Although the UK can be an expensive place to travel, there are many ways you can reduce costs and save money on your road trip. If you want to avoid overspending, consider all the expenses, set up a budget and get yourselves clued up beforehand with our top tips for saving.

1. Create a budget

Total the number of days and miles of your trip and then create your budget for fuel, vehicle costings, food, drinks and sightseeing.

If your budget is tight, you need to prioritise. Figure out what’s more important for you: the best food or staying in a nice hotel? Maybe you want to visit numerous attractions and don’t care if you’re camping and cooking out of the back of your car for a week. Do what works best for you.

Share out your money accordingly, applying the bulk of it towards those prioritised activities. This way you won’t overspend or have to limit yourself from doing things you want to.

2. Automatically transfer to savings

If you’re serious about your efforts to fund your travels, once you’ve worked out how much you can realistically save, set up a standing order to automatically transfer certain amounts of money to your savings every month or two weeks. Try to avoid using this money in the run up to your road trip.

3. Your car

Having your own car is a huge advantage when it comes to road trips because this enables you to reach idyllic spots that are impossible to get to via public transport.

If you’re a young driver or have recently passed your test, you're probably now on the hunt for a car. There are many options for you online, from eBay to Auto trader as well as local car garages close to home. But don’t panic if you’re worried about affording your trip and car insurance at once. Insurance with a black box could help you save a lot of money. Black box insurance works when your car is fitted with a black box device which records speed and the time of day or night that you are on the road. The device will also assess your driving style by monitoring braking and accelerating to build up a comprehensive profile of you as a driver. This could stop you facing an eye-watering insurance quote and allow you to put more money towards your road trip.

4. Track your spending

Money doesn’t have to be stressful and neither does effective money management. The stress begins when you’re too afraid to check your balance and have lost track of what your money is doing.

Tracking your expenses is important and is vital towards helping you save for your trip. Put aside a day on the weekend and go through your accounts, find out what your finances look like and see what you can cut back on each month. Write down everything from how much you spend on food a week, to entertainment and so on.

Money doesn’t have to be stressful and neither does effective money management. The stress begins when you’re too afraid to check your balance and have lost track of what your money is doing.

5. Set up shop

Do you have a house full of stuff you don’t use? Clothes you’ve never worn, old CDs and DVDs? Sell them. You’ll be surprised at how nice a declutter too. Even if you don’t make a fortune from what you sell, you will still be able to add some extra money to your road trip fund.

We hope you manage to get your trip together! For now, enjoy the holidays and have a Merry Christmas.

According to a recent report, late payments are costing SMEs in the UK a total of £2 billion every year, with the entire sum of the missed payments totalling £14 billion^[1]. Below Edwin Gabriëls, Consultant at Onguard, explains the intricacies of payments collection management, offering some tips for businesses.

With such a large amount owed to businesses, it would suggest that many organisations would benefit from improving their collection management strategy. Otherwise known as dunning, collection management is a vital process in credit control. It sees organisations follow set processes to chase for outstanding payments, making the chance of receiving payment more likely and given that 62% of invoices issued by UK SMEs in 2017 were paid late^[2], it’s important that businesses get dunning right.

A sub-standard dunning strategy can cause organisations to run into a number of challenges when trying to obtain a late payment, ranging from customers not responding to reminders and evading payment for long periods of time to ineffective systems requiring a great deal of data mining before the first step can even be taken. These factors often make collecting overdue payments a lengthy and difficult process. A poorly executed dunning strategy can be time-consuming, with UK SMEs estimated to spend 130 hours a year chasing outstanding invoices^[3], and can have a knock-on effect for the organisation as a whole, potentially damaging customer relations and inhibiting cash flow.

By creating an effective dunning strategy, which takes a structured approach to each stage of collection management, businesses are better placed to overcome these challenges.

By creating an effective dunning strategy, which takes a structured approach to each stage of collection management, businesses are better placed to overcome these challenges.The right strategy will enable credit control teams to determine factors such as how many times a customer is chased before legal proceedings are launched and what form of communication to take with the visible results of more efficient teams, reduced overdue payments and increased cash flow.

