In October, Orange Bank launched the financing of mobile devices and other purchases in Orange stores. Orange Bank has also just signed a partnership with the real estate services platform Nexity, to propose a home loans offer. Lastly, Google Pay will soon be available for customers with Android phones.

Over 20,000 new customers per month

With over 500,000 customers coming from Orange stores, Groupama branches and digital channels, Orange Bank is acquiring new customers at a respectable rate of over 20,000 per month. Apart from the volumes, the success is down to added value: ¼ of customers are acquired through loans, a major difference with other online banks, and ¾ through bank accounts which enjoy a high level of activity as 54% of these customers carry out an average of more than one transaction per week. An average of 10% of accounts are now being opened with the Visa Premium card.

A major advantage for Orange Bank is  the link with the Orange and Groupama store and branch networks which is proving very effective. The Orange stores now propose over the counter loans representing nearly 5,000 sales since its launch, and the holders of a Visa Premium card benefit from a 5% discount on their purchases in Orange stores. At Groupama, car insurance is also available with a car loan for customers who wish to benefit from it.

Partnership with Nexity

The development of the bank's distribution network has been enriched by a partnership with Nexity, the real estate services platform, intended to finance real estate projects. Through this partnership, seen as being of strategic importance, Nexity intends to become a source of new business for Orange Bank, with a shared vision: to be a player in the digital transformation of lifestyles. The first applications are expected to be processed by the end of 2019.

In response to the growth of its customer base and the diversification of its range of offers, Orange Bank is investing in resources; unlike many online banks, its 878 employees are based in France, Montreuil and Amiens, and benefit from an average per capita training budget that is 40% higher than other French banks. This justifies the attractiveness of Orange Bank which receives 20,000 job applications per year. This investment in human resources, as well as the gradual digitisation of the bank, has helped to increase the productivity of the customer relations centres and back offices by 30% to 40% depending on the activities.

This was a welcome move to protect banks, markets and consumers from illegal behaviour. However, according to Aditya Oak, Principal Consultant at Brickendon, with greater protection comes considerable challenges and risks as financial institutions of all shapes and sizes need to manage what could possibly be one of the biggest banking changes in recent memory.

The transition may be described lightly as a repapering, but there should be no mistaking the fact that in reality, the bedrock on how markets operate is shifting and everyone should prepare for the cracks that may appear.

The long arm of LIBOR

Before dissecting LIBOR’s replacements, we need to appreciate the many levels on which it helps financial institutions with their daily business.

LIBOR is calculated across five major currencies and seven maturities and denotes the rate at which contributing banks believe they can borrow from each other on the London interbank market. It is also the reference point for setting interest rates on an extensive list of financial products. The changes are not restricted to LIBOR, with other jurisdictions such as Hong Kong and Australia considering following suit.

Most importantly, LIBOR helps set rates for hundreds of trillions of dollars’ worth of financial instruments, including swaps, annuities, credit cards and mortgages. It is the global benchmark rate at which banks lend to each other in the interbank market for short-term loans.

However, therein lies the problem. LIBOR has always been an approximate estimate and therefore open to potential manipulation – which became the very reason for its demise.

SOFR so good

This demise will make way for new and multiple counterparts in different parts of the world. SOFR, the Secured Overnight Financing Rate, will be LIBOR’s US dollar market replacement. As it is based on past transactions, it is therefore more accurate.

Daily SOFR volumes are usually between $700 to $800 billion, making it a transparent rate that is representative of the current market across a broad range of participants, including fund and asset managers, insurance companies, corporates, securities lenders and pension funds. It is therefore more protected from attempts at manipulation than LIBOR.

Meanwhile, Alternative Reference Rates (ARR), such as €STR (Euro short term rate replacing current EONIA in October 2019), reformed EURIBOR (Euro Interbank Offered Rate) and SONIA (Sterling Overnight Index Average – GBP), will be replacing LIBOR in their respective currencies.

However, this transition poses substantial challenges. Firstly, replacements like SOFR are based on historical rates, meaning fixings cannot happen until after the market has closed. This means lenders and borrowers will have less certainty about the actual rate at which transactions will be settled, thereby impacting their ability to hedge and then settle transactions.

Repercussions, ramifications and risk rates 

This repapering is bound to have a range of repercussions on banks. The International Swaps and Derivatives Association (ISDA) has suggested a fallback to all contracts which will have to be agreed by all market participants. As a result, while banks will stand to benefit from some transactions, they will lose from others.

Another key impact will be the additional workload. Increased regulatory scrutiny and the basic differences between LIBOR and the other ARRs will cause further challenges in transition. For one, while all ARRs are risk-free rates (RFR), LIBOR already includes the risk premium. Buy- and sell-side parties will also need to agree on how to incorporate risk premium into the pricing. Another challenge with this transition will be the calculation methodology for instruments with tenors longer than overnight, as the majority of the ARRs are only overnight rates (with the exception of reformed EURIBOR). LIBOR is quoted for a range of forward-looking tenors (including overnight).

