In the world of payments, there are important changes on the near horizon which have been anticipated for some time, namely the implementation of the second Payment Services Directive. PSD2 is focused on initiatives to make payments safer, increase consumer protection, and foster innovation and competition.
The next tranche of the PSD2 legislation brings with it the introduction of Strong Customer Authentication (SCA). The SCA requirements came into force in September 2019, however the EU Commission and the European Banking Authority subsequently stated that national regulators should not actively enforce the regulation until 31st December 2020 for e-commerce.
In practical terms, in the UK and across Europe, SCA will mean additional security authentications for certain online transactions, a process designed to add an extra layer of fraud protection when cardholders make an electronic payment.
This means that in order for a card issuer to approve the transaction, a cardholder provides two of the following three independent sources of identity verification: something you know (e.g. PIN or password); something you have (e.g. a mobile device); or something you are (e.g. fingerprint or facial recognition).
With online transactions a large part of many businesses’ operations, it’s vital that they make the most of the technology at our disposal to smoothly integrate 3DS and, as a result, minimise the disruption to the checkout process without compromising customer security.
Despite this having already come into law, with a 2020 effective date, many e-commerce merchants are yet to begin taking the necessary steps to ensure they are suitably prepared for SCA. Payment providers, such as card issuers and acquirers, are subject to the new rules, so if merchants don’t act soon, they risk issuers declining the transactions, which could lead to a loss of revenue as well as cardholder dissatisfaction. And, while in the UK, the Financial Conduct Authority has confirmed a revised enforcement date of 14th September 2021, other regulators are requiring the industry to begin ramping up SCA now. It, therefore, is imperative for merchants to take immediate action to be ready for the implementation of the SCA requirements.
Fortunately, there is a global industry standard - EMV® 3-D Secure (3DS) - to give merchants the ability to undertake SCA integration for all major payment providers at once. This is key in helping to make implementation as seamless as possible and, in practice, will mean merchants will require minimal additional time and resources for implementation.
With online transactions a large part of many businesses’ operations, it’s vital that they make the most of the technology at our disposal to smoothly integrate 3DS and, as a result, minimise the disruption to the checkout process without compromising customer security. 3DS technology also offers data insights on the purchasing journey, allowing issuers to make smarter, more sophisticated risk decisions which helps to reduce friction while protecting against fraud. To create a more seamless experience for consumers and merchants alike, ‘whitelisting’ features also allow consumers to select merchants to be marked as ‘trusted’, and thus exempted from the requirements of SCA whilst managing fraud detection and protection.
We know that every purchase is an important one for merchants, and we have designed our technology to support a safe and smooth transaction environment. There are clear actions merchants can take now to have an SCA solution in place before their country compliance date, so they can continue to offer an efficient and secure checkout experience for their customers.
American Express recently launched SafeKey 2.2 - a security solution that leverages the global industry standard. For more information about SafeKey, please visit www.amexsafekey.com. For more information about Express List, the American Express trusted beneficiary tool, please visit www.americanexpress.com/uk/security/safekey.
A recent American Express’s CFO survey found that 89% of UK CFOs believe that the prospect of unanticipated surprise events is a rapidly growing concern for their company[1].
In light of this, it’s no surprise that the research also revealed that 96% of CFOs think that improving cash and working capital management is more important this year than last year.
It’s not only the big players for whom access to cashflow is vital. For SMEs, it’s arguably even more significant. Having working capital to hand allows SMEs to take advantage of their size and be nimble in responding to growth opportunities.
It also creates a safety net that could make the difference between staying afloat and going under. This is particularly the case for young SMEs starting out, with recent research suggesting just 41.5% of SMEs survive the five-year mark[2].
Of course, despite the best intentions, there will always be hiccups along the way, and occasions when a business must crack down on late payments.
American Express’s SME research with Oxford Economics shows that many SMEs find it challenging to stay on top of cashflow, with 30% of UK SME leaders reporting that getting the funds to drive growth is difficult.
Taking back control of cashflow
So how can businesses keep on top of their cashflow and thrive in the face of political and economic uncertainty?
For any business, the first rule in taking control of cashflow is to keep an accurate record of all payments and outgoings. Without an up-to-date cashflow forecast for the months ahead, it’s impossible to identify vulnerabilities or determine how much can safely be invested in growth opportunities.
The next step is establishing strong relationships with suppliers and customers. For many finance departments, it can be tempting to artificially improve cashflow figures by insisting on longer payment terms with suppliers and shorter payment terms with buyers. But doing so is likely to breed ill-will and resentment in the long term.
Instead, make sure background checks are carried out to ensure you’re working with a trusted and sustainable partner, including credit checks. And then clearly communicate expectations from the outset, to establish a good working relationship based on transparency. It also helps to send invoices out immediately to facilitate prompt payment.