To develop the right dunning strategy for your organisation you should include the three stages and processes outlined below:

1. Structured Dunning

This stage should form the basis of every dunning strategy as the structured nature allows credit controllers to work to a predetermined framework to gain remuneration. For example, this could take the format of sending an initial reminder five days after an invoice becomes overdue. Then, if it remains unpaid, another reminder should be sent out at 15 days and a final reminder should be sent after 30 days. If payment still hasn’t been made after the three reminders, then legal action should be started. By following this process of chasing for payment, customers will come to the realisation that processes within your company are structured, meaning they can’t evade payment, leading to a reduction in overdue balances. Additionally, this format enables companies to pinpoint where issues occur during the process.

2. Dispute management and internal collaboration

Once structured dunning is in place, you can move on to implementing dispute management processes to look into issues customers have raised with invoices and processes. This stage requires some collaboration with other departments within your business to get to the heart of a customer’s problem and allow you to resolve the issue quickly as the sooner the dispute is resolved, the sooner you can get back to chasing for payment. By adding this step to your existing dunning strategy, you will see a reduction in overdue balances and an improvement in your cashflow as it doesn’t allow customer disputes to linger and for invoices to go unpaid for long periods of time.

3. External collaboration

Finally, by using the data you hold on the customer from both internal and external sources, you can determine how the customer wants to be addressed and the best ways in which to communicate. As customer engagement is becoming increasingly important, it is vital to use the tools at your disposal to create the correct communication at the right time. For example, if you have a long-lasting relationship with a customer it is crucial to address them in the right manner to avoid souring the relationship. This will help you avoid risks to cash flow and overdue balances posed by miscommunication.

For an effective strategy, businesses must first ensure they enforce structured dunning before integrating the other two elements as the strategy matures.

For human resources specialist t-groep, collaboration with other departments has become a key aspect of their dunning strategy. In fact, the entire company has access to the collection management solution as it is considered that those working closest to the customers have the best relationship with them. As such, these individuals are better placed to decide how to tackle the issue of outstanding invoices and find a way to ensure the amount is paid.

For an effective strategy, businesses must first ensure they enforce structured dunning before integrating the other two elements as the strategy matures. As a by-product of this three-tiered approach, the credit control department will gain a more centralised position within your organisation, rather than only becoming involved at the end of the relationship when an invoice is created, and payment is required.

With an established dunning process, it is possible to use information gained on customers’ payment habits and feed them into other processes within credit management, such as the order to cash chain. External data gathered through credit management can be used to determine whether customers are high or low risk, and decisions can be made as a result. For example, the knowledge that a customer regularly avoids making payments can inform decisions over whether to release an order to them. Additionally, this data can be used to segment customers into homogenous groups which can be used to determine aspects such as payment terms or discounts. This information could then be fed back into the dunning strategy to determine when chasing for payment begins.

It is important to remember that dunning certainly isn’t one-dimensional. In fact, with benefits including increasing cash flow, lowering overdue payments and improving customer relations, an entire organisation is likely to reap the rewards of an effective dunning strategy. It will also encourage credit controllers to be more focused on customer communication and address the disconnect between the way different departments communicate with customers. Although there isn’t a one-size-fits-all approach to dunning, by following this three-tiered framework, businesses will reduce the time spent on chasing customers for payment and achieve greater results.

[1] https://www.independent.co.uk/news/business/news/late-payments-uk-business-cost-sme-2-billion-a-year-bacs-payment-customers-a7846781.html

[2] https://smallbusiness.co.uk/late-payments-trend-get-worse-uk-smes-2542060/

[3] https://www.siemens.com/content/dam/webassetpool/mam/tag-siemens-com/smdb/financing/brochures/united-kingdom/sfs-uk-late-payment-report.pdf

Chris Burniske, Placeholder Management partner, discusses the November downturn for crypto assets with Bloomberg's Joe Weisenthal, Caroline Hyde and Romaine Bostick on "Bloomberg Markets: What'd You Miss?"

This is the question Betway Insider asked 2,000 Brits, to reveal what the nation would spend a million on.

Despite claims that £1 million isn't enough to retire on, our research found 50% of Brits would leave their jobs today, with men being more likely to leave work than women.

Betway also took the question internationally and found in the US, just 36% would stop working, with 41% of mainland Europeans also packing up their desks.

