Yet last year, according to industry specialist GBG, over 18,000 fraud attempts were made against each UK retailer on average during the period between Black Friday and the January sales.
Sarah Whipp Head of Go to Market Strategy at Callsign argues that during busy periods such as Black Friday and Cyber Monday, businesses are under pressure to balance the fraud with customer experience, but they must be careful not to let the latter slip.
At the same time, banks have to foot the bill when it comes to a majority of this type of fraud, so they have a vested interest to not let their retail customers to get complacent when it comes to security.
Given the incredibly high volume of transactions over the coming weekend, and indeed the whole festive period, often merchants will accept that fraud will be higher than usual. However, they are often willing to take the hit because it will be worth it for the extra business as long as there is no long-lasting reputational damage. Indeed, the financial costs of fraud are now borne by banks as well as merchants and Black Friday fraud is a growing challenge for financial institutions.
This is set to change next year. With Secure Customer Authentication (SCA) coming in for merchants in 2021 they may be well advised to make hay now with a lower security bar. In the future they will need to make sure they have trusted merchant status and that they manage their pricing to take into account of SCA exemptions to have a premium user experience. Next year, merchants need to partner closely with issuers (banks) to manage this situation.
3D Secure could throw another spanner in the works for banks whose customers are online retailers that use it to avoid chargebacks. It can massively complicate treatment strategy as the payments are verified by the likes of Visa, Mastercard Secure Pay and Amex Safekey, therefore the liability is mainly with the card issuers and banks.
To deal with the issue, merchants should use agile IT systems to their advantage. For example, if a retailer’s system has the functionality to modify fraud appetite policy dynamically (including adding in extra fraud checks), then they may want to lower the bar initially to gain the maximum number of sales. Then, if they were to spot a high degree of fraud attempts they could ramp up prevention measures on the fly. Of course, the impact on the customer and the risk of possible reputational damage needs to be kept at front of mind at all times.
Research from AVORD – a revolutionary new security testing platform that launches today – reveals 95% of businesses in the financial sector have seen an increase in the number of data breaches over the last five years. And as a result of the growing threat to mobile devices, more than half (52%) are now investing more in identifying and protecting against app-based threats.
Opportunistic multi-national consultancies are being blamed for inflating the price of security testing in the UK, with many financial services businesses being charged inflated prices to conduct tests on their critical assets.
Consultancies taking advantage
Today’s findings put the spotlight firmly on the security testing market, which is dominated by consultancies who provide services to businesses, sometimes at twice the daily rate of an independent tester – often referred to as ethical hackers. With 76% of businesses claiming the cost of testing is too expensive, there is a clear demand for change.
More than three quarters (79%) of businesses in the financial sector currently outsource the security testing on their critical assets. The need to use consultancies is being driven by a skills shortage, with many (41%) revealing that they don’t fully possess the in-house, employee skills and knowledge to carry out security testing.
More than three quarters (79%) of businesses in the financial sector currently outsource the security testing on their critical assets.
A surge in cybercrime
Worryingly, the financial sector was subject to the most security breaches - of all surveyed industries - last year, with two in five (41%) suffering from an attack that directly hit their bottom lines, lost them customers and damaged their brand reputations. Of those hit by a cyberattack, 77% reported that the breach occurred partly as a result of issues with the security testing process.
Over the past five years, the majority of companies have seen a major increase in the number of data breaches: 29% reported an increase of between 11% and 20%, while more than two in five (44%) reported up to 10% more data breaches.
The true cost of cyberattacks
As new emerging technologies are deployed, and applications increasingly underpin core business processes, firms across the UK claimed that cybercriminals are creating new ways to exploit vulnerabilities, which is putting increased stresses on them at an already challenging time.
The impact of breaches in the past 12 months has been wide spread. 84% of those affected reported losing customers, while almost a half (48%) had to pay legal fees and 58% experienced reputational damage. In addition, nearly seven in 10 (68%) were hit by fines from regulators.
(Source: AVORD)
In May, US President Trump signed an overhaul to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Below Kerim Derhalli, CEO and founder of investment app Invstr, looks at the success of the bill and the potential impact of the changes.
While he may be often controversial, there’s no arguing that the most recent President of the United States hasn’t shied away from pushing through the issues that are close to his heart.
The rollback to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is a latest personal win for Donald Trump as he aims to deliver on his promise of reversing a number of Barack Obama’s policies. Whether Obamacare or foreign policy, he is making inroads into unravelling the legacy of his predecessor.