Of course, despite the best intentions, there will always be hiccups along the way, and occasions when a business must crack down on late payments. The most effective way of managing this is to incentivise the other party to pay on time, such as offering a small discount or favourable repeat terms. It’s also important to have an agreed and consistent escalation process in place, in cases where late payments need to be followed up.
Supply chain financing
Once these measures have been taken, there are also products and services available to businesses to help improve their cashflow. One example is supply chain financing, which enables customers to pay suppliers via a third party. Once an agreement has been reached between the two parties and an invoice approved, the third party pays the supplier their money and the customer holds onto their capital until it receives a single consolidated invoice at the end of its billing cycle.
This process allows suppliers to receive their payment immediately and affords customers more time before the money leaves their account – improving cashflow for both parties. At American Express we offer this service to thousands of our business customers, providing them with critical support to optimise their cashflow.
Companies exercising good cashflow management are better equipped to mitigate against external uncertainty and unlock opportunities for innovation and growth – benefiting the business, its customers and its suppliers in the short, medium and long term.
[1] American Express collaborated with Institutional Investor’s Custom Research Lab on its Global and Spending Outlook, a survey of 870 senior finance executives at large enterprises, 100 of whom are based in the UK. Survey responses were gathered in November and December 2018.
[2] https://survivalcalculator.biz
In 1880, we introduced the first ever credit voucher, which led the way as a pre-curser to credit cards and the likes, followed by the reveal of metal deferred payment cards from Western Union in 1914 and subsequently several appearances of payment or credit cards that allowed to users to credit shop at specific stores, like Diner’s Club, the first independent credit card company in the world.
Since American Express made credit cards popular in 1958, the idea of buying with cash that isn’t yet available to the buyer has evolved into the concept of cashless buying with money we do have. The accessibility, ease and efficiency of credit cards led to a culture, globally, that accepts plastic cards as the norm. The industry 4.0 revolution now presents the next stage in said evolution, whereby we are experiencing the proliferation of contactless payments, both via plastic debit cards and more recently, via smartphones.
2017 marked ten years since contactless was introduced, so it may still be another 10 years until we see an almost complete eradication of cash from western society. Currently, contactless payments account for just over a third of all payments in the UK. Equally over a third agree that the UK will be cashless in another 10 years. The further spread of contactless via mobile, which would only go to shorten those 10 years, is however hindered by the need to link a bank account with the customer’s smartphone, making this option inaccessible to a greater part of the world’s consumers.
A recent study conducted by Forex Bonuses reveals that Canada is currently number one in the list of top cashless countries worldwide , with 57% of transactions nationally being made without cash, as opposed to 2% in Sweden and France, 52% in the UK, and 10% in China. In China however, 77% of people said they were aware of cashless options, which could mean potential for a huge boost of cashless transactions in years to come. All in all though, 83% of global transactions are in cash, according to Western Union.
The ease of cashless transactions proves the potential for revolutionary popularity, as with a flick of a finger or a swipe of the thumb, all liquid assets can be accessed and moved around. The secondary benefits are the effect a cashless society can have on crime, both in terms of banks & financial institutions, as well as street crime and potential for muggings. In addition, though most cash payments do result in a printed receipt, digital records of transactions are few and far between, and whether by blockchain or other, documenting digital footprints for transactions has the capacity to help governments better set policy, tax citizens and stop fraud, as well as help banks to better monitor financial spheres and adjust rates and inflation accordingly. The introduction of Open Banking will also only go to facilitate these benefits in the digital payments sphere.
So, why are we not already making the world completely cashless and sending all our money to be burnt? One question we should ask first is whether this is truly something people want. Bloomberg reports that a recent move by Indian authorities to remove 86% of cash in circulation proved to be difficult, and shocked many cash dependent markets. The poor especially depend highly on using cash, and making everything digital could put lower earners at a serious disadvantage and the prospect of governments and banks having so much control of people’s finances does pose further concerns. Another major issue is that while street crime and fraud could be better monitored and prevented, cybercrime could rise in equal or greater measure, depending on the vulnerability of transaction systems.
Further on the topic of cybercrime, back in the day ‘looking over your shoulder’ referred to watching your back for pickpockets; that then became about being aware of criminals stealing your PIN, but the new risks are money swiping and the potential for losing your contactless card, which can then be used by whoever finds it or picks it up. Equifax recommends lining your wallet to eliminate the risk of signal and antenna making contact in a money swipe grab, which in essence, is today’s version of pickpocketing.
Bitcoin and the blockchain are proving useful in the payments security sphere, but in their short-lived popularity have already displayed weaknesses and risks that will need time to fix. Equally, infrastructure will have to keep up, as Visa have already showed that IT outages can cause serious disruptions, leaving users unable to make or take payments. On top of this, connections are required to record and document the data, as well as transfer information between the buyer, seller and bank; if the connection is affected in any way, this can create major difficulties. With cash, these issues don’t really exist.
