Martin Lewis, founder of moneysavingexpert.com says: “Everyone should take time to manage and boost their credit score. It's no longer just about whether you can get mortgages, credit cards and loans, it can also affect mobile phone contracts, monthly car insurance, bank accounts and more.”
However, what happens when applicants realise that their credit score is at the lower end of the rating scale?
How do you improve it and how long will this take?
First, what could be impacting your credit score?
Several factors impact credit scores, each contributing to the score credit reference agencies provide applicants.
Not being on the electoral roll
It's pretty easy to rectify if you are not on the electoral register - all you have to do is register with your local council. Lenders like when applicants have an address that confirms where they are. So if you are not on the register, do so as soon as possible.
Taking out too much credit at once
If applicants make several credit applications simultaneously, this does not look great to credit lenders, almost appearing as desperate, suggesting to lenders that you’re relying heavily on credit to manage your finances.
Using too much of your available credit
For some credit lenders, their preference is for borrowers to not use more than 25% of their total credit limit at any one time. For example, if an existing borrower has a credit limit of £2,000, they should not have more than a £500 spend on the account.
Borrowers who wish to improve their credit scores will need to repay some of the used credit limits to sit under the 25% spend. This is not an exact science as other factors still come in to play yet those who adopt this approach, will see their credit score rise.
Having too much available credit
This may sound weird, yet having lots of empty credit cards can adversely impact a score. Newer lenders worry that if they lend to you, you could still take on more credit with your other empty credit cards, thus making it riskier for you to repay them.
The point here is, do you need all that available credit? Keep the ones you use to spend and repay on time regularly, and ditch the ones you no longer use at all. Old balance transfer credit cards are an obvious target for closure.
Having the ‘wrong’ credit
Whilst this may be controversial, those with loans and credit from high-interest payday loan lenders like Wonga, or whopping interest-rate APRs on so-called credit builder credit cards could see their credit scores take a plummet. Lenders see these as the only credit you can receive rather than traditional borrowing like from a bank.
No or little credit history
Again, this may sound counter-productive, yet those who have lower scores are also those that have never used or only borrowed a long time ago. For lenders, this means that they have little credit history of you as a borrower - and thus whether you are actually able to repay in the present.
You will need to demonstrate that you can manage credit over a few months before seeing any improvement. A tip is to get a small balance credit card and pay it off each month.
Debt, Bankruptcy's & County Court Judgements
Debt, bankruptcy's and CCJs will linger on your credit report for six years. There is definitely no short-term fix here - the only option is to ensure that in these six years you remain debt-free and maintain an excellent financial position. Finally, this will be reflected in your credit score, yet it won't happen until the six years are up.
Being financially linked to another person
Being financially tied to someone – something that usually occurs when you share a financial account, like a joint saving or current account, or even a mortgage; will impact your credit score.
Sadly it is a fact, many couples separate or divorce, and if their score is terrible, this will still impact yours. The tip here is to contact each credit reference agency and ask for this link to be removed. Next time your credit report is refreshed - the link should be removed.
How long will my credit score take to improve?
Each bank, building society, online lender, local authority and other relevant organisations have their own timescales for updating credit reference agencies with the latest information. It could be several weeks before applicants notice any changes in their credit report.
Improving credit scores is about ensuring that you make smart choices about your financial situation, and having the determination to see it through.
So, first, check what is impacting your score, and then ensure that you update every credit reference agency. Sadly, there’s no overnight fix but having a good credit score is worth the effort and will set you up for a stable financial future.
Less well known, however, is another more imminent deadline. The PSD2 regulation requires banks to implement facilities for these third parties to test their functionality against a simulated bank environment six months prior to the September deadline, which means that these environments must be in place by 14th March. Below Nick Caley, VP of Financial Services and Regulatory at ForgeRock, explains that despite the importance of this fast-approaching deadline, many of the thousands of eligible banks are significantly challenged in meeting either deadline. And, while there are no formal penalties for not complying with it, there will certainly be consequences that could have long lasting commercial, technical and reputational effects.
Consequences of non-compliance
Banks which fail to meet the March deadline will need to implement fallback ‘screen-scraping’ - where customers essentially share their security credentials so third parties can access their banking information via the customer interface and collect the data for their own services - as a contingency mechanism at the same time as implementing their PSD2 API by the September deadline, something that would not be in the interests of banks, or their customers, and could lead to graver problems further down the line.