But is the Dodd-Frank rollback the right move, and is this the right time?
In 2010, the American public was crying out for Dodd-Frank. The bill sent through the Senate came in the midst of the financial crash; people were broke and the sector was in turmoil. ‘Regulation’ was the watchword – reckless bankers must be brought under control – and so they were.
For the past eight years, Dodd-Frank has broadly been a success in achieving what it was set out to do – avoiding a repeat of the 2008 financial crisis by regulating the growth and proliferation of “too-big-to-fail banks”.
Beyond playing its part in making banks more accountable, if you look at any raft of metrics and studies, economic stability has returned to the US. How much of this is directly down to Dodd-Frank is a debate that can be argued either way.
One of the big wins for consumers that did come out of Dodd-Frank was the Consumer Financial Protection Bureau (CFPB) which, since its inception, has returned almost $15 billion dollars to more than 30 million Americans wronged by the finance industry.
It hasn’t all been rosy however. Larger ‘small’ banks in particular suffered under the regulation, which demanded tough and restrictive capital and planning requirements. In the views of many, this has stifled growth and the bipartisan bill to roll back Dodd-Frank seeks to remedy this.
The move lifts the threshold at which banks are deemed too big to fail to $250bn – a fivefold increase – and releases smaller and medium sized banks from stricter capital and planning requirements.
Since 2008, small banks have been overwhelmed by the complexity of the bill, leading to the loss of many community banks and credit unions across the United States. These small banks are a lifeblood to the US economy – responsible for nearly half of all small business loans and 15% of residential mortgages.
As well as this, the Federal Reserve have been virtually stripped of their ability to respond to further financial crises. This is primarily due to the law’s stipulations that the Fed’s lending must be broad-based and not directed towards single institutions.
The biggest hint at the bill’s demise came when one of the law’s architects themselves, Barry Frank, noted that he saw ‘areas where the law could be eased’.
So, what now? Is this the start of a return to that Wild West of overleveraged lending – are we back on the merry-go-round of bust and boom?
The short answer is ‘no’.
While it is difficult to forecast exactly how the US financial sector will be reshaped following the bill, with jobs on the rise in the United States, spending power also broadly in growth, and with the economy in relatively good shape, it does seem like the time is right for change.
We’re also in a very different world from 2008. The last decade has been an explosion of access to information and consumers are increasingly empowered to cut out intermediaries and take a more proactive approach to their finances. Trust in finance institutions continues to be at a critical low and, nowadays, Joe Public is in no mood for manipulation.
Social media means we now have access to more information – and outlets for outrage – than we ever had before. If the banks take any liberties, they’ll have nowhere to hide, and competition is fiercer than ever with the rise of disruptive challenger banks and fintech platforms.
The global economy remains on a tentative road to growth, but the fact that we’re not booming also means that there are not tidal waves of opportunity for the banks to surf on, either. In the world of finance, we are now more risk averse and nervous of the repercussions of failure.
Within this wider social and economic environment, it would appear that the rollback is the right move, and at the right time. The measures that remain in place are strong, but the concessions also look reasonable. We’re not mourning the demise of the Dodd-Frank bill – we can look forward with excitement to its future.
According to reports, the ‘ridiculous’ bill the UK is to pay out in order to exit the UK, otherwise known as the Brexit bill, stands at around £44 billion. That’s a lot of money, and a lot of cash, but how much cash to be exact?
Finance Monthly has worked out approximately, based on the average size of a £50 bank note, the largest readily available note in the UK, how much space £44 billion in cash takes up? We don’t really have a photo of £44 billion in cash, so we’ll have to try and compare it to something just as big. Is it the size of a football field? The size of the Louvre? The size of the moon?
Well, a classic £50 measures at 156mm x 85mm x 0.113mm and weighs about 1.1g. That’s 1,498.38 mm3 per note. There are 20 million £50s in £1 billion. 20 million £50 notes take up 29,967,600,000 mm3, therefore 29.9676 m3. The Brexit cash is 44 times that figure. This brings us to 1,318.5744 m3, which rounded up is 1,318.6 m3.
Focusing on London, the capital of British finance, Big Ben is officially marked at around 4,650 m3 for its interior. Therefore realistically, the Brexit bill cash could fill up the inside of Big Ben just over a quarter of the way up! At this point it would likely also fill the floor in the House of Commons.
It’s a stack load of cash to hand over, 10 double decker buses’ worth in fact, in terms of volume that is, not value. A London Routemaster double decker bus is worth around £349,500, so 10 of those is £3,495,000 and well, Brexit is going to cost us a little more than that.
