Jeet Vasa

October 21, 2023December 18, 2023 byJeet Vasa

Chargeback fraud is growing – can AI and Big Data stem the tide?

According to our research, 60% of all chargeback claims will be fraudulent in 2023. This means not just that merchants have to consider that chargebacks claims are more likely to be fraudulent than legitimate, but that individual merchants and the anti-fraud industry need to lay the groundwork to collect and analyze data that will show them what fraud looks like in real-time.

By Monica Eaton, Founder of Chargebacks911

While many industries are benefiting from so-called ‘big data’ – the automated collection and analysis of very large amounts of information – chargebacks face a problem. The information that is given to merchants concerning their chargeback claims tends to be very limited, being based on response codes from card schemes (‘Reason 30: Services Not Provided or Merchandise Not Received’), meaning that merchants would have to do a great deal of manual work to reconcile the information that the card schemes supply with the information that they have on hand.

While Visa’s Order Insight, Mastercard’s Consumer Clarity, and the use of chargeback alerts have reduced the number of chargebacks, merchants still have very little data on chargeback attempts. This article will look at how merchants can improve the level of data they receive on chargebacks and how they can use this data to create actionable insights on how to improve their handling of chargebacks.

What is big data?

2023’s big tech story is undoubtedly AI – specifically generative AI. Big data refers to the large and complex data sets that are generated by various sources, including social media, internet searches, sensors, and mobile devices. The data is typically so large and complex that it cannot be processed and analyzed using traditional data processing methods.

In recent years, big data has become a crucial tool for businesses and organizations looking to gain insights into customer behavior, improve decision-making, and enhance operational efficiency. To process and analyze big data, companies are increasingly turning to advanced technologies like artificial intelligence (AI) and machine learning.

One example of a company that is using big data to drive innovation is ChatGPT, a large language model trained by OpenAI. ChatGPT uses big data to learn and understand language patterns, enabling it to engage in natural language conversations with users. To train ChatGPT, OpenAI used a large and diverse data set of text, including books, websites, and social media posts. The data set included over 40 gigabytes of text, which was processed using advanced machine-learning algorithms to create a language model with over 175 billion parameters.

By using big data to train ChatGPT, OpenAI was able to create a language model that is more accurate and effective at understanding and generating responses than previous models. This has enabled ChatGPT to be used in a wide range of applications, including customer service chatbots, language translation services, and virtual assistants. Currently, technology very similar to ChatGPT is being used by Bing to replace traditional web searches, with mixed results, but, like self-driving cars, it is a matter of ‘when’, not ‘if’ this technology will become widespread.

AI and fraud

Chargeback fraud is a growing problem for businesses of all sizes. The National Retail Federation estimates that retailers lose $50 billion annually to fraud, with chargeback fraud making up a significant portion of that total. With the significant rise of online shopping, this type of fraud has become even more prevalent, as it is much easier for fraudsters to make purchases using stolen credit card information, forcing victims of fraud to then dispute the charges with their credit card issuer.

Chargeback fraud occurs when a customer disputes a valid charge made on their credit card, claiming that they did not make the purchase or that the merchandise they received was not as described. If the dispute is upheld, the merchant is forced to refund the money to the customer, along with any associated costs, and is typically charged a penalty fee by their payment processor. This not only results in a financial loss for the merchant but can also damage their reputation and lead to increased scrutiny from payment processors.

Where can machine-learning technology help with fraud? To understand this, we have to first understand its limitations. ChatGPT and Large Language Models (LLMs) like it are not Artificial General Intelligence (AGI) – the sci-fi trope of a thinking computer like HAL 9000. Although they can pass the Turing Test, they do so not by thinking about the given information and answering accordingly, but by matching what looks like an appropriate answer from existing text.

This means that while they can produce perfect text by copying existing text rather than ‘thinking’ about the substance of the question, they are prone to producing errors. This is something that isn’t acceptable when it comes to fields like fraud prevention – nonsense answers with a veneer of truth won’t work in the binary world of whether a particular transaction was fraudulent and unfounded accusations of fraud can damage a merchant’s reputation.

What is needed then are AI solutions built specifically for chargebacks. Companies like Chargebacks911 have been working on this for years now, and their solutions are based on big data models that have been built up over that time. Because of their extensive experience working in that field, they are the ideal partner to work with to bring AI up to speed and address the problem of chargebacks.

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October 21, 2023December 18, 2023 byJeet Vasa

How to achieve growth and strengthen resilience using automated AR and digital payment

Times are challenging for businesses of all shapes and sizes as we enter the second half of 2023. Market volatility and slowing growth are being driven by high inflation and interest rates, economic instability, and geopolitical pressures, on a micro and macroeconomic level.

By Marco Eeman, Managing Director, Europe, Billtrust

Only resilient companies will flourish, but the IMF warned of the increased risk of a ‘hard landing’ for the global economy just last week. It predicted a 25% chance that the annual global growth rate could fall below 2% this year – double its normal level.

For businesses to rise to these challenges, companies across all industries are taking a good look at their income and expenditure. Those that will ultimately succeed recognise that it is not simply cash flow that businesses should pay attention to, it’s how that cash is flowing.

Drive growth during uncertain times

A well-executed, automated accounts receivable process can positively impact a company’s cash flow, working capital efficiency, customer relationships, risk management, and financial decision-making. By optimising this process, a company can enhance its financial stability, profitability, and long-term success, even in an extremely challenging economic climate. Digital payment systems can also deliver a series of interesting advantages.

