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Luckily, thinkmoney have uncovered the unspoken benefits for businesses if Britain were to ditch cash.

In addition, their research has also revealed which UK regions are the most prepared for the ‘death of cash’.

1. The Average Business Would See a £23,145 Boost

Research has revealed that businesses lose out on £23,145 when they only accept cash transactions.

2. Lower Risk of Illness Due to ‘Dirty Cash’

In its 113-month lifespan, the average £20 note is exchanged 2,238 times.

A single average banknote carries up to 3,000 different types of bacteria – some of which are known to spread skin infections, food poisoning and stomach ulcers.

3. Safer Workplaces for Staff in Retail and Hospitality

Since 2012, crime within the food/ retail businesses has fallen by 9% - which could be attributed to fewer establishments handling cash.

4. Your Money is Safer With Banks

In the past year, UK banks have successfully prevented £1.66 billion in fraud.

5. A Potential £80m Increase In Charity Donations

A lack of Brits carrying cash has led to UK charities losing a staggering £80 million every year.

However, another organisation that relies heavily on donations, the church, has seen a 97% increase in donations since accepting contactless payments.

6. The Government Could Save £35 billion – Which Could be Invested in Businesses

Every year, the HMRC loses a staggering £35 billion to tax avoidance.

If Britain were to go cashless, this saving could be invested in businesses.

As there’s been a notable drop in the number of people using cash machines, thinkmoney have also uncovered which regions have seen the biggest decline over the past year. The results suggest which regions are the most prepared for a cashless society.

The Decline in ATM Withdrawals Between 2017 vs. 2018
UK Region Reduction in the number of ATM withdrawals
London -8.5%
South East -7.7%
South West -7.0%
East of England -6.0%
North East -4.6%
Yorkshire & the Humber -4.4%
East Midlands -4.3%
West Midlands -4.0%
North West -3.3%
Scotland -3.3%
Wales -3.3%
Northern Ireland -2.0%

 

From this research, it is clear that Northern Ireland is the least prepared for a cashless society. It’s also worth noting that last year, N.I. was the only region that saw an increase in the number of bank branch openings. Every other region saw a clear decline.

You visit your local bank branch’s ATM to withdraw cash or to print out a mini statement and you are met with a message informing you that the ATM is out of service. That is frustrating at all times but can be especially aggravating when there is no other cash machine available nearby. On the theme of banking resilience, here Alan Stewart-Brown, VP EMEA at Opengear, discusses with Finance Monthly the network issues banks are currently dealing with.

For retail banks, the issues and challenges presented by ATM network downtime are likely to be high on the agenda. Financial institutions are reliant upon a resilient network to ensure unique compliance requirements are met, address customer needs and adapt to evolving industry trends. ATM resilience is an important element of this.

Many banks have extensive ATM networks across the UK and often further afield. They may have an ATM in every town or city across the country, and in some places, they may be running multiple ATMs. They are likely also to have machines in many other more remote sites.  If they have network issues or outages, a large number of ATMs could suddenly be out of commission and that presents a huge range of issues and challenges to the bank.

Whenever ATMs go down, it will inevitably result in a loss of revenue and customers for the bank, as they switch to other providers. It is likely to also have a negative impact on a bank’s reputation and brand image. Less well understood, but equally important, it presents a security issue, as the engineer will have to open the ATM up while on site.

In the past, when an ATM went down, an engineer would be scheduled. Depending on availability; how remote the ATM was geographically and the severity of the problem, that could mean at the least hours or even days of downtime.

Even when the engineer arrived on site after a potentially long journey, fixing the problem might not necessarily be straightforward. The ATM may be owned by a third party organisation, not necessarily the bank itself. It may therefore be difficult to access because it is located in a building or facility belonging to another organisation and/or because the engineer’s visit happens out of normal working hours.

Finding a Solution

Banks with ATM networks need something that allows them to get these remote units fixed without having to waste engineering time travelling to the site and dealing with the security issues of opening the box up and the logistical issues that may be involved in gaining access to the ATM itself. They need a solution that can give them remote access when the network is up and running and also when it is down. And they need one that can allow them to power cycle the equipment within the ATM when the router hangs - a common problem in these environments.

These networks also need a solution that is vendor neutral on the equipment it connects to but also on the power equipment it can manage. An out-of-band management unit can be added to each ATM to reduce downtime to just a few minutes and bring them back up very quickly. It also negates the need for someone to physically go to the site, and most importantly removes the necessity for the secure opening up of the ATM.