Of course, this is all speculation, and even the figure of £44 billion is an unconfirmed unofficial number. None the less, the prospect of paying the European Union such an amount means that as Brexit has all in all been a sizeable decision from the British public, there will be a sizeable price to pay.
The annual cost of fraud in the UK is £190 billion, equal to around £10,000 per family, according to a new research study.
The Annual Fraud Indicator 2017 reveals the staggering prevalence of fraud, which is now the UK’s most common criminal offence.
Put into context, the scale of the problem is such that the cost of fraud to the UK is greater than the Gross Domestic product of 148 out of 191 countries.
The study, compiled by Crowe Clark Whitehill, Experian and the Centre for Counter Fraud Studies at the University of Portsmouth shows that private sector fraud costs the UK economy £140 billion, while fraud in the public sector is estimated to cost the country £40.4 billion in 2017.
Fraudulent activity aimed at individuals amounts to £6.8 billion, while charities suffer to the tune of £2.3 billion.
These numbers are far from insignificant. With the latest National Audit Office and National Crime Agency statistics confirming that fraud has surged to the top of the list of commonly committed crimes, now is the time to identify and measure its cost so that businesses, government bodies, charities and individuals can understand the value of their investment in countering fraud.
The private sector is the worst hit, largely due to the volume of expenditure conducted by private enterprises. While public sector fraud is the easiest to measure and detect due to the reliability of tax and benefits data.
A significant proportion of the costs of fraud in the report are attributed to procurement fraud. Procurement accounts for a large portion of organisational expenditure and fraud can creep in at various stages of the procurement process. The rise in the incidence of fraud in registered charities is largely attributable to an increased expenditure on procurement, for example.
New trends have emerged that impact demography and type of fraud victim. Technology continues to open up new avenues for fraudulent activity. Online Banking fraud has grown by 226% and Telephone Banking Fraud by 178% in the past year, with many millennials increasingly being drawn into the fraudsters’ net.
Technology and legislative controls are also impacting behavioural patterns amongst fraudsters. Reformative measures such as the Payment Services Directive 2 (PSD2) will bring tighter regulatory controls and deter attacks, while new counter fraud tools are causing fraudsters to innovate and target platforms not governed by strong customer authentication.
Jim Gee, Head of Forensics and Counter Fraud at Crowe Clark Whitehill, comments: “The cost of fraud is clear – not just the proportion which is detected, nor a guestimate but accurate information about the total cost to UK plc, just like any other business cost. And that cost is £190 billion.
“Private companies are made less stable and financially healthy; as citizens we don’t get the quality of public services that we pay our taxes to receive; and even charities don’t get to spend the full value of the donations which people make. What other problem of this size doesn’t have a proper national response?”
Nick Mothershaw, Director of Fraud and Identity Solutions at Experian: “Awareness of the dangers fraud poses is growing, but the total of £190 billion is startlingly high. Plastic card and online banking fraud continues to increase, so new regulations which make it harder for fraudsters to use someone’s cards online are a necessary step. Fraudsters are shamelessly opportunistic and are now turning their attention to the pensions release, lured by the promise of high value returns when their scams are successful.”
Professor Mark Button, Director of the University of Portsmouth’s Centre for Counter Fraud Studies, adds: “The 2017 Annual Fraud Indicator highlights again the colossal cost of fraud to the UK economy. At £190 billion it would represent more than the UK government spends on health and defence combined, or on all welfare payments, bar pensions.”
(Source: Crowe Clark Whitehill)
Following this week’s news on a two year high for the Brent crude oil, Richard King, Trading Manager for Inprova Energy, discusses the current impact of oil price volatility on company energy bills worldwide.
Brent crude oil prices hit a two-year high of more than $58 a barrel on Monday 25 September. Although prices have since reduced slightly, analysts don't expect prices to fall back.
Outlook for oil prices
Oil price increases have been largely driven by cutbacks in supply from the oil exporting cartel OPEC. Market experts predict that OPEC will continue its deal to cut production beyond March 2018 as part of its strategy to rebalance oversupply in the global oil market. Market analysts expect the oil price to be within the range of $55 to $60 a barrel for the remainder of the year, with potential for higher levels in 2018.
In a further boost to recovering oil prices, US producers are struggling to fill the supply gap, and the independence referendum in Kurdistan has the potential to disrupt Middle East oil supplies due to the Iraqi government's call to boycott Kurdish supplies. Mounting political tensions between North Korea and the USA could also be a bullish force.