Increased regulatory scrutiny and the basic differences between LIBOR and the other ARRs will cause further challenges in transition.

Even with its flaws, LIBOR worked well in the main, so any replacement with a less tried-and-tested benchmark is likely to have ramifications.

Maturities and managed moved

As with any change, there will be winners and losers. As billions of people, from financial institutions, insurers and banks through to pension holders, retail investors and mortgage holders will be impacted, the time to act is now.

Reports state that more than 80% of the LIBOR-linked financial instruments will mature by the end of 2021, but many will be renegotiated, and the rest will need to be converted. One of the key challenges will be pricing these new products and their associated risk modelling. In addition, the lack of a set deadline will make the changes more gradual and it is likely that each market will move as and when it is ready, ie. if the three-month SOFR rates are reliable, markets will stop using three-month USD LIBOR rates, prompting the partial demise way before the December 2021 deadline. Others that aren’t ready may take longer.

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Testing, technology and transition

As LIBOR makes way for the other rate setting systems, consumer loans are likely to pose problems. With more than 40% of outstanding LIBOR-based residential mortgage loans due to mature after 2021, if not handled correctly, the fallout could be huge.

This change will also impact technology, as the need for new systems and adjusted products arises.  Platforms, confirmation matching tools and market data providers will all have to be updated, along with valuation models, interest calculations and market feeds. In addition, there are a lot of dependencies with a range of counterparties, so maintaining good relationships with clients is going to be key to ensure transitions happen smoothly.

As with any change, the key, we believe, is to prepare. Ensure you know what exposure your business has to LIBOR and what your options are for the future. You need to manage the transition and stay ahead of the curve to switch with the market in order to be successful. As always, it is the ones who have prepared who are likely to come out on top.

At Brickendon we are working with a number of clients to ensure they are aware of the impacts the changes will have on their business. We have significant experience in regulatory change and our experts are well placed to help your business prepare to not only limit any impact the changes may have but also thrive from the change.

But it is the speed at which the technological advancements have reached that has forced traditionally slow-moving financial institutions to heavily invest to remain relevant to their consumers and remain competitive in the marketplace.

Personal

Banking is one of the oldest businesses in the world, going back centuries ago, in fact, the oldest bank in operation today is the Monte dei Paschi di Siena, founded in 1472. The first instance of a non-cash transaction came in the 20^th century, when charga-plates were first invented. Considered a predecessor to the credit card, department stores brought these out to select customers and each time a purchase was made, the plates would be pressed and inked onto a sales slip.

Once the sales cycle was over, customers were expected to pay what they were owed to the store, however due to their singular location use, it made them rather limiting, thus paving way for the credit card, where customers that had access to one could apply the same transactional process to multiple stores and stations, all in one place.

Contactless

Leisurely spending has changed that much that we can now pay for items and services from the watches we wear on our wrists, but it wasn’t always this easy. Just over a few decades ago, individuals were expected to physically travel to their nearest bank to pay their bills, and had no choice but to carry around loose change and cash on their person, a practice that is a dying art in today’s society, kept afloat by the reducing population born before technology.

Although the first instances of contactless cards came about in the mid-90’s, the very first contactless cards associated with banking were first brought into circulation by Barclaycard in 2008, with now more than £40 million being issued, despite there being an initial skepticism towards the unfamiliar use of this type of payment method.

Business

Due to the changes in the financial industry leaning heavily towards a more virtual experience, traditional brick and mortar banks where the older generation still go to, to sort out their finances, are now in rapid decline. Banks are closing at a rate of 60 per month nationwide, with some villages, such as Llandysul closing all four of its banks along with a post office leaving it a ghost town.

The elderly residents of the small town were then forced into a 30-mile round trip in order to access her nearest banking services. With technology not for everyone, those that weren’t taught technology at a younger age or at all are feeling the effects most, almost feeling shut out, despite many banks offering day-to-day banking services through more than 11,000 post office branches, offering yet a lifeline for those struggling with the new business model of financial firms.

Future innovations

As the amount of digital natives increases year on year, the demand for a contemporary banking service continues to encourage the banking industries to stay on their toes as far as the newest innovations go.

Pierre Vannineuse, CEO and Founder of Alternative Investment firm Alpha Blue Ocean, gives his comments about the future of banking services, saying: “Artificial intelligence is continuing to brew in the background and will no doubt feature prominently in the years to come. With many automated chatbots and virtual assistants already taking most of the customer service roles, we are bound to see a more prominent role of AI in how transactions are processed from all levels.”

Technology may have taken its time to get to where it is now, but the way in which it adapts and updates in the modern era has allowed it to quicken its own pace so that new processes spring up thick and fast. Technology has given us a sense of instant gratification, either in business or in leisure, we want things done now not in day or a week down the line.