Though no longer king, cash is still the biggest way of actioning transactions around the world, and the physical act of exchanging money still feels the most secure and manageable for most. It’s still also the go-to fall back when the ole’ chip and pin doesn’t work, so it’s still very much in play, in fact the growth of cash circulation outpaced economic growth over the last 10 years. Despite the fact there has never been more cash in circulation worldwide, we are slowly moving towards a cashless society, but the eventuality of a 100% cash free world is still highly debatable.
What do you think? Would you be prepared to burn all your cash in return for liquid assets and the promise of a risk-free digital payments sphere?
Sources:
https://www.thetimes.co.uk/article/ten-years-of-contactless-payments-ck00rsx9p
http://www.theukcardsassociation.org.uk/history_of_cards/index.asp
https://www.finance-monthly.com/2018/07/over-a-third-think-the-uk-will-be-cashless-in-10-years-or-less/
https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/
https://www.finance-monthly.com/2018/08/high-level-of-cyber-security-and-cashless-go-hand-in-hand/
https://www.thetimes.co.uk/article/why-contactless-is-quick-and-easy-for-fraudsters-8dg6dfbfq
https://www.equifax.co.uk/resources/identity_protection/how_to_avoid_contactless_card_fraud.html
https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/
https://money.cnn.com/2017/11/20/news/economy/cash-circulation-payment/index.html
UK businesses optimistic about international trade plans – and view trade as a catalyst for growth, says new report from American Express.
The UK remains a uniquely connected major economy, and the future looks bright for the country’s trade activity; 39% of UK businesses presently trading internationally plan to increase their volume of trade over the next 12 months, and almost half (44%) expect their revenue from trade to increase within this period.
American Express commissioned the Centre for Economics and Business Research (Cebr) in October this year to undertake the Fresh Frontiers study to understand more about the dynamics of international trade opportunities across six major trading markets.
Based on economic modelling, the report reveals that the USA is the top untapped trading partner for the UK. In addition, continental European markets also feature strongly in terms of untapped trade potential, with Luxembourg, Denmark, France, Finland and Austria all ranking highly. This suggests the UK businesses should look to continental Europe and the US for future trade growth.
As part of the Fresh Frontiers study, American Express also separately surveyed businesses in each country about their international trade outlook. The majority (77%) believe that opportunities for international trade are increasing and half are looking to trade with new countries over the next 12 months.
Reassuringly, the research also shows that the present economic turbulence isn’t deterring UK businesses when it comes to their trade ambitions: The vast majority (80%) of UK businesses trading internationally are confident in their global trade strategies, with bigger businesses (with 250+ employees) 11% more likely to be confident than SMEs. However, it seems that they are taking a cautious approach to their trade plans, with almost half (49%) describing their approach to international trade as ‘measured’ and 21% saying they are ‘risk averse’.
Despite the opportunities offered by international trade, businesses admit that they face significant obstacles when looking to trade. 75% of UK businesses surveyed believe that international trade is becoming increasingly complex, citing exchange rate volatility and economic changes as the biggest challenges to both their current and future international trade activity. UK businesses also revealed that making and receiving payments abroad was overly problematic (71%). However, less than half (42%) currently use FX forward contracts and only 28% use FX Options, despite the vast majority of those that do deeming them effective (87%).
Jose Carvalho, Senior Vice President at American Express Global Commercial Payments, comments: “It’s very positive to see UK businesses looking to international trade as a way to grow and undeterred by either geography or logistics. As well as looking to new countries to trade with, businesses are actively seeking solutions such as FX forward contracts to overcome perceived barriers. Technology has been a great catalyst in enabling this to happen.”
Cristian Niculescu-Marcu, Managing Economist at CEBR, says: “Taking into account key trade drivers, such as economic performance, regional trade agreements, low levels of corruption and institutions, the Fresh Frontiers analysis shows significant untapped trade potential for UK businesses both in the USA and closer to home.”
With 91% of UK businesses agreeing that digital technology makes it easier to trade internationally and 73% agreeing that they expect to see business growth through international rather than domestic trade over the next year, there has perhaps never been a better time to assess new trade potential around the globe.
(Source: American Express)
Millennial leaders are set to shake up traditional company management as they focus on building businesses based on both profit and purpose, new research from American Express has revealed.
Redefining the C-Suite: Business the Millennial Way, surveyed over 2,300 global leaders and Millennial managers - the future leaders of business - to better understand how businesses will change as Millennials rise to senior management roles. The findings also provide an insight into how business leaders today can set their companies up for success in the future.