Impact on energy prices
This is having a knock-on effect on UK business energy market prices. Both gas and electricity contracts for delivery in the next few months have posted significant gains of 2-3%. This has reversed recent decreases in energy prices, linked to the currency improvements for Sterling against both the US dollar and the Euro.
Energy market volatility
Oil prices are firmly linked to wholesale energy prices, which will, undoubtedly, increase energy market volatility in future months. In addition, as we head into winter and uncertain weather conditions, and continue to face energy supply reliability problems from continental Europe, further price swings are inevitable.
Such volatility is becoming the new norm. During the past 12 months there was a 45% price swing in the wholesale power market, which was more than twice as volatile as the average movement of the five years prior.
Smarter energy purchasing
While overall electricity and gas commodity prices remain well below the levels reached in 2014, the sizeable commodity price movements underline the imperative of getting timing right when purchasing energy.
Flexible procurement strategies can be less risky than fixed purchasing because there is the facility to buy energy little and often when wholesale prices are favourable, rather than gambling that the prices are best on the day that you fix your purchase. There is also the facility to take advantage of forward prices, which are currently very attractive beyond 2018.
Above all, it is imperative for energy buyers to manage their energy purchasing within a robust risk management strategy, which will set price limits and guard against buying at the top of the market - helping to counter market uncertainty.
At the heart of the Queen’s speech today were an array of proposed bills that prepare the UK for a smooth exit from the European Union. Of 27 bills, eight pertain directly to Brexit and its implications for key sectors.
There are bills to convert EU laws to UK laws and some measures on immigration, fisheries, trade, nuclear power, agriculture and sanctions.
Below Tom McPhail, Head of Policy at Hargreaves Lansdown, discusses the proposed changes with Finance Monthly.
Given what a hash the Conservatives made of using the General Election to increase their majority, and given the overwhelming priority of Brexit, there were a least a few positive announcements in the forthcoming programme. The most important dog that didn’t bark was any kind of announcement on a savings and investment policy; we will continue to press the government on this issue and to look at the possibility of introducing a Savings Commission.
- Financial guidance body
- Unfinished business on pensions and savings
- Social care consultation
- Education
- Digital strategy
- Consumer markets, including the energy market
Financial guidance body
The creation of a new financial guidance body, merging the Money Advice Service, Pension Wise and the Pensions Advice Service into one single body was unfinished business from the last parliament. This guidance service is welcome and necessary, but there remain significant challenges in closing the advice gap and in helping consumers to get the guidance and information they need to make good financial decisions. This is an issue on which the Treasury needs to continue to focus and to work with the FCA and the financial services industry. We also believe that all investors should be encouraged to undertake a financial health-check at age 50 as preparation for their transition from work to retirement; for most people, this is an age when it they are close enough to retirement for it to seem relevant but also far enough way to make meaningful change to their eventual outcomes.
Unfinished business on pensions and savings
It is hardly surprising there was no announcement on the state pension triple lock, as it currently has no formal legislative status; this is something which the Conservative party will probably want to quietly revisit when it feels it has a little more pensioner goodwill in the bank. This could take a while. Similarly, it is hardly surprising there was no mention of any legislation to means-test the winter fuel payment.
In the meantime, there was a disappointing lack of any announcement on a savings and investment policy, something which this country and in particular the younger generations urgently need.
We are also disappointed the government has made no mention of plans to press ahead with a ban on pension cold-calling, something which would now be in train were it not for the General Election.
Social Care consultation
We welcome the announcement of a consultation on care costs. Given the structural damage the Tory party inflicted on itself in the election campaign through its mismanaged social care announcement, it would have been a wasted opportunity not to press ahead with a consultation on reform.
To put this in context, depending on assumptions used such as the continuation of the Triple Lock, we might see the cost of the state pension increase by perhaps 1% of GDP over the next 50 years (from around 5.5% today). The cost of long-term care can be expected to increase by another 1% of GDP over the next 50 years as a result of the ageing population (from 1% of GDP to 2%) and over the same period, the ageing population is likely to increase health care costs generally by over 5% of GDP from 7.3% to 12.6%.
Financial education
The Queen’s speech makes reference to government plans for school and technical education. As part of this programme, we believe greater prominence should be given to financial education and financial literacy. This needs to be addressed across all ages of the population, from those in Junior school through to investors of retirement age.