Sources:

https://www.sysco-software.com/7-emerging-trends-that-are-changing-finance-1-evolving-cfo-role/

https://www.vox.com/ad/16554798/banking-technology-credit-debit-cards

https://transferwise.com/gb/blog/5-ways-technology-has-changed-banking

https://www.forbes.com/sites/forbesfinancecouncil/2016/08/30/five-major-changes-that-will-impact-the-finance-industry-in-the-next-two-years/#61cbe952ae3e

This week Finance Monthly hears from Caroline Hermon, Head of Adoption of Artificial Intelligence and Machine Learning at SAS UK & Ireland, on the adoption of open source analytics in the finance sector and beyond.

Open source software used to be treated almost as a joke in the financial services sector. If you wanted to build a new system, you bought tried and tested, enterprise-grade software from a large, reputable vendor. You didn’t gamble with your customers’ trust by adopting tools written by small groups of independent programmers. Especially with no formal support contracts and no guarantees that they would continue to be maintained in the future.

Fast-forward to today, and the received wisdom seems to have turned on its head. Why invest in expensive proprietary software when you can use an open source equivalent for free? Why wait months for the official release of a new feature when you can edit the source code and add it yourself? And why lock yourself into a vendor relationship when you can create your own version of the tool and control your own destiny?

Enthusiasm for open source software is especially prevalent in business domains where innovation is the top priority. Data science is probably the most notable example. In recent years, open source languages such as R and Python have built an increasingly dominant position in the spheres of artificial intelligence and machine learning.

As a result, open source is now firmly on the agenda for decision makers at the world’s leading financial institutions. The thinking is that to drive digital transformation, their businesses need real-time insight. To gain that insight, they need AI. And to deliver AI, they need to be able to harness open source tools.

The open source trend encompasses more than just the IT department. It’s spreading to the front office too. Notably, Barclays recently revealed that it is pushing all its equities traders to learn Python. At SAS, we’ve seen numerous examples of similar initiatives across banking domains from risk management to customer intelligence. For example, we’re seeing many of our clients building their models in R rather than using traditional proprietary languages.

A fool’s paradise?

However, despite its current popularity, the open source software model is not a panacea. Banks should still have legitimate concerns about support, governance and traceability.

The code of an open source project may be available for anyone to review. But tracing the complex web of dependencies between packages can quickly become extremely complex. This poses significant risks for any financial institution that wants to build on open source software.

Essentially, if you build a credit risk model or a customer analytics application that depends on an open source package, your systems also depend on all the dependencies of that package. Each of those dependencies may be maintained by a different individual or group of developers. If they make changes to their package, and those changes introduce a bug, or break compatibility with a package further up the dependency tree, or include malicious code, there could be an impact on the functionality or integrity of your model or application.

As a result, when a bank opts for an open source approach, it either needs to put trust in a lot of people or spend a lot of time reviewing, testing and auditing changes in each package before it puts any new code into production. This can be a very significant trade-off compared to the safety of a well-tested enterprise solution from a trusted vendor. Especially because banking is a highly regulated industry, and the penalties for running insecure or noncompliant systems in production are significant.

What use is power without control?

When it comes to enterprise-scale deployment, open source analytics software also often poses governance problems of a different kind for banks.

Open source projects are typically tightly focused on solving a specific set of problems. Each project is a powerful tool designed for a specific purpose: manipulating and refining large data sets, visualising data, designing machine learning models, running distributed calculations on a cluster of servers, and so on.

This “do one thing well” philosophy aids rapid development and innovation. But it also puts the responsibility on the end user – in this case, the bank – to integrate different tools into a controlled, secure and transparent workflow.

As a result, unless banks are prepared to invest in building a robust end-to-end data science platform from the ground up, they can easily end up with a tangled string of cobbled-together tools, with manual processes filling the gaps.

This quickly becomes a nightmare when banks try to move models into production because it is almost impossible to provide the levels of traceability and auditability that regulators expect.

Language doesn’t matter

The good news is that there’s a way for banks to benefit from the key advantages of open source analytics software – its flexibility and rapid innovation – without exposing themselves to unnecessary governance-related risks.

The language a bank’s data scientists choose to write their code in shouldn’t matter. By making a clean logical separation between model design and production deployment, banks can exploit all the benefits of the latest AI tools and frameworks. At the same time, they can keep their business-critical systems under tight control.

SAS plus open source

One SAS client, a large financial services provider in the UK, recently took this exact approach. The client uses open source languages to develop machine learning models for more accurate pricing. Then it uses the SAS Platform to train and deploy models into full-scale production. As a result, model training times dropped from over an hour to just two and a half minutes. And the company now has a complete audit trail for model deployment and governance. Crucially, the ability to innovate by moving from traditional regression models to a more accurate machine learning-based approach is estimated to deliver up to £16 million in financial benefits over the next three years.