The research found that while over half (56%) of Millennials surveyed in the UK said that a C-Suite role is attractive to them, and that they are more likely than their Gen X counterparts to want a job that gives them status, Millennials also indicated that they want to shake up traditional business leadership.
75% of Millennials think that successful businesses of the future will see management look beyond the usual models of doing business and be more open to collaborating with new partners. Millennial professionals also think that teamwork is a more important quality in leaders than Gen X-ers, suggesting that the C-Suite of the future will promote a much flatter structure in the organisations they lead. Millennials also ranked passion as an important quality in leaders (30%) much more highly than their Gen X counterparts (19%).
As part of their C-Suite shake up, Millennial leaders will put employee wellbeing at the top of their agenda. When asked what the biggest challenges are to businesses of the future, Millennials’ top answer was paying employees fairly (49%), followed by retention of talent (40%). 74% of Millennials also say that successful businesses of the future will need to support employees outside of work, compared to just 67% of Gen X-ers.
The research also found that while the majority (76%) of future Millennial leaders think that businesses of the future will need to have a genuine purpose that resonates with people, they also recognise the importance of driving a profit – something often perceived as being at odds with doing purposeful business.
According to the research, 63% of Millennials say that it is important for them to be known for making a valuable difference in the world, and Millennials are more likely to invest in CSR when running their own businesses (58%) compared to their Gen X counterparts (50%).
At the same time, UK Millennials were found to have a keen eye on maximising shareholder profit, with 53% of Millennials saying that shareholder profit will be important for the success of businesses in the future compared to 46% of Gen X-ers. To achieve success in the future, 71% of Millennials also think that businesses will need to manage costs tightly, and 77% say that financial transparency will be important.
Commenting on the findings, Jose Carvalho, Senior VP and General Manager at American Express Global Commercial Payments Europe said, ‘Millennials are demanding more from the businesses they work for – and will come to lead. This is setting the stage for an evolution of the C-Suite, where they will seek to put both profit and purpose at the heart of their businesses whilst also structuring them in a way to ensure tight cost management and efficient processes.
Jose continued, ‘This offers valuable insight for today’s business leaders as they seek to future proof their organisations and prepare for Millennial leadership. At American Express, we are dedicated to providing payment products and services that are designed to help companies effectively evolve and navigate change to ensure they continue to get business done now and in the future.’
(Source: American Express)
Finance leaders are taking swift steps to invest and adapt to help their businesses navigate the unpredictable path ahead, according to new insights from some of the UK’s leading CFOs.
The 2017 Global Business and Spending Outlook by American Express and Institutional Investor surveyed 100 senior finance executives in the UK, more than half of whom work for companies with more than $1 billion in annual revenue. It gives an important glimpse into the thoughts and strategies of the UK’s most influential CFOs as the asks, and influence, of the CFO has never been greater.
There is understandable caution in the market, given geopolitical events unfolding around the world. However, rather than tightening the purse strings, almost all the finance chiefs surveyed (99%) say their company’s spending and investment will increase worldwide during the next year.
And CFOs are playing a central strategic role when it comes to mitigating the impact of ever-changing market conditions, indicating the evolution of the CFO into the Chief Flexibility Officer, with more responsibility but also more influence across the business than ever before. In fact, more than eight in ten (81%) say that the most senior financial officer wields more influence over strategic decision making than the CEO in their business.
Boosting competitive advantage seems to be the main strategy for CFOs tackling the uncertain economic climate. Ensuring the organisation remains competitive is cited as the biggest business priority (67%) and 92% of CFOs are increasing spending to ensure this happens.
To strengthen this competitive advantage, companies plan to spend more on customer service (67%), technology infrastructure (51%) and labour/headcount (48%). This is supported by reports of increased pressure to compete on the quality of customer service (84%), a focus on information security and how difficulties in hiring and retaining employees (sales and marketing staff in particular) are preventing businesses from hitting their goals.
But finance execs are also investing in financial reporting and compliance (37%), production inputs (35%) and advertising, marketing and PR (31%) as transparency remains critical, prices rise and the battle for market share continues to wage. And 59% say exports are set to become more important for growth.
Jose Carvalho, Senior Vice President, Global Commercial Payments Europe at American Express says: “CFOs in 2017 don’t just have to balance the books – they are having to tackle everything from automation to international trade, and plan their investment accordingly. The Chief Flexibility Officer isn’t just the guardian of the purse strings. They are absolutely critical to helping businesses survive and thrive, by investing in the right areas, in the right ways.”
“We work with business leaders across the country to make sure they are set up for success today and in the future. As a result we know how important it is for finance teams to have tools at their disposal to help them operate and grow their business efficiently – and for them to deliver the strategic value we know will be so important for the rest of 2017 and beyond.”
(Source: American Express)