Increased efficiency and faster cash flow

Automated AR and digital payment systems streamline financial transactions by automating processes, reducing paperwork, and minimising manual errors. This efficiency leads to cost savings and allows businesses to allocate resources more effectively, contributing to improved profitability.

Timely and efficient invoicing and collections are crucial for maintaining a healthy cash flow, which has never been more important than it is now, as it allows companies to meet their financial obligations such as paying suppliers and employees. Digital payments enable companies to receive funds quickly, accelerating their cash flow. Compared to traditional payment methods like wire transfers, digital payments are processed in real-time or with minimal delay, ensuring faster availability of funds. A robust AR solution also automates collections tasks so any overdue invoices are sorted out faster, freeing up time that can be used in more value-adding spaces.

Expanded customer base and global reach

Streamlining the invoicing process can help foster positive client relationships and prove reputationally beneficial. An automated approach will simplify the invoicing process and minimise errors. Also, by accepting digital payments, companies can tap into a broader customer base. Many consumers prefer the convenience and security offered by digital payment methods such as credit cards, mobile wallets, and online banking. By accommodating these preferences, businesses can attract and retain more customers, leading to increased sales and profitability.

Automated AR solutions and digital payment systems facilitate international transactions and enable businesses to expand their operations across borders. Companies can easily accept payments from customers in different countries, opening up new markets and revenue streams. This global reach enhances business resilience by diversifying customer bases and reducing dependence on specific markets.

Data insights and cost reduction

Digital and automated payment and AR systems, and the added use of AI-powered tools, generate vast amounts of transactional data which enable companies to make data-driven, risk-adjusted decisions that reflect current circumstances and offer more control during a period of significant uncertainty. By leveraging analytics and data mining techniques, companies can gain valuable insights into customer behaviour, spending patterns, and preferences. These insights can inform strategic decisions, such as targeted marketing campaigns, personalised offers, and product/service enhancements. By leveraging data, businesses can optimise their operations, tailor their offerings, and boost profitability.

Automated AR not only allows companies to optimise their way of working, but it also allows companies to save paper, printing, and postage costs and eliminate expenses associated with physical checks, cash handling, and manual reconciliation. Moreover, digital payments can automate recurring billing processes, reducing administrative overhead and improving operational efficiency.

Choosing the right solution

Businesses must focus on compatibility when looking for a modern AR provider and make sure the solution is integrated with the open Business Payment Network (BPN) and interoperable with the larger payments ecosystem. It’s also important to work with an AR partner that has an in-depth understanding of evolving payments legislation. For example, EU laws are currently changing: in December the EU published the VAT in the Digital Age (ViDA) directive which will mandate e-invoices. It’s crucial businesses implement processes that are fully compliant with all relevant trading laws and choose tech solutions that help, not hinder this.

Conclusion

Digital payments offer numerous advantages that can contribute to building resilience and driving profits for companies. By embracing digital AR systems, businesses can improve efficiency, accelerate cash flow, access a larger customer base, expand globally, enhance security, gain valuable data insights, and reduce costs,

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October 21, 2023December 18, 2023 byJeet Vasa

Awareness and trust holding consumers back from pursuing Open Banking products

Although the IMF recently reported that the UK economy has once again avoided a recession, the rate of inflation isn’t expected to return to the Bank of England’s target rate of 2% until mid-2025 – later than expected.

By Stefano Vaccino, founder & CEO, Yapily

This means mortgage repayments, bills, credit rates, costs of household items and more will continue to pinch consumers’ finances. Indeed, research from the Nationwide Building Society found that 74% of people were worried about their finances and ability to cover essential costs in April – with the value of spending on essentials rising 9% since earlier this year.

Within this tough environment, however, consumers believe their financial providers are falling short, with our data revealing that 53% don’t feel that their financial needs are being met. The natural conclusion you’d think is to look for a new and, hopefully, better alternative. And yet, only a tiny 2% of consumers say they have started using new products and services – meaning that many of the population could very well be stuck in a financial rut. Not great given the current state of the economy when most people need to manage their finances effectively.

Consumers trust what they know

One of the main reasons consumers don’t feel their financial needs are being met that we identified in our State of Payments report was trust. Many consumers say they only trust products and services they have heard of or that are recommendations for family, friends, and colleagues. There’s a name for this: the familiarity principle (or the exposure effect) and while it generally happens subliminally, it also influences a lot of the decisions we make… from the restaurants we frequent to the financial products and services we use.

Interestingly, though, consumers said they would be open to securely sharing more of their data with financial services organisations, like their bank or with a personal finance app if it improved their financial well-being. This includes saving money more consistently, building their credit score, and reaching financial goals quicker like saving for a mortgage.

Such services are now being provided by many major financial services providers and FinTechs in the UK – and many are powered by Open Banking. But despite these encouraging findings, 76% of consumers said they either don’t care about whether a product uses open banking or would be less likely to use a product if it is enabled by Open Banking. Again, the trust issue creeps in as a quarter say this is down to them not knowing enough about it and being wary of the technology.

An awareness issue

The plot thickens further in the issue of trust. Though consumers say they are willing to share their data, many decision-makers in financial services organisations paint a very different picture. Almost one-third (30%) indicated that trust in data sharing is the biggest barrier they face as a company in driving the adoption of their Open Banking services and products.