When it comes to making money, the research found something surprising; Generation Z (18-24) are most likely to start a business with their million - a choice more popular than buying a holiday or paying off debts.

In recent news the world witnessed Venezuela’s turmoiled path to hyperinflation. According to a recent report by the International Monetary Fund, Venezuelan citizens have been experiencing price hikes on consumer items of 200% week to week, and that’s just things like coffee and bread.

Behind the cause of Venezuela’s inflation is rumoured to be corrupt politics, price-fixing and social unrest, but much of the capital crisis began with rising prices of raw materials and a large reliance on imports for day to day living. Since 2015, an estimated 1.6 million people have left the country making themselves economic refugees elsewhere.

However, before we can understand how Venezuela, once a country with one of the strongest economies in South America, came to bust a 3-month annualized inflation rate of over 1,200,000%, we should learn about inflation and how it works.

Inflation is often considered the pinnacle of modern economics, but it’s not just a modern phenomenon. It goes way back, and has impacted exchanges, banking and commerce for hundreds of years. Today, inflation primarily influences interest rates, including but not limited to mortgages, pensions, payments, accounts, and all in all, the price of goods and services. On the back of all these, inflation also impacts investors.

In fact, inflation could be described simply put as the rate at which the price of things increases. The opposite is deflation, the rate at which the price of things decreases.

Inflation is usually measured and discussed according to two systems: The Consumer Prices Index (CPI) and the Retail Prices Index (RPI). These change according to data on how much stuff costs, how much people spend and how much something is valued, over time. The percentage figure shown by the measured CPI, i.e. 1.5%, means that goods and services are costing 1.5% more than the previous year. In theory, CPI should fluctuate according to supply and demand and therefore inflation occurs quite naturally in most countries, like the US and the UK, while in countries like Venezuela, the equation is littered with impacting factors that are difficult to even make sense of.

CPI figures in the UK are measured up to at least three decimal places and reported rounded up to a single decimal place. In Venezuela, they are far from reporting CPI in decimal round-ups, and perhaps they may never again. Once the fast-paced acceleration towards hyperinflation occurs, it’s very difficult to come back. Two famous examples of similar hyperinflation that have occurred are 1920s Germany and 2008 Zimbabwe, and in the latter case the solution was a complete overhaul of the African nation’s currency and dollarization of its economy.

The natural turnaround of inflation is that when the prices of items increase, the value of the currency buying the items decreases. For example, if I bought a cup of coffee for £1.50 last year, and this year it cost me £1.55, then for the same cup of coffee, I’ve had to spend more money, which on the flip side means my money is worth less; it’s worth less cups of coffee.

This video explains it well.

If we take a look at the changing prices of a cup of coffee in the UK compared with Venezuela, over the last four or so years, it may look something like this:

Since Venezuela's established position as a leading economy in South America, it has come a long way in doing bad trade. Prices of daily used items and household groceries have been coupling MoM. The main reasons behind this are a, shortages in state manufactured and produced goods, and b, a shortage of imported goods due to poor international relations. Within this equation is oil, which forms a majority stake in Venezuela’s export economy and a greater part of its GDP, given that Venezuela is home to some of the biggest oil reserves in the world. A slowdown in oil production since Maduro’s government came to power, mainly due to a lack of historical investment in the sector compared with the rest of the world’s oil markets, consequently resulted in a 45% reduction in GDP since 2013.

Pre-2013, Chavez was in power, and managed to keep the country’s economy afloat via oil revenues, but when he died of cancer in 2013, Maduro came to power and when global oil prices crashed, he failed to maintain stability. He ordered money to be printed to pay employees and continued to dispense state welfare. He then proceeded to control the price of household groceries, like flour, eggs and cooking oil. As CPI figures increased, the value of the Bolivar decreased, making foreign imports even harder. These events, combined with a collapse of import trade, led to the current hyperinflation that exists today. Further scarcities in food and medicine have also created hostile local environments, with protests and riots taking place across the country.