Keeping Branches Up and Running

ATM failures are of course one key aspect of a broader requirement facing banks to keep their retail branches up and running at all times. At Opengear, we are seeing a growing demand for solutions that deliver network resilience from core to edge in financial networks. One of the top performing banks in the US recently needed an out-of-band solution for its multiple locations across the country. With the challenge it faced highlighted by a recent outage at a remote location, the bank wanted to reduce the burden of travelling to geographically-distributed sites, decrease downtime and ensure compliance requirements were met. It chose to deploy ACM7000 Resilience Gateways from Opengear at each branch location, paired with the Lighthouse Central Management System (CMS), also from Opengear.

Failover to Cellular (F2C) and Smart Out-of-Band (OOB) technology ensure security requirements are met while also providing access to infrastructure during a disruption, with an alternate path to the primary network using 4G LTE. In addition, the bank is able to deploy and provision new sites remotely.  It is a great example of the benefits of resilient access to networks in financial services when an outage occurs.

In summary, outages are bad news for banks and other financial institutions. ATM outages are arguably especially bad because they are particularly visible to customers; cause immediate loss of revenue and customer churn; as well as negatively impacting reputation and presenting a security risk. But they are inevitable because of human error, cyberattack, and the ever-increasing complexity of network devices, modern software stacks, and hardware devices. To keep consumers happy and the institution’s reputation intact, financial services must be prepared for outages. Smart OOB with Failover to Cellular can keep services running even when part of the network is down.

Last week a row erupted over ATMs in the UK. While Link announced that the fee paid each time a cash machine is used will be cut from Sunday, consumer champions Which? claimed that 300 ATMs are closing every month.

Stuart Rye, Director of business development for financial services at Fujitsu UK, believes that it’s vital to ensure a spread of ATMs across the regions that addresses consumer demand and for ATM networks to look to technology to lower costs.

“Even as we move towards a cashless society, ATMs still play an important role in the financial life of Brits across the country, and reduced access might have unpredictable consequences for a number of industries besides the financial services – such as retail and hospitality – as well as for consumers.

“There is clearly a mandate for a more homogenous spread of ATMs across all regions, but if closures need to happen, they should be done in a strategic manner that still takes into account ATM supply and consumer demand. Other countries, such as Sweden, have developed cashless economies that work well for everyone, but we would need a more sophisticated ecosystem to do this in a cost effective and efficient way – ATMs are still vital.

“Maintaining an ATM estate can be challenging, with cash replenishment and machine maintenance involving high recurring costs. However, there are other ways to lower these costs; investing in technology can help create power and energy savings and better install and maintenance processes. At Fujitsu, we’re looking at how we can use AI and advanced computing techniques to optimise cash management, a development which could reduce the cost of cash handling and create a more efficient ATM network.

“Ultimately, this is a complex issue involving numerous important stakeholders – banks, retailers, consumers, and ATM businesses. It’s tough to get it right, and requires a considered approach which takes into account those parties needs now and the trends that will determine their needs in the future.”

Below, Thanassis Diogos, Managing Consultant, SpiderLabs at Trustwave, discusses with Finance Monthly the intricate planning and plotting behind the recent Eastern European cyber hack on banks, which combine both physical and cyber stealing methods. Trustwave believe that this attack has the potential to spread to the UK and around the world.

Earlier this year Trustwave was called in to investigate several security breaches which had affected banks in Post-Soviet countries. These attacks appeared to be a hybrid of physical and cyber techniques with people used as mules to open new bank accounts, and cyber specialists using their skills to hack into the banks systems. Banks which had been compromised suffered significant monetary losses, somewhere between USD$3 million and USD$10 million. Trustwave’s investigation also discovered that the attacks shared common features. These identifiers included large financial losses originating from apparently legitimate customer accounts and all thefts taking place at ATM locations outside of the banks originating country, where the money was withdrawn using a legitimate debit card.

In some cases, the banks were not aware they were being breached until the attack was complete. However, there were cases where the malicious activity was picked up by third party processors, who are responsible for processing credit and debit card transactions. Despite the large sums being stolen, the thefts were hard to detect thanks to the use of debit cards acquired legitimately through the standard in-branch application process.

A closer look

Upon investigation of the third-party processors and the affected banks, we found a completely unique modus operandi behind the breaches. The criminal gang had used innovative attack tactics, techniques and procedures to successfully complete the attack campaign. The attack itself comprised of two physical stages which top and tailed the attack – the mules opened bank accounts in the initial phase and withdrew the funds in the final ATM cashing out phase. The cyber-attack compromised four stages beginning with obtaining unauthorised access to the banks network, compromise of the third-party processors network, obtain privileged access to card management system and finally activate the overdraft facility on specific accounts.

Method in the madness

The criminals hired a number of mules and provided them with false credentials, so they could open new accounts in branch. On opening the accounts, the mules requested to receive debit cards with the account, and the cards were then passed on out of the originating country to a group of international conspirators. It is not unusual to request a debit card with a new account as the balance of the account is directly related to how much money is available.