So, there is a disconnect here in that fed-up consumers aren’t switching to new products and services to improve their financial well-being, even though the solutions do, exist thanks to Open Banking. This may be a result of a lack of understanding around Open Banking services or the true value they can deliver to their finances, but it undoubtedly presents a missed opportunity.

Conquering the disconnect

Financial organisations must conquer a broader awareness issue so consumers know that they could have access to better and fairer financial products that support their financial well-being. There’s an opportunity to bridge the trust gap and build confidence in Open Banking solutions to get consumers turning to new products that will power better financial experiences. These positive experiences will be key to raising broader awareness of the benefits of and, in turn, increasing demand for Open Banking.

This starts by highlighting the benefits of Open Banking vs traditional banking processes and how they impact financial well-being. For example, by highlighting that it’s easier to track spending and budgets more effectively when bringing all bank account and credit card information into one personal finance app.

Another area that needs more clarity is dispelling some of the myths that have crept in surrounding data privacy and security. Sharing financial information that was once only available to notoriously highly regulated banks, naturally raises questions about privacy. But Pay by Bank is one of the most secure payment methods and there’s a reason why: it was a top priority when PSD2 was drafted, so banks and providers are required to use highly secure and encrypted APIs. To access data in the first place, a service provider needs consumer consent and cannot access without it. Raising awareness of these issues will help ease worries and build trust around Open Banking.

Final thoughts

Now more than ever, people need tailored financial products and services that are right for them, particularly as the UK continues on unsteady economic footing. Building trust and awareness amongst consumers will be vital to drive demand for Open Banking services and importantly, let them know there are products and solutions available that will make managing their finances easier. We hope to also see the right steps taken by industry and government to ensure Open Banking can build on its seven million active users and be a success story in the UK in years to come.

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October 21, 2023December 18, 2023 byJeet Vasa

Why FinTech M&A in the UK is on the up and up

The UK FinTech sector will experience an upswing in M&A towards the end of 2023, as companies look to consolidate their positions in the market and take advantage of the potential for growth and innovation.

By Konstantin Dzhengozov, Co-Founder and Chief Financial Officer at Payhawk

While headwinds such as the turbulent geopolitical landscape, volatile stock markets, and rising interest rates and inflation have meant both companies and investors have remained cautious throughout Q1 and into Q2, pressure is mounting for them to complete transactions.

According to data from Prequin Pro, this is particularly pertinent to private equity firms that are sitting on a record level of $1.96 trillion (about £1.5 trillion) of dry powder. Thus, we will soon see a switch out of defensive cash strategies and into M&A. Figures from Ernst & Young’s latest CEO Outlook, for example, show that 50% of UK CEOs are planning to make acquisitions in the next 12 months and 67% are considering joint ventures.

VC funds, on the other hand, will not have the same capital reserves and might struggle to fundraise since they are unable to showcase success stories to potential investors in the current macroeconomic environment. This means they will start to pressurise their companies to consolidate, merge and create bigger organisations that will appear more capital efficient and thus have the potential for a more meaningful exit down the line.

Time to focus

Although most of the movement in this space will be motivated by necessity, there are countless advantages to M&A in the current environment. Firstly, it pushes companies to conduct vital internal evaluations to determine which assets are core to their business, allowing them to divest those they consider non-essential. This will ultimately result in a more mature company with a bolstered focus and cash to spend.

Secondly, it allows cash-rich companies to purchase spin-offs at a reduced price and go on to achieve better returns. According to PwC analysis, deals done during a downturn are often the most successful. Data from the 2001 recession, for instance, indicates those that made acquisitions had a 7% higher median shareholder return than their industry counterparts one year later.

M&A for geographical expansion

This concept will also prove useful when it comes to using M&A for geographical expansion. FinTechs that are already successful in the UK will likely look to acquire or merge with strong yet struggling competitors in other countries instead of enduring the rigmarole of setting up there from scratch. We have already seen the number of cross-border M&A announcements increase, with data from Investment Monitor’s Global FDI Annual Report 2022 showing a 45.2% jump in 2021 compared to the previous year – a trend we can expect to continue in 2023.

FinTech trends

Some of the key growth areas for M&A in the FinTech space will be Banking as a Service (BaaS) and Gen AI. As customers become increasingly dissatisfied with existing offerings, BaaS providers are rapidly gaining popularity and new players are entering the market. This is set to change, however, as regulators are beginning to force these organisations to strengthen control and their compliance functions to obtain a license-holding. Naturally, this would limit the number of new entrants in this space, making licence-holding companies extremely attractive and driving appetite for M&A or consolidation.

Gen AI can exponentially boost a company’s productivity and allow greener enterprises to disrupt big industries. Businesses already innovating in this space will become more valuable and there will no doubt be fierce competition to acquire them.

Overall, one can anticipate a flurry of M&A activity in Q3 and Q4. While not all driven by preference, companies positioned with both the financial resources and a thorough strategy will be able to capitalise on the current dubious market to make transformational deals that may contribute to their long-term success.

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October 21, 2023December 18, 2023 byJeet Vasa

Unlocking AML efficiency: streamlining compliance with automation

In today’s digital era, businesses are confronted with ever-increasing challenges in achieving anti-money laundering (AML) compliance. However, a new wave of AML experts is transforming the landscape by leveraging advanced automation and configurability capabilities.