At this point, having depleted the state’s foreign exchange reserves, nation’s like Russia and China are no longer willing to help. Venezuela also cut off ties with the IMF in 2007, and the chances of a current bailout are slim. Although reports indicate Venezuela is on route to hit the 1 million percent inflation mark this year, according to the BBC, Venezuelan officials plan to resolve the country’s current economic anguish with very unorthodox methods. Nicolas Maduro’s government introduced a new digital currency, launching an Initial Coin Offering (ICO) for Petro this year. Serious doubt surround this move, as it is widely agreed the Petro is simply smoke and mirrors, with no real value. On the other hand, the government claims it raised $735m with the ICO, mostly backed by oil. The aim is to circumvent US and other countries’ economic sanctions, originally put in place due to political squabbles, and open the country up to international investment. They also intend to turn things around by introducing urban chicken and rabbit farming…

Sources:

https://nationalpost.com/news/world/an-estimated-1-6-million-people-have-fled-venezuela-since-2015-thats-five-per-cent-of-its-population

https://www.finance-monthly.com/2018/03/the-pound-vs-inflation-and-how-this-impacts-investors-today/

https://www.forbes.com/sites/garthfriesen/2018/08/07/the-path-to-hyperinflation-what-happened-to-venezuela/#6b96ff9915e4

https://www.bbc.co.uk/news/uk-45652921

https://www.bbc.co.uk/news/business-12196322

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic

https://www.forbes.com/sites/stevehanke/2017/10/28/zimbabwe-hyperinflates-again-entering-the-record-books-for-a-second-time-in-less-than-a-decade/#776634f03eed

https://www.livemint.com/Opinion/7gNrvecy9QlyFrJYmZfiiL/The-how-and-why-of-the-Venezuelan-crisis.html
 

Saving and investing money are two completely different things. They each have a different purpose and play different roles in your life. You should make sure that you are clear on the concept before deciding which step to take on your financial journey to avoid stress and help towards meeting your financial goals.

It may seem like a simple question, but wondering whether you should save or invest will completely depend on your financial situation and what you want in life. So perhaps the best way to start is to work out the difference between saving and investing for, defining both concepts.

Saving

Saving involves you putting money into an account and adding to it regularly. Your capital will not be at risk and you have the chance to grow your money by earning interest on it. But there is a risk that the rate of interest paid on your money may not be higher than the rate of inflation and your money may not increase in value.

Savings are great to have as they are always available to access and can be used for many things such as emergencies or a down payment on a house. You can also set up savings accounts for major life events such as retirement and death. With the rising costs of funerals, for example, saving money for it now will help loved ones find a funeral director and pay for it without any stress or worry.

Pros: A savings account is easily accessible when you need money you can go to your bank and withdraw what you want. When you set aside money into a savings account, you’re not putting your funds at risk - a savings account is stable.

Cons: With low risk, comes low returns. Interest rates on savings accounts are lower than any other account. If you are planning on leaving the money in there for a long period of times, you may want to consider a different type of account with a higher interest rate.

Investing

Investing involves you allocating money for a long period of time into an investment, in the hope of making more money on it. When it comes to investing, there is no guarantee you’ll get your initial capital back, or make a profit. But you could end up growing your money, depending on how your investment performs.

Pros: When buying stock or another investment, you do so hoping that your investment will appreciate over time and earn you some money back. Stocks typically have the highest average return. However, they come higher risks. When looking to invest your money you have lots of choices too, from a classic car to a house.

Cons: Investing involves you allocating money for a long period of time into something that should gain in value, in the hope of making money on it. When it comes to investing there is no guarantee you’ll get your initial capital back, or make a profit. But you could end up growing your money, depending on how your investment performs.

Taking money from an investment is not as easy as withdrawing it from a savings account. While it’s best to invest for the long term, if you need the money and want to sell what you’ve invested in you need to wait for the funds to become available.

So whether you put the bulk of your money into a savings account or into an investment, it will depend on various factors and what suits your situation best. Both of them are important for overall financial security.

In 1880, we introduced the first ever credit voucher, which led the way as a pre-curser to credit cards and the likes, followed by the reveal of metal deferred payment cards from Western Union in 1914 and subsequently several appearances of payment or credit cards that allowed to users to credit shop at specific stores, like Diner’s Club, the first independent credit card company in the world.

Since American Express made credit cards popular in 1958, the idea of buying with cash that isn’t yet available to the buyer has evolved into the concept of cashless buying with money we do have. The accessibility, ease and efficiency of credit cards led to a culture, globally, that accepts plastic cards as the norm. The industry 4.0 revolution now presents the next stage in said evolution, whereby we are experiencing the proliferation of contactless payments, both via plastic debit cards and more recently, via smartphones.