Here Finance Monthly hears from Hannah Conway, Consultant at Brandpie, on exactly why shifts in consumer trust are what drive and alter the financial landscape.

The financial crisis of 2008 had far-reaching consequences, some of which can still be felt. Public trust in traditional banking institutions has eroded and brands in the sector are dealing with the reputational damages endured. One needn’t look further than Chase Bank capitalising on the trend of being relatable on social media only to face public wrath for bailouts that occurred ten years earlier.

Consumers have clearly not forgotten the crisis. In fact, the 2018 Edelman Trust Barometer ranked financial services as the least trusted industry worldwide. In the same report, technology ranked as the most trusted. Silicon Valley flourished in the decade following the financial crisis, with organisations small and large introducing technologies that would come to revolutionise consumer finance.

In this landscape, tech conglomerates, have been able to make serious in-roads into different aspects of consumer finance, a process that shows no signs of waning.

Amazon was among the trailblazers innovating in this space, introducing one-click ordering as early as 2000. With an ecosystem boasting 310 million active customer accounts, over 100 million Prime subscribers and over 5 million sellers across 12 marketplaces, Amazon is no rookie. The retail giant is building an array of financial services to increase further participation in the Amazon ecosystem, ranging from payments infrastructure to Amazon Pay – which already has 33 million customers worldwide.

Amazon Cash, which launched in 2017, enables customers to deposit cash to their Amazon.com balance by showing a barcode at participating retailers. The cash is applied to their Amazon account immediately, giving “cash customers”, such as anyone who doesn’t have a bank account or debit and credit cards, the ability to shop on the e-tail giant.

The technological advancements in voice will ultimately enable Amazon to make further encroachments into consumer finance. Virtual assistant Alexa is set to dominate voice shopping, currently having the largest market share of smart speakers, more than twice that of its competitors, Google and Microsoft. Purchases processed through voice are expected to skyrocket to $40 billion by 2022. As consumers were already using the platform, the introduction of new customer-friendly payment experiences serve to further boost Amazon’s position.

The technological advancements in voice will ultimately enable Amazon to make further encroachments into consumer finance. Virtual assistant Alexa is set to dominate voice shopping, currently having the largest market share of smart speakers, more than twice that of its competitors, Google and Microsoft.

Apple has similarly made great strides in the space. ApplePay is already available in 33 countries, with over 250 million users worldwide.

CEO Tim Cook recently announced Apple Card, a new credit card, which is expected to be released in the US this summer before potentially being rolled out globally. Purchases from Apple’s physical stores, website, App Store or iTunes will come with a 3% cash back, with all other purchases at 1%, all in the form of Daily Cash, which will then be added in Apple’s Wallet app.

Apple is building an ecosystem which will see consumers use Apple products to pay, with the cash back options leading to more purchasing. In addition to the seamless customer experience across its portfolio, the giant is pushing privacy as its main differentiator, with its latest “Privacy Matters” commercial prime example. Apple wants to assure customers that all their private information on their phone is safe, with its new credit card offering similarly touting security and ease of use.

Facebook introduced peer-to-peer payment in its messenger app back in 2015, but it is the company’s subsidiary Instagram that is making significant in-roads to consumer finance.

Facebook usage might be steadily dwindling, but Instagram is on the rise. As Instagram is a highly visual medium and users have the feed to interact with their favourite brands, it was a logical next step that the network would introduce purchasing and payment mechanisms sooner rather than later. This became a reality earlier in the year with Instagram enabling in-app checkout for its shoppable posts. In April 2019, the offering was extended from brands to influencers, significantly boosting Instagram’s reach. Deutsche Bank analysts have already predicted Instagram’s move into social shopping could be worth $10 billion by as soon as 2021.

But while the West is fast encroaching this space, no one has managed to catch up to WeChat’s fast ascension into the sphere of digital payments. With over 1 billion active users, and thanks to its own in-app shopping and payment system, the Chinese social media network is a force to be reckoned with. It provides a seamless mobile lifestyle through which consumers can order food, send and receive money, pay utility bills, shop and more.

With over 1 billion active users, and thanks to its own in-app shopping and payment system, the Chinese social media network (WeChat) is a force to be reckoned with. It provides a seamless mobile lifestyle through which consumers can order food, send and receive money, pay utility bills, shop and more.

Social payments are the norm. Consumers can buy a friend a cup of coffee and send it through WeChat Pay. Busking musicians no longer expect coins or notes, they have signs with their WeChat Pay QR codes on them. WeChat Pay leads the way with over 600 million users, outranking most of its competitors. Tencent, the company that owns WeChat recently joined forces with JD.com, China’s leading e-commerce platform to cover both online and offline markets.