By Fraser Mitchell, technical director at SmartSearch

Fraser Mitchell, technical director, SmartSearch

By leveraging fully automated workflows and extensive search configurability, businesses can tailor their AML processes, resulting in significant time and resource savings.

These automated workflows streamline crucial tasks such as data collection, analysis, and reporting, thereby reducing the risk of human error. Additionally, the configurability aspect enables businesses to adapt their AML practices to meet evolving regulatory requirements, industry standards, and emerging financial crime trends.

The adoption of automation and configurability fosters scalability in AML compliance. As businesses grow and transaction volumes surge, manual processes become increasingly overwhelming and prone to errors. By harnessing technology, regulated firms can handle larger volumes of data, analyse them in real-time, and identify potential risks more effectively.

Next-generation platforms are transforming compliance processes. By leveraging fully automated workflow capabilities, businesses can align their AML workflows with their internal processes, enabling seamless integration across different business functions.

This automation significantly reduces manual efforts and minimises the risk of human error, ultimately enhancing operational efficiency. Businesses can customise their AML workflows by utilising custom risk profiles and watchlist screening configurability. This level of customisation allows users to screen custom lists and adapt their processes according to the specific risk profiles of their clients. By tailoring the configurability to individual needs, businesses can optimise their compliance efforts and ensure regulatory adherence.

A bespoke workflow capability empowers businesses to create rules-based applications and assign tasks based on specific triggers. This automation provides timely outcomes and actions, simplifying the decision-making process for users. Additionally, configurable watchlist screening enables a seamless customer journey for legitimate clients. By automating these processes, businesses can improve customer onboarding and enhance the overall compliance experience.

With a fully-configurable solution, firms can customise their AML operations to align with their unique needs. The platform facilitates the seamless onboarding of clients by offering extensive search configuration, allowing businesses to identify high-risk clients more efficiently while streamlining the onboarding process for genuine customers. By utilising custom watchlists tailored to their specific business requirements, firms can proactively mitigate compliance risks.

In the rapidly evolving landscape of AML compliance, businesses need innovative solutions to streamline their processes and maintain regulatory compliance. Advanced automation and configurability capabilities offer a game-changing approach to AML workflows.

By leveraging fully automated workflow capabilities and extensive search configurability, businesses can customise their AML processes and focus on their core operations. The result is enhanced efficiency, improved customer onboarding, and reduced compliance risks. Embracing these technologies will empower businesses to thrive in the evolving compliance landscape while maintaining their commitment to regulatory standards.

SmartSearch’s commitment to supporting regulated firms with AML compliance spans over a decade. Their digital compliance solution has earned the trust of more than 6,000 clients and 55,000 users, including prominent financial services and property firms, and leading accountancy and legal firms.

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October 21, 2023December 18, 2023 byJeet Vasa

Digital Banking: Prioritising Financial Inclusion

In recent years, digital transformation and the rise of FinTech technologies have made digital banking increasingly accessible. Now, there is a wide variety of digital services available as banks continue to focus on delivering the best, most convenient services to their customers.

By Hans Tesselaar, Executive Director at BIAN

There is clear momentum happening in online and digital banking, with 416 million active users of online banking in Europe alone, an increase from 398 million in 2022. This is reflected globally, with 170 million users in 2023 in Latin America, expected to spread to almost 198 million next year. Emerging technologies can support this expansion, but it’s the responsibility of the industry as a whole to ensure financial inclusion and economic growth for all, which is a priority amid this growth.

Digital inequalities caused by this shift must be addressed through collaboration and emerging technologies, an area where some developing countries are leading by example. The role of industry standards is also incredibly important when looking to better deliver digital services to all.

Counting on industry standards

We can look to the Union Bank of the Philippines as an excellent example of this. The extensive use of legacy technology within banks means the speed at which these established institutions can bring new services to life is often too slow and outdated. This challenge is also complicated by a lack of industry standards, meaning banks continue to be restricted by having to choose partners based on the ease and cost of integration. This is instead of their functionality and the way they’re able to transform the bank.

To truly digitise, banks need to overcome these obstacles surrounding interoperability with a coreless banking model. This approach to transformation empowers banks to select the software needed to obtain the best-of-breed for each application area without worrying about interoperability and being constrained to those service providers that operate within their own technical language or messaging model.

By translating each of that proprietary messages into one standard message model, communication between different parts of organisations is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data.

Adopting emerging technologies to increase accessibility

While some elements of financial inclusion and digital adoption require a more considered approach, there are instances where emerging technologies are bringing transformative services to the unbanked.

The Union Bank of the Philippines, for example, overhauled its quick loans retail engine (RLE) to serve as the central platform for the bank’s loan and credit products, leveraging its reusability and ease. Using a combination of low-code, based on the BIAN Models, and the adoption of BIAN APIs, the bank sought to establish a seamless, fully digital experience that could scale up to meet the country’s huge demands for loans by the unbanked.

This has enabled the Union Bank of the Philippines to overcome the issues preventing the RLE from scaling to the mass market to reach the 51.2 million unbanked Filipinos. Through this innovation, those who otherwise wouldn’t have access to a fully digital quick loan service now do.

This is just one example of many, as fintech adoption continues to grow in emerging markets due to the increasing use of mobile phones and the internet, the large unbanked population, and the growing middle class. It will be no surprise to see more of these examples where banks look to digital services to reach the mass market over the coming years.