There are multiple problems associated with screen-scraping. Firstly, there are the significant security risks it poses. Screen-scraping involves customers sharing their banking security credentials with third parties, which is an outright, bad security practice. No-one should ever feel comfortable sharing a password to a system, let alone one that provides access to a bank account. Such credentials, whilst clearly able to provide access to banking data, also unlock numerous other account functionalities that should only be available to the account owner. Any increase in the risk that banking credentials could be compromised will not build the confidence of consumers.
Alongside security considerations, there are also cost implications since maintaining more than one interface increases the resources required. Each interface will require strict and ongoing monitoring and reporting to the National Competent Authority. While larger tier one banks might be able to absorb this extra cost, for smaller banks this will further compound the already serious burden of compliance with the regulatory technical standard (RTS).
Beyond these very practical concerns, failing to comply with the March deadline will mean banks are left playing catch up on the developments set to be made as PSD2 comes into effect. Avoiding such pitfalls would mean banks can significantly boost their long-term prospects, giving themselves a strong foundation to stay on top of PSD2, meeting regulatory deadlines whilst crucially increasing their ability to compete in the new era of customer-centric financial services.
Despite the clear importance of the March deadline, many banks are still largely focused on developing their production APIs ahead of the September deadline, rather than their testing facilities. For those banks who haven’t yet found a solution, having development teams put a testing facility live in such a short space of time might seem like an impossible task. The good news is that there are ready-made developer sandboxes that banks can deploy in a short space of time to stay on top of the requirement for a testing facility. These sandboxes are essentially turnkey solutions that are fully compliant with the defined API standards, making the March 14th deadline much easier to digest. Banks should look to these ready-made sandboxes if they haven’t already found a solution.
Looking further ahead
As the trusted holders of customer banking information, PSD2 gives banks an unrivalled opportunity to add value for their customers. Through development of new interfaces, modernization of authentication methods and the redesign of customer journeys, banks can achieve the new holy grail for any business; delivering intuitive, secure digital services and experiences that are personalised to the customer offering far greater insights and advice.
With the focus on complying with deadlines, it’s also important for banks to keep an eye on the competition. The promise of PSD2 is to provide a level playing field to encourage competition and innovation. There are certainly plenty of new competitors: Account Info Service Providers (AISPs), and Payment Initiation Service Providers (PISPs), retailers and internet giants, all have the opportunity to introduce their own payment and financial management products and services that integrate directly with the established banks.
At the same time, the challenger banks built from the very beginning to be ‘digital natives’ have been leading the way with innovative customer-first experiences and third-party marketplaces that go beyond what is currently on offer from traditional players. This means banks will need to provide better digital services to stay competitive, giving people more freedom and choice in the way they interact with financial services.
The March deadline is the first litmus test for which banks are keeping up with PSD2, and which are falling behind. However, as we have seen, the far-reaching changes that PSD2 heralds means this upcoming deadline won’t just be a test of a bank’s ability to meet technical regulations - it will be a strong indication as to how well each bank will be prepared to stay competitive in our increasingly digital future.
The research found that 1 in 10 would be “extremely likely” to switch.
28% would be unlikely to switch if bad behaviour was found at their bank, while 24% would be neither likely nor unlikely to switch.
Although half of those surveyed would consider switching because of non-financial misconduct, only 4% of respondents have actually done so.
For customers who would consider switching because of non-financial misconduct, the main barrier to switching is the perceived hassle of doing so. 37% of respondents cite “excessive hassle” as the reason they haven’t already switched. 23% of consumers view all banks as equally bad, and 20% don’t know enough about alternative options to switch.
The main barriers to switching are:
- 37%: "excessive hassle”
- 23%: “all banks are equally bad”
- 20%: “don’t know about the other options”
- 10%: “loyalty to bank”
- 4%: “the products of ethical providers aren’t good enough”
Racial discrimination against employees is seen as the most intolerable example of non-financial misconduct, with 58% saying they would be likely to switch banks if it was going on, and 21% saying they would be “extremely likely”.