Whilst these numerous bank accounts were being opened in branch, the cyber part of the attack was already under way. Members of the criminal gang hacked into the victim banks’ internal systems and manipulated the debit cards features to allow very high overdraft limits or no overdraft limit at all, and also removed any anti-fraud controls in place on specific accounts. Almost simultaneously the operation continued in the countries where the debit cards had been sent to. The cards were used to make large withdrawals from a number of ATM’s which had been carefully selected because they had high or no withdrawal limits. Locations were also chosen to be remote and have either no or obscured security cameras. During the following few hours the operation concluded with a sum between USD$3 million and USD$10 million being withdrawn from each bank.

Recommendations to banks

There are measures which banks can take to help mitigate these kinds of attacks. A proactive program such as managed detection and response (MDR), also known as threat hunting is recommended. Implementing a threat hunting program will allow banks to detect threats early on and mitigate them before they have the opportunity to do any real damage. Banks should also prepare incident response plans and have them well documented and tested so they are fully prepared to act swiftly if such incidents occur.

Unfortunately, the success of these attacks could be attributed to the lack of coupling between the core banking system and the third-party card management system. Had these two systems been integrated correctly the changes to the debit cards overdraft limits would have been red flagged much earlier on. A second example of non-technical control failure is that several accounts on the card management system were able to both raise a request for a change and approve the change. This process is a violation of a commonly used control used in banks and banking applications called Maker-Checker. Banks are therefore advised to undertake frequent cyber security risk assessments to detect and mitigate this type of control weakness.

Currently the attacks have been localised to Eastern Europe and Russia, however, we believe that they do represent a clear and imminent threat to financial institutions in Europe, North America, Asia and Australia over the forthcoming months. During the course of the investigation it was discovered that bank losses currently stand at around USD$40 million. However, this does not account for undiscovered or un-investigated attacks or investigations undertaken by internal groups or third parties, the total losses could already run into hundreds of millions of USD. We would advise all global financial institutions to consider this threat seriously and take necessary precautions.

Today marks the 50th anniversary of the ATM (the Automated Teller Machine in case you never knew), and Auriga is urging banks to seize the opportunities presented by the ATM as part of a shifting financial landscape and look at the opportunities the next 50 years bring. Below, Auriga explains to Finance Monthly what ATMs could really amount to for the banking sector and its customers.

“Brits still love their ATMs – they’re a key part of the banking process and are incredibly valuable. 43% of UK respondents to the survey using an ATM on a weekly basis so banks who don’t embrace the technology are missing out on a chance to communicate with their customers and build trust,” explains Mark Aldred, who leads Auriga’s International business.

But banks are running the risk of missing out on new revenue streams and opportunities. “1 in 10 UK consumers thinks the UK doesn’t have enough ATMs that can do more than just dispense cash,” explains Mark, “they’re much more than just cash machines now. They can process bill payments, exchange currency and even sell event tickets. The demand is there from UK customers, but banks now need to meet it.”

With bank branches around the country closing, ATMs can be the middle-ground approach between the ex branch and empty buildings with no contact at all. “A combination of self-service machines and staff could be the ticket to reviving the dwindling number of bank branches,” explains Mark, “this hybrid approach appeals most to customers, if banks can strike a balance between customer autonomy and personalised support and advice. Customers want more personalisation and ATMs are a great channel to deliver this - for example pre-set fast withdrawals for the customer who always takes out £70 for weekend expenses or allowing customers to set up their dashboard to meet accessibility needs. It all adds up to a better relationship and more trust with your customers, which can only be a good thing.”

The challenge for banks is to achieve these steps despite the constraints of sometimes outmoded legacy technologies. There are countless examples outside of UK where the right software could rejuvenate existing ATMs. That’s one of the reasons we started in this industry - we began in the Age of the Internet and challenging the internet banking market to be better than ever before and it was logical for us that the ATM could benefit from the same cloud based approach – it reduces the total cost of ownership, improves time to market and eases the development of new services.”

“What is needed is a mind-set change from the current position of offering very limited services and reducing operating cost as the single most important focus, to a more optimistic outlook of expanding revenue-generating consumer services with operating costs being only one management metric. The ATM is on the brink of some very exciting developments – with technology like artificial intelligence, data analytics and chatbots poised to bring an even better experience to the ATM – but without the right infrastructure in place banks could risk missing out” concludes Mark.

You may have heard the words ‘data management’ flying around left, right and centre with no clear understanding on what it is and how paying attention to said meaning could be useful to you, so this month Finance Monthly heard from Maysam Rizvi, a 15-year banking innovator, who provides particular insight into exactly why the data revolution is worth paying attention to. Maysam is the Founder and MD of Aelm, and is responsible for managing change initiatives at international institutions including J.P. Morgan and National Bank of Dubai.