2017 marked ten years since contactless was introduced, so it may still be another 10 years until we see an almost complete eradication of cash from western society. Currently, contactless payments account for just over a third of all payments in the UK. Equally over a third agree that the UK will be cashless in another 10 years. The further spread of contactless via mobile, which would only go to shorten those 10 years, is however hindered by the need to link a bank account with the customer’s smartphone, making this option inaccessible to a greater part of the world’s consumers.

A recent study conducted by Forex Bonuses reveals that Canada is currently number one in the list of top cashless countries worldwide , with 57% of transactions nationally being made without cash, as opposed to 2% in Sweden and France, 52% in the UK, and 10% in China. In China however, 77% of people said they were aware of cashless options, which could mean potential for a huge boost of cashless transactions in years to come. All in all though, 83% of global transactions are in cash, according to Western Union.

The ease of cashless transactions proves the potential for revolutionary popularity, as with a flick of a finger or a swipe of the thumb, all liquid assets can be accessed and moved around. The secondary benefits are the effect a cashless society can have on crime, both in terms of banks & financial institutions, as well as street crime and potential for muggings. In addition, though most cash payments do result in a printed receipt, digital records of transactions are few and far between, and whether by blockchain or other, documenting digital footprints for transactions has the capacity to help governments better set policy, tax citizens and stop fraud, as well as help banks to better monitor financial spheres and adjust rates and inflation accordingly. The introduction of Open Banking will also only go to facilitate these benefits in the digital payments sphere.

So, why are we not already making the world completely cashless and sending all our money to be burnt? One question we should ask first is whether this is truly something people want. Bloomberg reports that a recent move by Indian authorities to remove 86% of cash in circulation proved to be difficult, and shocked many cash dependent markets. The poor especially depend highly on using cash, and making everything digital could put lower earners at a serious disadvantage and the prospect of governments and banks having so much control of people’s finances does pose further concerns. Another major issue is that while street crime and fraud could be better monitored and prevented, cybercrime could rise in equal or greater measure, depending on the vulnerability of transaction systems.

Further on the topic of cybercrime, back in the day ‘looking over your shoulder’ referred to watching your back for pickpockets; that then became about being aware of criminals stealing your PIN, but the new risks are money swiping and the potential for losing your contactless card, which can then be used by whoever finds it or picks it up. Equifax recommends lining your wallet to eliminate the risk of signal and antenna making contact in a money swipe grab, which in essence, is today’s version of pickpocketing.

Bitcoin and the blockchain are proving useful in the payments security sphere, but in their short-lived popularity have already displayed weaknesses and risks that will need time to fix. Equally, infrastructure will have to keep up, as Visa have already showed that IT outages can cause serious disruptions, leaving users unable to make or take payments. On top of this, connections are required to record and document the data, as well as transfer information between the buyer, seller and bank; if the connection is affected in any way, this can create major difficulties. With cash, these issues don’t really exist.

Though no longer king, cash is still the biggest way of actioning transactions around the world, and the physical act of exchanging money still feels the most secure and manageable for most. It’s still also the go-to fall back when the ole’ chip and pin doesn’t work, so it’s still very much in play, in fact the growth of cash circulation outpaced economic growth over the last 10 years. Despite the fact there has never been more cash in circulation worldwide, we are slowly moving towards a cashless society, but the eventuality of a 100% cash free world is still highly debatable.

What do you think? Would you be prepared to burn all your cash in return for liquid assets and the promise of a risk-free digital payments sphere?