When it comes to the gender pay gap, just over one-third (38%) would consider switching bank because of a significant gender pay gap. 9% of women and 5% of men would be “extremely likely” to switch banks because of this. Respondents were also asked if they believed banking was more likely to have a culture of gender inequality than other industries. 36% said that they believed this to be true.
The factors that would make customers most likely to switch banks:
- 58%: discrimination based on race
- 54%: discrimination based on sexuality
- 52%: poor environmental practices
- 52%: sexual harassment
- 38%: significant gender pay gap
Mike Fotis, founder of Smart Money People, said: “The financial services industry has come under increased scrutiny in recent years for its track record on non-financial misconduct, with the FCA signalling that how firms handle non-financial misconduct is potentially relevant to their assessment of firms. Our survey shows that these issues matter to around half of banking customers.
“We were particularly interested by the barriers to switching. Despite the high profile promotion of the Current Account Switch Service, the hassle factor remains the key reason why customers don’t switch. And while new banks continue to emerge, 20% cite a lack of knowledge about alternative options as the reason why they wouldn’t switch.”
(Source: Smart Money People)
Financial institutions (FIs) continue to spend more and more money on fraud tools, with seemingly no end in sight. Every time fraud increases, so does spending. But this, paired with the fact that fraud continues to rise, indicates the approach financial institutions are taking is flawed, says David Vergara, Director of Security Product Marketing at OneSpan. British banking customers lost £500m to fraud in the first half of 2018, and new figures from Action Fraud show that more than £190,000 a day is lost in the UK by victims of cyber-crime. We’re also seeing newer types of fraud gain momentum, such as contactless fraud, which doubled in just 10 months in 2018.
The Home Office estimates there is £14.4bn worth of economic crime within the UK's financial sector each year. And a recent report by the Financial Conduct Authority estimates the financial services industry is spending over £650 million annually in dedicated staff time to combat fraud and other financial crimes. This excludes costs such as IT investments in fraud prevention and detection, so in reality, the number is likely far higher. Achieving the goal of driving down fraud, while ensuring the best user experience and meeting strict compliance regulations, continues to be a major challenge for the industry.
On the other hand, technology is often a bank’s first line of defence against fraud. A Juniper Research report on online payment fraud said merchants and FIs will spend £7.2 billion annually on fraud detection and prevention tools by 2022. There are several challenges that come with this. One big part of the problem is that banking environments are becoming harder to defend, and computing environments which are already inherently complex only become more complex with the integration of new technologies.
Another problem is solutions overload: there are over a thousand vendors competing to sell security solutions to financial institutions, with a seemingly limitless variety of claims and undifferentiated value propositions. Unsurprisingly, vendor procurement is a daunting task: approval can take more than a year, implementations typically take six months or longer, and often, various solutions are not designed to work in harmony with existing platforms and technologies.
A recent report by the Financial Conduct Authority estimates the financial services industry is spending over £650 million annually in dedicated staff time to combat fraud and other financial crimes.
Meanwhile, the nature and sophistication of attacks against FIs, especially in online and mobile channels have reached new heights, making it increasingly clear that fraud is not something that can be easily contained. For example, PwC’s 2018 Global Economic Crime & Fraud Survey reported a shift to technology-enabled crime, with cybercrime overtaking all other methods to secure its place as the most prevalent type of fraud.
To address the challenges and stop the loss of billions to fraud each year, banks and financial institutions need a profoundly innovative approach, one that leverages vast cross-channel data and mitigates fraud in real-time. This should make use of modern machine learning algorithms, behavioural analysis, and automated policy-driven workflows to reduce fraud, through more accurate detection of emerging fraud schemes and continuous monitoring to satisfy regulatory compliance. Also, open platforms that leverage APIs to connect to third-party data sources to further improve the accuracy of fraud detection, boosting the bottom line.
Intelligent authentication is one of the latest innovations that helps FIs to achieve these goals. Intelligent authentication works through a comprehensive risk score based on vast and disparate data, including transaction details, end-user behaviour, the integrity of their devices and mobile apps, and other contextual data points. So, for example, it can recognise that a customer regularly transfers £200 to the same account each month from the same mobile phone in Manchester. The score and related level of risk for this transaction are based on the customer’s unique behaviour and context.