Thanks to the innovative way they use technology to communicate integrity, security and trust, as well as creating a better customer experience, tech organisations have seen younger generations and seasoned consumers alike gravitate towards digital-first offerings.

But while challengers were ahead of the curve in evaluating how consumers want to interact with banks, traditional players need not despair. From designing apps that introduce a more mobile-first offering to embracing cutting-edge tech, such as AI and IoT, to enable predictive and hyper-personalised interactions, there is plenty traditional banks can do to create captivating customer journeys to meet customers’ ever-evolving expectations.

Oxford Economics recently published research titled “the big business of small business”, which states bank lending to SMEs has fallen 3% since 2015. This is in the face of a rise in credit provisions to large companies of 43%. The report states that SMEs are being given the ‘cold shoulder’ resulting in an impact on recovery against small businesses.

Sam Moore, Managing Director of Oxford Economics, says the findings of the research offer a “stark reminder” of “the uphill challenges which small businesses face when dealing with the traditional banking sector”. Although SMEs are responsible for half of all employment in industrialised countries and 50-60% of GDP, the focus of banks is still on loaning primarily to larger firms. A primary factor for this is the “lingering effect” of the financial crisis ten years ago, with the impact it had on the small business lending market still being prominent today.

Why is the merchant cash advance rising in popularity?

The way consumers access their money and choose financial products has changed drastically due to technology continuing to advance at an incredibly fast pace. Oxford Economics state that it is estimated a third of all digital consumers now use a form of FinTech (Financial technology). This ranges from apps which allow you to take a loan out, online banking or invest in stocks and shares, among other things.

Small businesses, due to the poor treatment they are receiving from banks, are also beginning to get on board with FinTech. As the financial services landscape changes due to a number of innovations within the sector, the reliance on traditional banks has fallen substantially in favour of a FinTech solution.

How does a merchant cash advance work?

A merchant cash advance - or MCA - is a form of alternative business finance for small firms and sole traders. Whereas traditional bank loans require borrowers to pay back a set amount of funds on set dates over time, a merchant cash advance – also known as a business cash advance – works on a rather different basis, with the amount repaid at any one time proportional to turnover. That’s because it’s a form of finance based on a company’s credit or debit card transactions.

Given the difficulty of obtaining a traditional bank loan for many businesses, it’s understandable that a great number turn to this innovative source of finance.

What advantages are there to a merchant cash advance?

There are many advantages to a merchant cash advance. For instance, during busier periods when a business is making more money, more of the MCA will automatically be paid back, compared to leaner times when it won’t pay so much. With an MCA, there’s also no need to worry about keeping a certain amount of money to one side to pay on a set date - it really is a flexible, scalable and manageable form of business finance

With high approval rates, approvals within as little as 24 hours, zero APR, no fixed term, no other hidden charges and no need to provide security or a business plan, merchant cash advances are becoming an ever-more invaluable part of many firms’ cash-flow management.

An MCA also frees you up to use another type of finance alongside it, such as a bank loan or equipment lease, in the knowledge that the MCA won’t imperil your entire financial future in the way that other loans can if you are unable to keep up with the repayments.

Given such wide-ranging advantages as the above, it’s no surprise that so many firms that may otherwise struggle to obtain finance – especially those in the leisure sector, such as bars, restaurants, clubs and shops – are increasingly deciding to use their future credit card receipts as a means of securing quick funding through an MCA.

Some buyers are having to delay because they just do not have the money saved up.

We are now seeing a growing trend of over 50's looking to buy their first homes. As such, they are also hoping to find specialised over 50's mortgages. Note that such mortgages do exist. Also note that buyers can do some things that can improve their chances of being approved.

Know Your Terms

First and foremost, getting a mortgage when you're over 50 requires that you know your terms. Every kind of loan comes with its terms – defined as the total amount of time you have to repay the loan. The terms are especially important to older borrowers because they may have less time to repay what they borrow.

Let's say you are 55 and looking for a 20-year mortgage. Given that the average life expectancy in the UK is 80 for men and 83 for women, a 20-year deal is doable. Still, it is right on the edge. You would likely find a lot more options if you were willing to take a 10 or 15-year deal instead.

Save a Larger Deposit

Larger deposits make decisions a lot easier for lenders. Imagine seeking a 10-year mortgage with a 50% deposit as opposed to 20%. When the lender looks at the loan-to-value ratio on your application, that 50% deposit is going to look a lot sweeter. It increases the ratio while simultaneously reducing the lender's risk.

If you have been prevented from buying a house because you haven't had a large enough deposit, this suggestion may seem out of place. Do not let it discourage you. Rather, let it be an encouragement to spend the next two or three years saving more. Even if you are already in your mid-50s, delaying your purchase to build a bigger deposit will help you in the long run.