In 2006, UK mathematician Clive Humby coined a phrase that was utterly obvious, hugely prophetic and unerringly timeless. Pointing at the raw material with which we'll build life's next phase, he said: “Data is the new oil.”

In 2017, some 2.5 quintillion bytes of data are created each day. At this rate, it'll take just three months to double the world's entire existing data stock. So Humby's statement is truer now than it was then: data is every industry's imperative. And that's quintuply true for banking.

If financial institutions want to edge ahead, and stay there, it's time to fully embrace data and its possibilities for the long term.

Financial institutions have been longsighted enough to harvest data, but our putting it to work has been sporadic and disorganised. We've been slow to deploy data in areas like regulation and compliance, and we've probably been over keen, and under-effective, in areas like credit and risk.

To digress slightly, I grew up watching movies like Terminator 2: classic struggles depicting robots (bad) versus humans (good). As a young man, I learned – as many of us did – not to trust a world that's in the hands of Artificial Intelligence (AI).

Whenever machines edge out a human workforce, or Hollywood spawns a new cyber villain, robots' reputations nosedive. But it's important to remember that AI is simply a manifestation of data: sets of numbers, trends and analytics built and programmed to perform tasks.

It's daunting, but today's data is the foundation of tomorrow's AI. And the effectiveness of banks' AI will, as the future of finance draws nearer, separate the wheat from the chaff.

The proposition is this: banking will soon rely incalculably on AI. The bedrock of AI is data. We are in a position to mine and manage rich data now.

If the story of the industrial revolution is one of optimising processes and stripping out costs, the tech revolution has utterly multiplied that paradigm.

Twenty years ago, cars started to, basically, build themselves along production lines. Today, quantum data and real-time machine learning means cars can now drive themselves. That's data in action.

And so is this: a 2013 study by Oxford University’s Carl Frey and Michael Osborne estimates that 47 percent of US jobs may be replaced by robots and automated technology within 20 years. Owing to all the brains required, banking is the kind of high cost industry where an AI coup is inevitable.

Since the ATM, we've given pieces of banking over to machines. From internet banking to intricate trading algorithms, anything that can be handed over to machines has been – and will be.

So, that's the proposition. And we can probably make peace with it. Then comes the practical.

How can banks adapt and ensure a steady transition?

On that, there's no quick answer. Whether it's retail or investment banking, preparing for mass AI means dramatically improving technology infrastructures, and sorting a lot of data.

Aside from what already sits in banks' data vaults – and what data is being crunched this very moment – 2017 will bring more machines, software and apps that'll further swell the data highways. We will probably never hit a data ceiling so I can't overstate the importance of a sound and forward-looking data management strategy now.

Central to that strategy are things like business intelligence: drilling quickly to the truth in your data. Storage: expensive server farms versus the Cloud. And security: Tesco got hacked, TalkTalk got hacked – the threat is very real.

Unfortunately, fix-all, pan-department, off-the-shelf AI systems aren't available. So, automated platforms, AI, robots – call them what you will – need to be mapped, developed, integrated and trained. And this data management strategy can't exist in isolation: banks need to roll it up as part of a wider digital strategy, and as part of an overall business strategy.

For starters, new talent is required to develop, design, deploy, analyse and work with new technologies, while current employees will need to be reskilled for a new reality.

Then there's clients and customers. Institutions that are able to construct and manage efficient, intertwining data flows must find ways to push benefits down the chain.

Like it or not, banking is not a trusted industry. Putting more automation between customers and their money or goals may be a bitter pill to swallow. In addition, the AI push will see certain people nudged out of jobs, so banks must think about payoff.

Customers aren't daft. Facebook, Google, Uber - we wearily trade our data in exchange for what, in the end, are personal, hyper-relevant services. Banks need to, basically, come up with their own 'crystal ball' technology.

Uber knows where you are, before, during and, now, even after your ride. It knows where the driver is; how much you'll pay; what service you require.

Uber has a crystal ball. But all that goes to show is that we're not staring down an impossible task. Banks have power, reach and resource at their disposal so my last point, which might sound laughable after all that, is to try and keep things simple.

A comprehensive data strategy for your bank may include only a dozen key end goals, so start there and work back: there are some great brains out there to help you with the detail.

Banks need to believe in and invest in a future made of data. If you don't, the others will.

In fact, the others are.

If you’re a bank looking at AI solutions, I advise you to consider

Where can you apply AI and how to set it up?

How quickly can you adopt an AI solution?

How to manage your team's transition through this technology upscale;

What do you need to do to your existing infrastructure to make this successful?

Tying business strategy closely with technology strategy;

Taking baby steps, solving one problem at a time;

Building the right partnerships to facilitate the transition.

About Finance Monthly

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Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
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