Creating a supportive ecosystem

As FinTech adoption continues to grow in emerging markets, banks must form an ecosystem alongside fintech, service providers, and aggregators. This will help banks when it comes to the speed they can introduce new products.

An effective ecosystem strategy will make banks more relevant to their customers, providing an opportunity to drive better relationships and bigger wallet shares by providing the speed, scale, and differentiated products that make the most of the opportunity presented by the significant shift to digital banking. With this approach, banks can focus on offering services to meet the demand of all customers, whether that be digital, analog, or reaching the unbanked population.

The journey to digitalisation

To be truly inclusive, banks must assess their customer base and look to meet its needs.

Where digital adoption risks leaving customers behind, banks must ensure these customers are prioritised through collaboration, access to offline services, and a slow, steady digital transformation process. In other cases, digital transformation is the answer to bringing financial services to the mass market. In both situations, industry standards can be the key to unlocking new technologies and providing services to those who otherwise wouldn’t be able to access them.

Putting the customer first and taking a collaborative approach will be how the industry brings all customers along on the digitalisation journey. As long as the priority for banks remains on financial inclusion and innovation increasingly supports this, there will never be a customer left behind.

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October 21, 2023December 18, 2023 byJeet Vasa

Why the time is right for Buy Now, Pay Later

As UK shoppers face the impact of the cost of living crisis, customers are even more scrupulous in the choices they make online. Checkout finance options, such as Buy Now Pay Later (BNPL), are helping to ease the financial pressures on necessary purchases, enabling consumers to spread the costs of items across a period. Therefore, it’s not just how customers shop that matters today; it’s how they pay.

By Melanie Vala, Chief Commercial Officer, Deko

Technology’s impact on retail has invited expectations of instant access to the best options; the choice is now the primary concern for consumers in a competitive retail climate.

A central issue for merchants is being able to offer consumer finance solutions that address the needs of consumers today. For example, how mobile apps have permeated daily living over the last few years has accelerated consumer transactions – and expectations. Consumers will shop where they have the most choice – and that no longer just extends to products; it extends to the best deals and, therefore, finance options. The consumer experience at the online checkout must be as frictionless as the rest of their user journey, or they will simply look for better options. Businesses must adapt or risk losing out to competitors. This is the difference an effective BNPL solution affords.

BNPL has existed in one form or another throughout the entire history of commerce. Once known as installment plans or payment plans here in the UK or layaway programs in the US, the contemporary version is now digitally savvy, and brand driven.

Today BNPL is a central strategy for any retailer looking to not only diversify buying options for consumers but to also expand their buying power in an era of constrained budgets.

This is a market that has shown extraordinary growth in recent years. The BNPL gross merchandise value in the UK is expected to reach $55.1 billion by 2028, according to research by ResearchAndMarkets.com. Globally, the BNPL market size is expected to reach $39.41 billion by 2030.

What is BNPL?

BNPL, at its core, is a point-of-sale installment loan. The most common type of BNPL service is split payments, which is simply a charge that is split into four payment installments. The other commonly available product is installment loans, where the cost of the good is likely higher, and the length of the payback schedule is longer, with periods that range from six to 24 months plus.

The question then becomes: what is driving BNPL’s massive growth? It was not just the pandemic that added accelerant; two years after the economy opened up, the BNPL revolution continues to march.

All the research is pointing to one clear reason – BNPL lowers the barriers to purchase which has combined with the convenience of digital platforms. This perfect storm has made BNPL hugely attractive for Gen Z and Millennials in particular. Nearly a third (30%) of millennials aren’t currently in possession of a credit card – even fewer for GenZ. Instead, they opt for alternative payment methods when buying online as these options provide the flexibility and ease of use they demand. Findings have indicated that 55% of Millennials now cite convenience as their top online shopping preference.

However, its popularity amongst more mature demographic cohorts, who currently account for the majority of retail spending, should not be ignored. According to research by Pymnts.com, older generations with higher income levels are expanding their footprint in BNPL usage.

Why BNPL matters today

As we have seen the premise of BNPL is repayments by installment, making purchases more affordable for consumers. The customer journey then extends; the final cost is no longer the only indicator of affordability. Instead, it becomes about the financial solutions on offer: BNPL.

As a consumer begins a buying journey, the knowledge that an item’s final cost can be made afforded removes one central barrier to purchasing. Importantly, it also removes a psychological barrier and increases motivation and willingness to buy which, in turn, means increased revenues for merchants.

Whilst BNPL effectively increases cart values and reduces cart abandonment rates, perhaps even more importantly, it encourages consumers to stay engaged with a brand. Offering more accessible finance options increases trust between retailers and consumers, leading to increased sales and a higher frequency of purchases overall. This is even more valuable amid a cost-of-living crisis; customers can afford necessary but higher-value items.

BNPL gives consumers a more budget-friendly way to buy the things they want when they want, which in turn increases consumer satisfaction. Central to this is the transparency and ease of use afforded to consumers of BNPL products. As we have already stated, there is a younger generation coming through who are actively looking for alternatives to traditional credit cards. And with good reason. Credit cards very often have a high barrier to entry, come with high-interest rates, and have long and cumbersome application processes. For a generation looking for a funding solution with the same benefits as credit cards, but without the pain, BNPL is the go-to.