Digital Charter and digital ID
The government proposes to introduce a new digital charter to ensure the UK is a safe place to be online. We support this initiative and would encourage the government to work with the financial services industry to develop a private sector Digital ID to complement the existing public sector Verify system. Individuals conducting financial transactions, opening accounts, transferring money or using the pension dashboard in the future, need a simple electronic mechanism to prove they are who they say they are. A Digital ID is the answer to cutting bureaucracy, reducing costs and speeding up processes; the government’s new Digital charter may offer a vehicle to accelerate this process.
Last week Brexit Secretary David Davis said the UK will not be paying the EU’s expected €100 billion ‘divorce bill’ in order to leave the Union. Michel Barnier, the EU’s Chief Negotiator said it’s not a punishment, simply a settlement of accounts.
This ‘divorce bill’ is expected to be the most fought over and sensitive areas of the Brexit negotiation process between the UK and the EU.
Below Finance Monthly has heard Your Thoughts and listed comments from various expert sources.
Ben Martin, Founder, The Brexit Tracker:
A €100bn EU exit bill, paid upfront represents 18% of all income earned in the UK in the first three months of 2017. Or 239% of the annual increase in UK income earnings (12 months to March 2017 vs March 2016.) [Source: ONS GDP March 2017.] Either way it’s a huge figure.
So, whatever the eventual EU exit bill - €65bn or a net €42bn cost (or lower) – it’s going to take time to agree. Or continue to not agree.
Both sides have set out their negotiating stalls; the UK is looking for a parallel track (let’s talk about the terms of the exit and the bill together) vs. the EU (pay your bill first.) This will take months to resolve, even without the French and German elections. The sign off process will be arduous in the extreme as no individual will want to go down in history as the person who got it wrong. Agreement on what ‘Exit 2019’ looks like is a long way off.
The biggest losers of this head to head are businesses who need to plan for what the 2019 exit will mean for their operations. Employees will also suffer, due to the continued uncertainty surrounding EU workers right to remain, reduced investment spend and lower associated hiring as firms delay strategic investment.
What should businesses do now? We’re encouraging them to assign Brexit responsibility to an individual in the firm; to review Brexit through the firm’s lens; to establish a reporting procedure to keep the CEO/Board/entire business + employees up to date on the changes Brexit may bring. And to create Brexit Key Performance Indicators. What can be measured can be improved – so we’re helping business start that measurement process.
Businesses must navigate Brexit by accepting continued uncertainty and actively tracking the possible implications.
Markus Kuger, Senior Economist, Dun & Bradstreet:
Although Article 50 has been triggered, it's still far too early to say how the negotiations will unfold - particularly as the general election results in June could change the government's priorities. Currently, it's clear that the UK is keen to present a firm negotiating stance and avoid any political damage from the prospect of a hefty Brexit bill. It's almost certain that some compromises will need to be reached, but where the UK will make concessions, and the size of any potential settlement, remain to be seen.
Positively, real GDP growth is still reasonably solid, labour market conditions sound and stock markets are rallying. However, forward looking indicators have deteriorated somewhat over the past months, pointing towards more challenging operating conditions as Brexit negotiations unfold. As a result, we are maintaining our DB2d country risk rating, down from the DB2a before the referendum, and the 'deteriorating' risk outlook. The best advice for businesses is to monitor the progress of negotiations and use the latest data and analytics to assess and manage risk during this period of uncertainty, and identify any potential opportunities for the post-Brexit world. A careful and measured approach to managing relationships with suppliers, customers, prospects and partners is key.
Charles Fletcher, Head of Analysis at Cogress:
The UK is caught in the midst of uncertainty surrounding Brexit, now compounded by Theresa May’s snap election. Brexit is unfamiliar territory and presents potential risk to the future of the UK, but so far the economy has remained resilient and this should continue to instill confidence in the country’s future. Papers have been reporting various figures for the UK’s so called ‘Brexit Bill’ ranging from 50bn to 100bn euros, but this remains conjecture as no hard facts have been made clear yet.
Until more information about the nature of the negotiations is released, the exit cost will remain a guessing game and potentially a dangerous one, as speculations on the Brexit bill can only fuel unnecessary anxiety around the future of the UK economy.
However, I would argue that although the "divorce bill" will be one of the most sensitive points during the negotiations - at least for the general public - it's the trade deal that the business community will be watching closely. As a safe harbour in a storm, the property market has always shown great resilience especially at times of uncertainty, and some foreign investors might even benefit from more favourable exchange rates. However Brexit may well cost other sectors dearly, especially those such as manufacturing which can afford uncertainty the least.
We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!