To address the challenges and stop the loss of billions to fraud each year, banks and financial institutions need a profoundly innovative approach, one that leverages vast cross-channel data and mitigates fraud in real-time.
Why is this information important? Because, if it now appears that the same customer is trying to send £1,000 to a new account from an untrusted device in Paris, which falls outside his usual scope and contextual pattern, the transaction is more likely to be an attempt at fraud. However, people don’t live in boxes: it’s entirely possible that they travelled to another city.
Therefore, instead of denying the transaction, intelligent authentication challenges the consumer accordingly: they are granted conditional access to particular account features, such as larger funds transfers. If they can pass the security hurdle and authenticate, then they can proceed with the transfer. As customers’ contextual patterns and circumstances evolve, the technology is intelligent enough to recognise these changes and adapt. To achieve greater security and superior user experience, banks and FIs need to put these new technologies practices into motion now.
Ultimately, mitigating fraud requires keeping up with the latest technologies that will enable financial institutions to more effectively and efficiently mitigate both existing and quickly emerging fraud schemes. By delivering a strong, consistent user experience across digital channels, today’s FIs will continue to grow revenue, bring new solutions to market fast and quickly exceed customer expectations, all of which will drive higher services utilisation and loyalty.
Industry experts CACI forecast that 2019 could very well see mobiles usurp PCs as the main appliance for internet banking. It’s even predicted that by 2023, 72% of Brits will use apps as their main financial management source.
But mobile banking has already transformed how we spend money. Let’s explore how.
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Average Spending
Thanks to banking apps, it’s easier than ever to access money. Access to phone signal granted, you can transfer money, anywhere, at any time. However, with this comes the risk of overspending.
And many people can’t resist the temptation to buy more than they need. In fact, a recent report by Bain & Co. revealed that on average, mobile payment users spend twice as much as those who don’t.
Therefore, what we’re spending money on – as well as how we’re spending it - has already been hugely affected by mobile banking.
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Budgeting Apps
Very often, with the risk of overspending comes an increased demand for easy money-saving tactics. Unsurprisingly, banks have been quick to jump on this need by bringing out budgeting apps.
Although increased spending remains common among mobile bankers, these apps could help to provide a remedy. Because managing finances is a priority for most people, they have been quick to take off.
So, mobile banking hasn’t just influenced how we spend — it’s changing how we save, too.
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All-Inclusive Banking
Banking apps make it more straightforward to exchange money and make purchases, therefore they are particularly valuable for people who struggle with traditional methods of money management.
For wheelchair users, visiting a local bank or an ATM can often be inconvenient. But thanks to these apps, financial affairs can be managed from home. The need to venture into town to take out cash or pay for goods is now a thing of the past — and this is transforming lives.
Likewise, this has revolutionised how people with specific learning differences monitor their money. Features like colour-coding are ideal for users with Dyslexia, Dyspraxia and ADHD, for example.
For people who live far from the town or city, driving to an area with a hole in the wall or bank is no longer necessary as banking can be done from home. Using this kind of app could even reduce your carbon emissions.
Mobile banking isn’t just benefitting its users — it’s helping the environment.
How we spend, save and manage our money has been completely transformed by mobile banking. No wonder its set to rise in popularity over the next four years. This is an exciting time for the financial world. How will it affect your finances?
More than three-quarters (80%) of bankers believe challenger banks are an increased threat to their business, while almost one-third (30%) believe they will be the single most disruptive threat in 2019. The survey, commissioned by fintech provider Fraedom, found that in response the challenger bank threat, bankers expect their organisations to invest heavily in updating legacy systems (44%) and new technology (26%) in 2019.
“With challenger banks setting themselves apart by offering innovative technology platforms, commercial banks are now realising they must invest in key areas in order to counter this threat. This was also echoed by our survey which found other disruptive influences in 2019 to be digitalisation (36%) and consumerisation of technology (36%)” said Kyle Ferguson, CEO, Fraedom.
This comes as almost half (46%) of respondents perceive legacy systems to be the biggest barriers to the growth of commercial banks, while 32% cite it’s the pressure to save money.
With investing in new technology high on the agenda for commercial banks, the survey found that over half (53%) of respondents believe AI and Machine Learning will be the technologies to have the biggest impact on commercial banking in 2019.