Not only are BNPL platforms more accessible than traditional credit cards, but the way these platforms integrate with major retailers creates an easy-to-use option for consumers as well. While the customer will invariably go through a separate BNPL portal for payment, this ability for an integrated digital experience allows consumers to have a consistent payment experience throughout their digital journeys with a brand.

As the younger generations begin to come into their own and gain further purchasing power — and as credit cards continue to decline in popularity — expect the desire for these alternative payment options to increase.

BNPL presents a flexible option that’s already disrupting the payments industry, stealing customers away from credit card companies and enabling them to spread purchase payments over time.

Digital financing options will only continue to grow, as the world becomes increasingly enmeshed with the digital world. For organisations who want to remain on the cutting edge — and meet a changing customer base — implementing BNPL into your online offering can only serve to benefit the merchant and no more so than in the age of the cost-of-living crisis.

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October 21, 2023December 18, 2023 byJeet Vasa

Navigating the transformation of online payments in 2023

The year 2023 is off to a rocky start for retailers. Recent events including the COVID-19 crisis, the ground war in Europe, and rising inflation are all having a toll on how consumers are shopping – and merchants need to adapt to the new landscape.

By Amal Ahmed, Director, Financial Services and EMEA marketing at Signifyd

One of the biggest developments is the constant change in payment preferences, as new and innovative payment methods enter the scene. But rather than be a hindrance, this shift presents an opportunity for European merchants to thrive in the age of uncertainty, with retailers being urged to diversify their payments stack in line with consumers’ demands.

Signifyd’s eCommerce fraud report explores payment methods as a way to navigate the complexities of the uncertain eCommerce landscape in 2023. Here, we outline the approach that will help merchants stay afloat in 2023.

Rigid payment acceptance is driving customers away

One of the biggest disappointments for consumers which are harming sales and revenue is not finding their preferred payment method on a merchant’s website.

In a world where consumers are looking for a fast and efficient customer experience, and where Strong Customer Authentication (SCA) is already creating friction in the checkout journey, one inconvenience can have detrimental effects on transaction approval.

A 2021 survey by UK Consultancy Merchant Advice Service found that one in five consumers in the UK and European Union would abandon their purchase if they’re unable to pay the way they want to. As a result, merchants are losing £1.8 billion a year.

For merchants, it is time to embrace the new when it comes to payment trends. Research firm 451 Research found that merchants who put a strong emphasis on payments during the pandemic saw their sales increase much more rapidly than others.

Considering payments as a highly strategic area led to an increase in sales for 55% of those who agreed that payments are an essential part of the revenue optimisation mix.

451 analyst Jordan McKee said, “Merchants that had scalable payments infrastructure accepted a diverse mix of payment methods, and put automated fraud-prevention processes in place weathered the storm. Many even thrived.”

Europe’s payment trends in eCommerce

What are Europe’s payment methods that are defining the eCommerce landscape today?

Europe’s eCommerce market is growing at a rapid 11% CAGR (compound annual growth rate) year-on-year and is expected to increase that through 2025. Diversified payment methods are a vital part of that growth across all European countries.

While credit and debit cards used to be the most popular payment methods, sales through them have dropped by 22% in 2022 compared to the year before, shows Singifyd data. Meanwhile, digital wallets are on the rise. In 2021, they accounted for 26.7% of the transaction value – the highest of all. eCommerce sales through PayPal and Apple Pay in particular increased by 274% and 70% between 2021 and 2022.

Buy now, pay later (BNPL) is another payment method that is gaining momentum in Europe, as the eCommerce sales conducted via this method accounted for 8.1% of ecommerce spend in 2021, more than in any other region.

BNPL and digital wallets are leading the way in the Nordic countries, where they’ve had exponential growth, as well as in Germany, France, Poland, and the UK.

While in some countries, such as Germany and France, sales through bank transfers are in decline, in others, such as the UK, Poland, and Turkey, they are projected to grow. Poland, they have a 54.5% share of eCommerce transaction value, and it’s projected to reach 58.6% by 2025.

Payments data is paving the way to a better transactions flow

Understanding payment trends and implementing them into your eCommerce strategy is key. But what’s also aiding merchants in optimising their transaction flow is leveraging payment data and utilising it.

Payments data holds the key to unlocking insights about consumers’ trends and behaviour and then using it to improve approval rates, drive more loyalty, and target the prime consumers that are bringing the most revenue in.

Collecting payment data is all about adopting machine learning to optimise the process and drive better results. It also helps reduce friction caused by SCA, as data helps develop a better understanding of exemptions and approval performance. According to Signifyd’s report, European retailers who have optimised their payment stack have increased sales by 5% to 9%.

Understanding and tapping into the latest payment methods can be a golden key for merchants to unlock their full eCommerce potential and reduce the friction in the customer journey created by SCA.

Analytics Artificial Intelligence IBSi Blogs

October 21, 2023December 18, 2023 byJeet Vasa

Can ChatGPT help fight cybercrime?

Open AI’s ChatGPT has taken the world by storm, with its sophisticated Large Language Model offering seemingly endless possibilities. People have put it to work in hugely creative ways, from the harmless scripting of standup comedy to less benign use cases, from AI-generated essays that pass university-level examinations to copy that assists the spread of misinformation.