Consider a Shared Ownership Scheme

The government offers a shared ownership scheme through its Help to Buy programme. Under this scheme, you purchase shares in a home rather than buying the home itself. The shares you do not own belong to the scheme, and you pay rent to cover those shares. Once in your home, you can continue purchasing shares up to 75%. Reach that 75% threshold and you'll pay no rent thereafter.

Note that this scheme is only for people 55 and older purchasing a first home. There are income eligibility restrictions as well. You can learn more by contacting the Help to Buy programme.

Work with a Mortgage Broker

The next suggestion is to work with a mortgage broker rather than going directly to banks and building societies. Remember that lenders are naturally afraid of risk. They tend to be nervous of over 50's who might be asking for mortgages they will not live long enough to repay.

A mortgage broker is a better option for several reasons. First of all, mortgage brokers are financial advisers first. It is part of their job to help applicants look through and understand their financial situations before applying for mortgages. Simply put, a mortgage broker helps the client to understand whether or not home ownership is financially viable.

Mortgage brokers also have access to a wider range of mortgage deals. Even if a broker cannot find you a mortgage with a high street bank, there are likely lots of other options through lesser-known banks and private mortgage lenders.

Be Persistent

Finally, be persistent in your search for an over 50 mortgage. They are out there. In fact, over 50's have more mortgage opportunities today than ever before. Lenders are realising the value of lending to older borrowers who just want to get out of the renting game and into their own properties.

Can you get a mortgage if you are over 50? Absolutely. Doing the things you read about in this article should improve your chances of getting a mortgage deal that is right for you.

Online research from Equifax, the consumer and business insights expert, reveals a lack of awareness of banking options among Brits. When presented with a list of digital banks 60% hadn’t heard of any of the brands and only 20% would opt for a challenger bank if opening a new account today.

The survey, conducted with Gorkana, showed 44% of Brits would choose a traditional bank, and when choosing which brand to bank with, they prioritise good customer service (41%), ease of managing money via a good app or online service (34%), and availability of a physical branch (32%). Media influence was least important; only 3% of people factor news stories about a bank into their decision.

Good customer service also topped the list of priorities for people who would choose a challenger bank (31%), followed by incentives such as a joining fee (28%) and a good app or online service (27%). Friends or family using the bank was the least important factor – just 5% of respondents would take this into consideration.

People who would opt for a challenger bank appear to be more value conscious; one fifth (20%) said better rates when using their card or withdrawing cash abroad would appeal to them, compared to 12% of people who would use a traditional bank. Over a quarter (27%) rate more competitive rates, for example on overdraft fees or loans services a contributory factor when choosing a challenger bank, versus 19% for traditional banks.

Jake Ranson, Banking and Financial Institution expert and CMO at Equifax Ltd, says: “Challenger and digital banks have been making their mark in the banking sector bringing attractive, consumer friendly services to market, yet many consumers are still unaware of these brands. The government has taken action to increase competition in the sector but there’s still a lot of work to do to encourage consumers to fully explore the options available to them and make informed decisions on selecting or retaining accounts.

“Open Banking is underway and is a huge advance for consumers. Services are coming to market that will help people get better value from banks, for example identifying sign-up incentives or better rates tailored to their needs. The next step is for the industry to work together to increase consumer awareness of the value Open Banking unlocks.”

(Source: Equifax)

There used to be a certain romance about a classic bank robbery - the outlandish plots, the intricate planning and the ingenious strategies (often involving digging tunnels) designed to get criminals into the vault and out with the cash. In the 21st century, though, the digital banking revolution means that instead of cracking the vault, cybercriminals are concentrating on cracking the network and moving laterally within it to get their hands on the goods. This doesn’t make for such great movie plots but it does mean that banks are facing a far more relentless threat to their security systems. Below Finance Monthly hears from Rick McElroy, Security Strategist of Carbon Black, to find out how today’s would-be bank robbers are targeting the digital vault.

It’s no surprise that the financial sector is constantly under attack as criminals pursue financial gain directly, or via the theft and sale of valuable customer data. The number of material cyber incidents reported to the Financial Conduct Authority rose 80% in 2017 and that trend is only likely to continue. More specifically, what we found when talking to CISOs is that the threat has undergone considerable evolution in the past three years and the last six months have seen still greater innovation from cybercriminals as they adopt new techniques, tactics and procedures to thwart banks’ attempts to keep them at bay.

The invisible invasion – fileless attacks on the rise

Instead of leaving a gaping hole in the door of the vault, cybercriminals would rather banks didn’t know they’d got in at all. Fileless or non-malware attacks are increasing as actors “hide in plain sight” using legitimate tools, such as PowerShell and Windows Management instrumentation, to gain illegitimate access to networks and facilitate lateral movement without detection. 90% of the CISOs we talked to had seen PowerShell being used during an attempted attack on their network. This awareness is actually a good thing, because with 97% of Carbon Black customers suffering non-malware attacks in the last year, if our CISOs hadn’t spotted an attack of this kind it would simply have meant that the attacker had succeeded in getting in unseen.