“It is clear to see that challenger banks are a disruptive force within the sector. Through the use of innovative technology, these banks have plugged a gap left by established retail banks, and are acting as a stark warning to banks within the commercial space which remains open to similar disruption,” added Ferguson. “If commercial banks are to compete, they must become more agile and adopt new technology platforms suited to changing needs of businesses, or risk being left behind.”
(Source: Fraedom)
YouGov carried out Custom Research using brand tracking tool, Profiles, into online banking usage revealing that almost one in five Brits still visit a branch monthly (17%).
Interestingly, this figure is slightly lower among Santander customers (15%) than the industry as a whole (17%). Over a quarter of Barclays customers (27%) and a quarter of Lloyds customers (25%) visit their bank at least monthly.
Just under half (48%) of Santander customers open the bank’s smartphone app in an average month (48%). This is some way short of banks such as NatWest, which sees almost two thirds (65%) of customers open the app each month.
Unsurprisingly, those who use physical bank branches are mostly older (32% are over 65) and retired (33%). This reluctance to bank digitally isn’t completely due to lack of access however; almost all own a mobile phone (93%) and three quarters have a laptop (75%).
Six in ten of those who visit their branch at least monthly say they find the pace of new technology overwhelming (60%) and 42% say they “don’t understand the decisions made by computers”. Over a third feel uncomfortable using online banking (36%) and the majority prefer to use cash when shopping (52%). In fact, aside from online banking over a quarter never make online purchases (26%).
Commenting on the research, Matt Palframan, Director of Financial Services Research at YouGov said: “Santander is not the first to close physical branches and it won’t be the last; the way people are banking is constantly changing. However, it’s worth remembering there will always be customers who prefer to go into their branch. The question is whether these customers are prepared to travel further or use alternative channels if their local branch closes.”
(Source: YouGov)
Digital transactions do not end at simple purchases. Cryptocurrency, online betting, and sending cash via the internet have all become popular recently. With the amount of money changing hands online, it is no surprise that hackers see this as an opportunity for identity theft.
Privacy was once the only concern for web browsers, but financial data security has taken a place on the list of essential things to consider when roaming the internet. Digital shopping and online transactions are not going away, so it behooves everyone to learn ways to protect private information.
Seemingly becoming more challenging by the day, internet security is possible. Hackers regularly find new ways to attack their victims but practicing internet safety and putting safeguards in place will help keep your information out of the hands of a cyber-criminal.
1. Protect Your Privacy Using a VPN
The first thing any mobile device user should do is download a VPN app. While a VPN can be used on other devices like laptops or tablets, it is important to protect mobile devices, too.
People frequently connect to Wi-Fi in public places to conserve data costs, leaving themselves vulnerable. Hackers roam unsecured networks hoping to find an easy target. A VPN can create a more secure environment by encrypting data to and from your device.
2. Practice Internet Safety
Social media has created an environment ripe for malicious cyber-attacks. Facebook and Twitter alone often provide hackers with all the information they need to infiltrate the privacy of an individual.
Being safe online is more than avoiding “sketchy” web areas. Avoid putting too much personal information on social media sites and keep your profile restricted to those you know. Decline unknown friend requests and think twice about liking every post you come across.
Hackers prefer easy targets, and many users make themselves very vulnerable by providing so much information online. These details can give hackers tips to decoding your passwords or usernames, which opens you up to a world of digital trouble.
3. Pay Attention When Purchasing
Online transactions are here to stay, and it would be ridiculous to recommend someone avoid digital purchases. However, when buying online, you should pay attention to where you are shopping.
Small online businesses are popping up everywhere, and while they may offer unique and trendy items, it is important to validate their security. Never enter financial information on a site missing the “HTTPS” at the beginning of its URL. The “s” means secure and any site without it should be considered unworthy of your personal information.
Internet security is possible by practicing a little diligence and understanding that your information is valuable. Hackers prefer the easiest targets and creating a few blockades may prevent you from becoming a victim. Practicing safe internet behaviors can help you enjoy your online shopping experience safely.
The findings form part of a report into borrowing practices and frustrations with the consumer credit market. The research, conducted by Duologi, surveyed 1,000 UK residents and found that, on average, 34% of people think that UK businesses could be doing more to provide point-of-sale (POS) finance to their customers.