Iain Swaine, Head of Cyber Strategy EMEA at BioCatch

Iain Swaine, Head of Cyber Strategy EMEA at BioCatch

Chat GPTs (Generative Pretrained Transformers) are a deep learning algorithm that generates text conversations. While many organisations are exploring how such generative AI can assist in tasks such as marketing communications or customer service chatbots, others are increasingly questioning its appropriateness. For example, JP Morgan has recently restricted its employees’ use of ChatGPT over accuracy concerns and fears it could compromise data protection and security.

As with all new technologies, essential questions are being raised, not least its potential to enable fraud, as well as the power it may have to fight back as a fraud prevention tool. Just as brands may use this next-gen technology to automate human-like communication with customers, cybercriminals can adopt it as a formidable tool for streamlining convincing frauds. Researchers recently discovered hackers are even using ChatGPT to generate malware code.

From malware attacks to phishing scams, chatbots could power a new wave of scams, hacks and identity thefts. Gone are the days of poorly written phishing emails. Now automated conversational technologies can be trained to mimic individual speech patterns and even imitate writing style. As such, criminals can use these algorithms to create conversations that appear to be legitimate but which mask fraud or money laundering activities.

Whether sending convincing phishing emails or seeking to impersonate a user and gain access to their accounts or access sensitive information, fraudsters have been quick to capitalise on conversational AI. A criminal could use a GPT to generate conversations that appear to be discussing legitimate business activities but which are intended to conceal the transfer of funds. As a result, it is more difficult for financial institutions and other entities to detect patterns of money laundering activities when they are hidden in a conversation generated by a GPT.

Using GPT to fight back against fraud

But it is not all bad news. Firstly, ChatGPT is designed to prevent misuse by bad actors through several security measures, including data encryption, authentication, authorisation, and access control. Additionally, ChatGPT uses machine-learning algorithms to detect and block malicious activity. The system also has built-in safeguards against malicious bots, making it much harder for bad actors to use it for nefarious purposes.

In fact, technologies such as ChatGPT can actively help fight back against fraud.

Take Business email compromise fraud (BEC). Here a cybercriminal compromises a legitimate business email account, often through social engineering or phishing, and uses it to conduct unauthorised financial transactions or to gain access to confidential information. It is often used to target companies with large sums of money and can involve the theft of funds, sensitive data, or both. It can also be used to impersonate a trusted business partner and solicit payments or sensitive information.

As a natural language processing (NLP) tool, ChatGPT can analyse emails for suspicious language patterns and identify anomalies that may signal fraud. For example, it can compare email text to past communications sent by the same user to determine if the language used is consistent. While GPT will form an essential part of anti-fraud measures, it will be a small part of a much bigger toolbox.

New technologies such as GPT mean that financial institutions will have to strengthen fraud detection and prevention systems and utilise biometrics and other advanced authentication methods to verify the identity of customers and reduce the risk of fraud. For example, financial organisations already use powerful behavioural intelligence analysis technologies to analyse digital behaviour to distinguish between genuine users and criminals.

In a post-ChatGPT world, behavioural intelligence will continue to play a vital role in detecting fraud. By analysing user behaviour, such as typing speed, keystrokes, mouse movements, and other digital behaviours, behavioural intelligence will aid in spotting anomalies. These can indicate that activities are not generated or controlled by a real human. It is already very successfully being used to spot robotic activities which are a combination of scripted behaviour and human controllers.

For example, a system can detect if a different user is attempting to use the same account or if someone is attempting to use a stolen account. Behavioural intelligence can also be used to detect suspicious activity, such as abnormally high or low usage or sudden changes in a user’s behaviour.

As such, using ChatGPT as a weapon against fraud could be seen as an extension of these strategies but not as a replacement. To counter increasingly sophisticated scams, financial service providers such as banks will need to invest in additional control such as robust analytics to provide insights into user interactions, conversations, and customer preferences and comprehensive audit and logging systems to track user activity and detect any potential abuse or fraudulent activity.

And it’s not all about fraud prevention. Financial institutions should also consider how they use biometric and conversational AI technologies to enhance customer interactions. Such AI-driven customer service platforms can ensure rapid response times and accurate resolutions, with automated customer support services providing quick resolutions and answers to customer queries.

Few world-changing technologies arrive without controversy, and ChatGPT has undoubtedly followed suit. While it may open some doors to criminal enterprise, it can also be used to thwart them. There’s no putting it back in the box. Instead, financial institutions must embrace the full armoury of defences available to them in the fight against fraud.

Analytics IBSi Blogs Payments

October 21, 2023December 18, 2023 byJeet Vasa

How to be a disruptor in the payment card market

True disruption is hard to achieve and rarer than you think, but when a company addresses a real consumer problem and rides the wave of consumer change, you see the birth of a major market player.

By Jeremy Baber, CEO of virtual payment card provider Lanistar

We often see the biggest disruptors thrive in times of change, very often as a result of economic challenges. It will come as no surprise, therefore, that the likes of Netflix, Uber, and even Airbnb all rose to prominence after the financial crisis in 2010 simply because they all provided solutions for consumers facing very real problems in a time of change.

Each brand delivered convenience and financial savings, using the very latest technology and a shared economy model that created new, exciting, and inherently better experiences for consumers. This is exactly what consumers wanted, and it helped spawn a host of new markets.