Ransomware remains a tactic of choice for cybercriminals with 90% of financial institutions reporting that they were targeted by a ransomware attack in 2017. The commoditisation of ransomware, which now sees it offered on an “as-a-service” basis, and the lack of expertise needed to carry out attacks means that it has become the lowest common denominator of cybercriminal activity and with financial gain being the primary motivation of most cybercriminals, it’s not surprising that banks are a regular target.

Criminal masterminds are getting smarter

So far, so familiar, but a most interesting and concerning development uncovered by our survey was that a quarter of CISOs had experienced counter-incident responses when defending their networks. Attackers have realised that network defence is often based on simple indicators of compromise that launch an automated or manual incident response playbook. By going off-script after their initial attempt, they can find another way in while security teams think they have thwarted the original threat. Tactics include mutating code, targeting security analysts and engineers in separate but coordinated attacks, deleting logs from endpoints to obscure their activities and launching DDoS attacks on critical defence systems. As attacks grow in sophistication, cyber security becomes a high stakes game of digital chess, where the attacker only has to be lucky once, but defenders need to get it right every time.

The weakest link – third party providers

It’s not just their own security banks need to consider. The security of third party technology service providers is becoming an increasing concern as attackers seek out the weakest link in the chain. They use suppliers’ privileged credentials with the banks’ networks as a stepping stone to gain access to their real target. 44% of CISOs at financial institutions said they’re concerned about this issue and as more incidents come to light the scale of the problem will be more clearly revealed.

To combat the twenty-first century thief, we need to remember that we’re talking about human assailants here. It’s logical that attacks will grow more sophisticated as attackers learn more about companies’ defences – the potential loot is well worth the effort of innovation. Security teams are locked in a cycle of reactivity which needs to be broken if they are to gain the upper hand. So far, only 37% of financial institutions say that they have established threat hunting teams which means that, far from keeping thieves out of the building, 63% are still having to wait until they hear them knocking on the door of the vault before they can act. With an average of 220 days between intrusion and detection a lot of digital gold can leave the building before anything is done about it!

By actively threat hunting, teams look for signs of abnormal activity on endpoints that could indicate compromise well before any alerts are generated. To quickly detect and respond to threats, suppress intrusion and prevent lateral movement, financial institutions need to collect and analyse endpoint data in near-real-time. By doing this they can build up a ‘sight picture’ of attacker behaviour relating to internal movement and external command and control channels. Once these anomalies have been detected and analysed they can be communicated to existing control mechanisms and action taken to disrupt and contain the attacker’s kill chain.

In the age of the digital bank heist a proactive threat hunting strategy is far more effective at stemming the network invasion, capable of evolving alongside the TTPs used by assailants and stopping their digital tunnelling towards the vault. It won’t make such a classic  movie, but it will put a bit of star power in the hands of CISOs and security teams who really are the lead actors in the fight against cybercrime.

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.”

Sometimes investing isn’t as straightforward as some make it out to be, and knowing the tricks behind stronger investment strategies can go a long way. This week Finance Monthly benefits from expert advice from Hannah Goldsmith DipPFS, Founder of Goldsmiths Financial Solutions and author of ‘Retire Faster’.

If you’d like your money to work harder, perhaps with a view to retiring sooner, here are five rules you need to follow. And they are probably not what you’re thinking:

1. Trust the markets

The global market is an effective information processing machine. Millions of participants worldwide buy and sell securities in the world markets every day. The real time information they bring to the market helps set the market price. With more than 98 million trades a day, the probability is miniscule that a committee, sitting in a board room and discussing where to invest your money, will spot a favourable discrepancy in a stock price. It is possible, but it is also highly improbable.

Instead, of buying retail funds selected by a fund manager, buy a diversified basket of global index tracker funds and let the markets work for you. A wide basket of stocks from around the world linked directly to market returns can reduce the risk of trying to outguess the markets or worse, paying somebody else to outguess the markets.

2. Diversification is key

Investment returns are random; they cannot be predicted with any certainty. Therefore, don’t limit your investments to a handful of stocks or one stock market. This is a concentrated strategy with high risk implications.

You cannot be certain which parts of the world will outperform others, if bonds will outperform equities, or if large stocks will outperform small stocks. So, don’t let your financial adviser visit you each year moving and changing your funds to justify their existence and their fees. They are wasting your money.

Instead, buy the global market using a diversified basket of index tracker funds and leave the speculation to the gamblers.

3. The Financial Services Industry does not have your best interest at heart

Conventional wealth management institutions are far happier when the status quo prevails; it’s more profitable for them and their shareholders. Why would they provide you with an opportunity to move your money to a competitor at their expense, even if it was in your best financial interest? These corporates are in business to maximise shareholder value – not your investment returns.