Despite many large brands already providing POS finance on purchases, more than two in five (42%) shoppers believe that retailers could do more in this respect.
Another 42% of people said that this payment model could be better utilised in the property industry for payments such as estate agent fees, conveyancing costs or added expenses for mortgage advisory services.
A further 32% of people believe that the education and training sector could do more to offer POS finance, with another quarter (24%) of people saying that the health industry should work harder to offer these options to help patients access a wider range of services and procedures like IVF.
Lastly, 32% of people stated that the travel industry’s POS finance offering could be made more accessible – not only for splitting the cost of a holiday, but also for fees like rail season tickets, which often offer a better deal when paid upfront.
The research also showed that almost a fifth of shoppers would want to borrow from as little as £100 – but that many brands only offer finance over a certain amount; therefore, limiting their ability to tap into this market.
Duologi credit director, Rob Cottingham, commented: “Currently, POS finance is used most widely in retail but consumer appetite for credit options across a wide range of sectors is evident, and many think that these industries should be doing more to offer POS finance. Given the ongoing growth of e-commerce, the ability for these retailers to provide credit both on and offline could prove crucial in the future.
“Clearly, there is consumer demand for POS credit – so for those brands that do already provide finance options but aren’t seeing results, it’s vitally important to promote it more heavily. Simple tools such as pop-up banners near till points, posters in the waiting room or a clearly-visible website header can alert potential customers to the benefits of finance solutions, providing a clear reason to purchase from that business in particular.”
Backed by global investment firm, Oaktree Capital, Duologi offers merchants the chance to increase their sales, boost customer satisfaction and grow profitability through the delivery of tailored point-of-sale finance options.
(Source: Duologi)
However, dipping into an unarranged overdraft can have costly consequences.
Did you know that dipping into an unauthorised overdraft could incur a number of fees from debit interest, transaction fees to monthly and even daily fees? Usually these fees and charges combined can mean finding yourself in more debt than anticipated, which you may later find more difficult to get out of.
According to Sunny, the consistent use of an unauthorised overdraft can negatively impact your credit score which could affect your chances of getting a mortgage, credit card or loan in the future.
Learning to manage your money is crucial, particularly when it comes to avoiding unauthorised overdrafts and all of the potential consequences that come with it.
Discover more about unauthorised overdrafts and exactly what charges you could face for spilling over into an unarranged overdraft. This handy guide is full of tips and tricks that will help you avoid any money mishaps.
Provided by Sunny Loans
Handling financial transactions also comes with its own risks, such as online fraud, that can have serious financial implications on day-to-day bank operations. The good news is, blockchain technology could turn the traditional banking industry on its head by making banking services seamless, transparent and more secure for customers. So far,
33% of commercial banks are expected to adopt blockchain technology in 2019.
Blockchain technology is set to disrupt the banking industry in a number of ways:
1. Reduced Payment Costs
Technological innovations have enabled more people to work online and even receive payments for their work-from-home jobs through their smartphones or computers. With banks adopting blockchain technology, the cost of sending payments is expected to reduce drastically. This will help eliminate the verification requirements from third parties during bank transfers. The processing time for payments will also be reduced, and the additional fees that banks charge eliminated. For instance, Bitcoin and Ethereum can take 30 minutes or a few hours to settle a customer's financial transaction compared to bank transfers that can take up to three days.
2. Direct Clearance and Settlement of Transactions
Traditional banks use a centralized SWIFT protocol to transfer money between two parties, with the actual cash being processed by intermediaries. The processing of SWIFT payments can take approximately 30 minutes if both parties screen and approve the transaction. However, if the corresponding banks don’t reconcile their ledgers in time, the transaction fails. With blockchain technology, the clearance and settlement of transactions are instant. Blockchain allows banks to track and keep their decentralized ledgers in their public network rather than relying on custodial services and correspondent banks. According to Goldman Sachs, banks would save at least $6 billion in settlement fees and related costs annually by adopting blockchain technology.