It is this model that is powering a revolution in the card payment market today- one that has so often been at the forefront of change and innovation in its own right. Today’s consumers – banked or unbanked – are demanding more from their suppliers, forcing them to reinvent themselves and their product offerings. This is happening while the financial services industry as a whole is facing increased regulation.

The Disruptive Consumer

Historically, brands and service providers have always relied on consumers basing their purchasing decisions on basics such as service levels and fair pricing. But the modern consumer has developed far higher expectations based on a host of new metrics such as personalised interactions, proactivity, and even whether a company can offer a connected digital experience.

Today’s consumers are disrupting traditional buying patterns and businesses, demanding elements such as cloud, mobile, social media, and AI to deliver an immediate, valuable, and personalised experience. They have learned from Netflix and Uber, and any business that fails to address this will fall by the wayside.

But the disruptive consumer does not stop there. According to research from Capita, over half (56%) of all consumers said it was important to them that their bank or building society acted sustainably and/or ethically. This does appear to be a direct result of the pandemic and increased awareness of the climate crisis, with consumers taking time to reappraise what’s important to them.

Put bluntly, these views have been extended to those businesses where they wish to spend their money. Millennials are leading the charge in this ethics revolution, with 60% claiming it’s important, followed by Boomers (57%) and Gen X (39-53 years old) 55%.

Democratisation Of Financial Products

Financial inclusion matters and is the cornerstone of economic development. When people have a bank account, it enables them to take advantage of other financial services like saving, making payments, and accessing credit.

According to The World Bank, 71% of people have a bank account in developing countries today, up from 42% a decade ago, while globally, 76% of adults around the world have an account today, up from 51% a decade ago. These tremendous gains are also now more evenly distributed and come from a greater number of countries than ever before.

But this still means some 1.4 billion people remain outside of the traditional banking sector. These tend to be the hardest people to reach – very often women, the poor, the less educated, and, very often, those living in rural areas.

While digitising payments is the way to go, much more is needed. Governments, private employers, and financial service providers – including FinTechs – should work together to lower barriers to access and improve physical, financial, and data infrastructure. This means FinTechs need to build trust and confidence in using financial products, develop innovative new products, and implement a strong and enforceable consumer protection framework that will include these aforementioned individuals.

After all, the unbanked and the underserviced sector is today the greatest untapped market opportunity for many fintechs.

The Integration Of People And Technology

The evolution of technology is at the heart of efforts to better serve customers. Adopting new technology is, therefore, critical for financial services organisations to thrive.

Progressive financial services companies are on the lookout for new technologies to improve efficiency and speed of service, as well as provide a better customer experience. This is without doubt a direct result of the competition faced from consumer brands like Amazon, Facebook, and Google.

Even before the pandemic, customers increasingly expected easily accessible and fully personalised digital products and services. As a result, financial institutions were already rethinking processes, expanding tech investments, and testing new applications.

Incumbents have traditionally looked for technologies to increase efficiency and lower costs. FinTechs, by contrast, start with a customer problem, identifying ways to address it with digital tools, then build new business models around digital solutions.

The digitisation of financial services is ongoing. Enterprises have a choice: make innovation the focus of a stand-alone organisation, or integrate it throughout the business. The winners in this race will be the ones that marry technological innovation with the expectations of today’s consumer.

The Progressive Consumer

Over the last few years, some of the most influential global financial institutions have committed to reducing emissions attributable to their operations. They have also pledged to reshape their lending and investment portfolios to produce a net zero carbon footprint by 2050.

ESG is big business. Banks are restructuring to adopt green pledges, and fintech is developing new solutions to address climate-related consumers and issues, all as part of detailed, overarching ESG strategies. ESG-focused FinTechs in particular have a unique ability to achieve rapid growth, deliver sustainability-focused innovation, and attract investment capital to support their efforts to improve the environment and society, all while generating substantial returns. All of this is being done due to the requirements of an ever-evolving and demanding consumer.

The climate-centric FinTechs in the payments sector driving the biggest change are the ones focusing on influencing the spending behaviours of sustainability-minded consumers. By engaging with this demographic, FinTechs can sustain their revenues by aligning financial transactions with ESG goals.

Over the past decade, new digital FinTechs have begun to transform and disrupt the financial services sector. Technological advances in finance are not new, but progress has arguably accelerated in the digital age due to improvements in mobile communications, AI, machine learning, and information collection and processing technologies. This revolution was matched by an extraordinary increase in consumer expectations.

The payments market in particular has experienced a rapid proliferation of digital innovations that make payments faster and cashless. Consumers in advanced and emerging markets have increasingly adopted fintech services because of their convenience and lower cost. The challenge for both new and existing firms is to create and deliver new financial products and services as they strive to compete.

What is big data?

AI and fraud

Drive growth during uncertain times

Increased efficiency and faster cash flow

​​Expanded customer base and global reach

Data insights and cost reduction

Choosing the right solution

Conclusion

Consumers trust what they know

An awareness issue

Conquering the disconnect

Final thoughts

Time to focus

FinTech trends

Counting on industry standards

Adopting emerging technologies to increase accessibility

Creating a supportive ecosystem

The journey to digitalisation

What is BNPL?

Why BNPL matters today

Rigid payment acceptance is driving customers away

Europe’s payment trends in eCommerce

Payments data is paving the way to a better transactions flow

Using GPT to fight back against fraud

The Disruptive Consumer

Democratisation Of Financial Products

The Integration Of People And Technology

The Progressive Consumer

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