instances, storing biometric information, such as face templates, locally and subsequently sharing that information only with authorized devices, may be more secure and less susceptible to hackers (albeit potentially less convenient) than storing that info centrally on the cloud. If vendors are cognizant of potential issues and implement preventative security measures accordingly, facial recognition technology is no easier to hack than other, comparable systems.

Myth #3: Facial recognition will always be a fringe technology because people are worried about their privacy.

Fact: While face recognition privacy is a hot topic in the news, hundreds of millions of people use it daily to access their phones and interact with other devices. Where transparency, speed and high security is desired, almost nothing can provide the same level of convenience and accuracy.

Facial recognition tech is already far more ubiquitous than one might think. While some jurisdictions, such as the city of San Francisco, have placed a ban on agencies such as law enforcement and transport authorities from employing facial recognition tech, it’s exploding in industries and fields as diverse as retail, road safety, home security, and even agriculture, where farmers are using it to identify and track animals, help mitigate the spread of herd-killing diseases unintentionally transmitted by workers, and measure an animal’s vital health information.

While the general public is often wary of the implementation of facial recognition tech by sectors such as law enforcement and the military, its unmatched expedience, precision, and practicality mean that people are increasingly open to incorporating such technology into their daily lives.

Myth #4: Facial recognition doesn’t work well in low-light situations.

Fact: Ironically, Some facial recognition technologies actually work better with less light! This may sound counterintuitive, but with the right technologies the darkest night or even the brightest sunlight need not reduce the accuracy or performance.

Low light conditions shouldn’t be a barrier to the functionality of 3D imaging. Problems with elements such as accuracy and depth manifest when infrared oversaturation occurs – such as when users whip out phones or other devices in full sun or near highly reflective surfaces. These options tend to test well in the lab, but not so well on the beach or next to plate glass windows. Fortunately, many developers have taken note of this and managed to work around the problem to ensure that the technology functions in a range of settings and locations – be they a cave at midnight or a desert at high noon.

Myth #5: Facial recognition is only for high-end devices.

Fact: Cameras are being included in most everyday devices. And the computing power to accurately process those images is already present.

This means facial recognition technology is only likely to increase in popularity – and decrease in cost. You’ll find it embedded not just in law enforcement security tech but in products as common as door locks and restaurant payment systems, as well as in health care screening devices and programs and in retail stores. You may be surprised to learn that your phone, laptop, or tablet already feature facial recognition software, or the capacity to incorporate it. Essentially, if a device has a camera, it’s probably capable of employing some kind of facial recognition technology – if it doesn’t already.

By Amir Sarhangi, VP Product at Ripple

The global pandemic is having an unprecedented impact across industries around the world. Remote working, in particular, has rapidly become the ‘new normal’ for workforces globally, enabling many employees to carry out their daily roles — albeit from their own homes.

As companies transition to remote working environments and increase their reliance on digital services and modern technology, FinTech simply can’t remain in stasis. To date, a large part of the industry’s lockdown-induced holding pattern stems from its reliance on outdated technology that can’t keep up with customers’ fast-evolving needs brought about by the pandemic’s impact.

On top of that, The World Bank has now classified remittances as an essential service — signalling the need for faster adoption of digital financial services, which can make remittances cheaper and more convenient during these uncertain times.

Keeping services modern and accessible
It’s with this in mind the financial services industry should continue driving innovation to improve the cross-border transactions that are so key to keeping the wheels of the global economy turning. Notorious for being late to the game, FinTech and banks need to recognize the importance – and urgency – of modernizing their offerings or risk falling behind at a time when their customers are relying on them most.

Fortunately, cloud-based solutions can help payments technology keep in-step with the remote workforce. For example, cloud removes the pain for financial institutions having to procure and maintain their own hardware, install and operate the software, and employ a dedicated team for 24/7 monitoring — an important factor in these socially distant times. On top of that, cloud technology enables the ability for these firms to update their systems remotely and regularly, removing the physical hurdles companies now face with on-prem management and ensuring faster upgrades to new features. Additional benefits include businesses’ cost savings on on-premise hardware and staffing costs to maintain those systems, as well as reduced cost of doing business by removing the need to maintain its own hardware and planning investment for scaling.

RippleNet Cloud is one such solution that has been particularly beneficial in helping businesses navigate the ‘new normal’ of working from home. RippleNet Cloud is delivered to customers as a service, allowing customers to connect to more than 300 financial institutions in Ripple’s global blockchain payments network without the need to install on-premises software or onerous internal processes to procure new hardware and databases. It is also upgraded every three months, so updates and new features can be delivered quickly and reliably.

Maintaining a competitive advantage
Yet despite the obvious benefits of the cloud, many of the top global banks continue to fall behind in its adoption — missing out on its advantages to their business and the economy. Some of their reticence comes from the concern about moving customer-sensitive data to the cloud, but well-managed cloud infrastructure is equally as secure as on-premises. In fact, cloud-native software vendors subject themselves to regular external audits and have deep security expertise on their staff.

The need to modernize with solutions like cloud will supercharge the competitive advantage of innovative banks over their slower-moving rivals — now more than ever. The more agile and innovative players that are already using banking-as-a-service tech platforms to revolutionise their cost-to-serve and cost-to-change are ideally placed to easily and cheaply plug into emerging blockchain networks, AI engines and other generation-defining FinTech capabilities. Incumbent and legacy banks who are still relying on ‘museum’ banking technology will be delayed in effectively tapping into this valuable innovation. What is more, the longer that big banks dally with implementing cloud processes, the more out of step they are with today’s customer expectations.

The COVID-19 pandemic has underlined an already compelling use case for the cloud in our industry — and it will provide a lifeline for helping businesses and economies thrive and remain competitive in this new and challenging world of work. It’s important that key players across the FinTech sector use this moment to bring their own services up to scratch to ensure they aren’t left behind.

By Amir Sarhangi,
VP Product at Ripple