It is therefore essential to take back control of your money and ensure that the ‘hidden’ ongoing portfolio costs are kept to the bare minimum. Aim to keep the costs of managing your portfolio at under 1%. The industry average is in the region of 2.3%, so if you save yourself even 1% a year you will have made a substantial amount of money using compounding interest over the life of your portfolio.

For example; if you invested £100,000 with a traditional financial services company paying a total fee of 2.3%, and you received a 7% return on your money for 25 years, you will have a projected future value of £329,332. As £100,000 was yours to start with you will have made a £229,332 profit. The overall cost to you, to make that profit, will have been £109,912.

If you invested £100,000 in a low fee portfolio, paying a total fee of 1.11% and received a 7% return on your money for 25 years you will have a projected future value of £441,601. As £100,000 was yours to start with you will have made a £341,601 profit. The overall cost to you would be £63,718.

This additional £112,269 can be used by you and your family, rather than just giving it away to an industry that feeds the ‘fat cats’. Remember it’s your money … don’t give it away.

4. Think long term, not just about today

When there is a long slow decline in markets, investors want to jump ship and wait for the markets to recover before jumping back in. However, market timing cannot be predicted. Taking your money out in falling markets means you lose real money – thanks to fear. Most people don’t reinvest until they get their optimism back, which is often too late; by then the stocks have risen, you’ve missed out on the gains, and you still have your losses to make up.

Manage your emotions by investing in a risk portfolio that is correlated to your capacity for loss. Not one that is based purely on your search for the highest returns. Remember, investing is for the longer term. History shows that you will be rewarded for your bravery – and your patience.

5. Don’t lose money with the banks

Although the banks’ advertising agencies tell us how wonderful these institutions, I am still reminded of the chaos and misery they caused when they needed bailing out by the tax payer. This was due to what was described by the Financial Crisis Inquiry Commission, as a ‘systematic breakdown in accountability and ethics’.

Your capital deposited in a Bank is being eaten by inflation at 2-3% every year. Over the last 10 years, whilst the stock markets have gone up, the buying power of your bank deposited savings has decreased dramatically and will continue to do so for the immediate future.

My advice is to look at investing, rather than ‘saving’ with a bank; diversify your portfolio; let the markets work for you; and ensure you keep your management fees to around 1%. By following these rules you’ll increase your fund faster and the day you can retire (or splash the money on your dream) will arrive much sooner.

Billon and the Polish Credit Office (Biuro Informacji Kredytowej - BIK), the largest credit bureau in Central and Eastern Europe, have announced they will implement blockchain for storage and secure access to sensitive customer information. Billon's blockchain technology will benefit the bureau through superior security, integrity and immutability of data. The fully-GDPR compliant solution guarantees total visibility, trackable history and full data integrity for any client-facing document including banking records, loan agreements, insurance claims, telephone bills and terms & conditions.

BIK, owned by the largest banks in Poland including Pekao, ING, mBank, Santander and Citi, tracks nearly 140 million credit histories of over 1 million businesses and 24 million people. "Our cooperation with Billon is long-term. We believe that blockchain technology will transform client communications in the financial sector. Our solution will soon be expanded to include electronic delivery with active confirmation and remote signing of online agreements. It is also important that the solution meets legal requirements of a durable medium of information, as well as the EU GDPR requirements," said Mariusz Cholewa, President of BIK.

BIK and Billon developed the solution for durable medium of information, defined by EU regulations and directives such as MIFID II and IDD directives. The partnership saw eight Polish banks participating in trials, which established that Billon's scalable blockchain architecture could publish over 150 million documents every month. This would be more than sufficient for even the largest institutions to move to paperless customer service.

The solution has been approved following extensive consultation with the Polish Office of Competition (UOKiK) and Data Protection Regulator (GIODO), making it one of the world's first Regtech compliant blockchain solutions, and the only one with on-chain data storage and a mechanism enabling "the right to erase personal data". Currently, the only major alternatives to this are hardware-based archive solutions such as legacy WORM drives. Compared to them, Billon's solution offers 30% saving in TCO, ensuring minimal upfront costs.

"Our partnership is the start of a true revolution in information management. It is now possible to move away from the constraints of closed central databases to a democratic blockchain-based Internet where every user will be able to control their identity," explained Andrzej Horoszczak, CEO of Billon. "This solution provides the world's first GDPR-compliant blockchain platform that streamlines customer service processes and implements customer rights such as the "right to be forgotten". We're fixing the problem of consumer data control, creating a level playing field between individuals and corporations. The benefits could affect more than the financial sector, and we anticipate it will soon be adopted by industries such as telecommunications, insurance and utilities. Our cooperation is only the first step to introducing mass blockchain technology use for trusted document management."

(Source: Billon)