3. Lower Security Exchange Fees
The purchasing and selling of securities in the current financial market are done through brokers, central security depositories, custodian banks, and clearing houses before processing is complete. The manual process is tedious, sometimes inaccurate and prone to deception as it passes through several parties during the exchange. Blockchain technology will help eliminate intermediaries and brokers who are present during the transfer of stocks and assets, saving $17 to $24 billion in processing costs. Through blockchain technology, clients can transfer their securities and assets via cryptographic digital tokens like Bitcoin and Ethereum much faster and with lower exchange fees. Big banks such as JP Morgan and CitiBank, who are large custodians of assets worth over $15 trillion, are already adopting blockchain technology to lower security exchange fees.
Blockchain technology has immense potential in revolutionizing the banking and finance industry. Many financial institutions are expected to adopt it in 2019 and beyond to enjoy the benefits it offers.
Great strides have been made in protecting the banking infrastructure from network-based attacks and securing the web and mobile application layer – often the front door into banks through customer interactions. Here Mike Nathan, Senior Director – Solutions Consulting EMEA at ThreatMetrix, A LexisNexis Risk Solutions Company, delves into the ins and outs of cybercrime in the banking sector, offering some insight into the most targeted and vulnerable victims of cybercrime.
Interestingly, fraudsters are not always responding by upping their own technological prowess but turning to con artist style tactics to simply circumvent increasingly sophisticated cybersecurity measures. We have seen a dramatic rise in social engineering attacks, a more analogue approach to hit the banks where it hurts and as a result, customers have now become the new weakest point.
So, what can be done to anticipate or prevent this sort of attack?
Based on my observations, several years ago around 70 percent of attacks against banks involved account takeovers. Accounts can be hacked into using stolen identity credentials, or off the back of a phishing campaign where the customer is tricked into entering their login credentials on a fake site. Once the account has been compromised, the fraudster then accesses their digital banking account and commits the fraud.
Today, however, account takeovers only account for half of the problem due to the rise in social engineering attacks, also known as Authorised Pushed Payments (APP). APPs involve fraudsters contacting account holders directly and tricking them into making a payment. Given that the customer appears to give consent to the transaction, and it is originating from a device that is associated with that user, these attacks tend to be more difficult to detect.
A phone call from a concerned “member” of the fraud team at a bank may make a consumer panic, and instantly put all trust in that person. The consumer might then willingly send all his or her money to a separate account for “safe keeping”. In reality, that money has disappeared and so will the member of the fraud team who made the initial call. This is a simple method of APP attacks used today.
These fraud techniques are especially effective with some of the most vulnerable people in our society, who tend to struggle with the evolution of banking and fintech. Advancements in certain remote access tools that allow the cyber criminals to access and control the customer’s computer are making the job even easier.
If fraudsters are evolving, so must the banking industry. The first step to tackle APP is through education. Ensuring all customers have extensive knowledge on the “dos and don’ts” when it comes to digital and phone banking is of paramount importance. Email alerts reminding customers that their bank would never ask for certain information over the phone, as well as adverts raising awareness on the risks of letting another person access their computer, are but a few options that can be used to ensure customers are protected and well-informed.
It is also imperative for the bank to place protections throughout the customer journey by monitoring user behaviour and spotting anomalies that indicate fraud. Banks must be actively looking for indictors of social engineering and account takeover attacks at crucial customer touchpoints including login, setting up a new beneficiary, and making a payment. By assessing activity in the context of historical activity for that individual, key red flags can emerge to identify suspicious behaviour. An example of this could be a payment from a desktop when the customer traditionally uses the mobile app, or a longer time between login and payment than normal or remote access tools being on the device for the first time.
Once the suspicious behaviour is identified, banks can choose between blocking the transaction or alerting the customer through other means to advise them that something is out of the ordinary. The art here is to strike the delicate balance between maximum protection against fraud – while avoiding blocking or questioning legitimate transactions, which can annoy customers and drain internal resources.
Avoid basing decisions on the typical banking customer but use advanced behavioural analytics to assess how that particular individual typically transacts. By using real-time intelligence on a user’s digital identity and their historical behaviour, banks can deliver security and customer satisfaction without compromise.
Banks implementing protocols like these can help ensure that customers are not placed in harm’s way and that cybercriminals are not entering into bank systems.
It is important to follow the latest fraud trends order to keep ahead of the curve. There will always be new technologies and techniques that increase the threat posed by criminals. However, in the same way technology may sometimes play against us, it also provides us with a number of tools which help us undermine attackers and keep businesses and customers safe.