Sources:

https://www.thetimes.co.uk/article/ten-years-of-contactless-payments-ck00rsx9p

http://www.theukcardsassociation.org.uk/history_of_cards/index.asp

https://www.finance-monthly.com/2018/07/over-a-third-think-the-uk-will-be-cashless-in-10-years-or-less/

https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/

https://www.finance-monthly.com/2018/08/high-level-of-cyber-security-and-cashless-go-hand-in-hand/

https://www.thetimes.co.uk/article/why-contactless-is-quick-and-easy-for-fraudsters-8dg6dfbfq

https://www.equifax.co.uk/resources/identity_protection/how_to_avoid_contactless_card_fraud.html

https://www.finance-monthly.com/2017/02/a-cashless-society-the-urban-myth-of-2017/

https://money.cnn.com/2017/11/20/news/economy/cash-circulation-payment/index.html

15 Ways To Make One Million Dollars | Sunday Motivational Video from Alux.

How hard is to make one million dollars? How fast is to make one million dollars? What is the fastest way to make one million dollars? How long until you make one million dollars? What is the best job to earn one million dollars? What can you do for one million dollars? How to get rich? How to make more money? What books to read to understand money? How to earn more money? Can writing books make you rich? How to license a patent? What is dropshipping? Can saving money make you rich? How to save money to make money? What is ICO? How to make an app that makes money? Can having a blog make you rich? How many views do you need to earn one million dollars?

With the future looking more cashless by the day, the future of cybersecurity looks even more risk heavy. Below Nick Hammond, Lead Advisor for Financial Services at World Wide Technology, discusses with Finance Monthly how banks/financial services firms can ensure a high level of cyber security as we move towards a cashless society.

Debit card payments have overtaken cash use for the first time in the UK. A total of 13.2 billion debit card payments were made in the last year and an estimated 3.4 million people hardly use cash at all, according to banking trade body UK Finance.[1] But with more people in the UK shunning cash in favour of new payments technology, including wearable devices and payment apps as well as debit and credit cards, the effects of IT outages could be more crippling than ever.

Take Visa’s recent crash, for example, which left people unable to buy things or complete transactions. Ultimately, payment providers were unable to receive or send money, causing serious disruption for users. And all because of one hardware issue. Finding new ways to mitigate the risk of system outages is a growing area of focus for financial services firms.

Application Assurance

At a typical bank, there will be around 3,500 software applications which help the bank to deliver all of its services. Of these, about 50-60 are absolutely mission critical. If any of these critical applications goes down, it could result in serious financial, commercial and often regulatory impact.

If the payments processing system goes down, for instance, even for as little as two hours in a whole year, there will be serious impact on the organisation and its customers. The more payments systems change to adapt to new payments technology, the more firms focus their efforts on ensuring that their applications are healthy and functioning properly. As Visa’s recent hardware problems show, much of this work to assure critical applications must lead firms back to the infrastructure that their software runs on.

Having a high level of assurance requires financial services firms to ensure that applications, such as credit card payment systems, are in good health and platformed on modern, standardised infrastructure. Things become tricky when shiny new applications are still tied into creaking legacy systems. For example, if a firm has an application which is running on Windows 2000, or is taking data from an old database elsewhere within the system, it can be difficult for banks to map how they interweave. Consequently, it then becomes difficult to confidently and accurately map all of the system interdependencies which must be understood before attempting to move or upgrade applications.

Protecting the Crown Jewels

Changes to the way financial services firms use technology means that information cannot simply be kept on a closed system and protected from external threats by a firewall. Following the enforcement of Open Banking in January 2018, financial services firms are now required to facilitate third party access to their customers’ accounts via an open Application Programming Interface (API). The software intermediary provides a standardised platform and acts as a gateway to the data, making it essential that banks, financial institutions, and fintechs have the appropriate technology in place.

In addition, data gets stored on employee and customer devices due to the rise of online banking and bring-your- own- device schemes. The proliferation of online and mobile banking, cloud computing, third-party data storage and apps is a double edged sword: while enabling innovative advances, they have also blurred the perimeter around which firms used to be able to build a firewall. is no longer possible to draw a perimeter around the whole system, so firms are now taking the approach of protecting each application individually, ensuring that they are only allowed to share data with other applications that need it.

Financial services firms are increasingly moving away from a product-centric approach to cyber-security. In order to protect their crown jewels, they are focusing on compartmentalising and individually securing their critical applications, such as credit card payment systems, in order to prevent a domino effect if one area comes under attack. But due to archaic legacy infrastructure, it can be difficult for financial institutions to gauge how applications are built into the network and communicating with each other in real-time.

To make matters more difficult, documentation about how pieces of the architecture have been built over the years often no longer exists within the organisation. What began as relatively simple structures twenty years ago have been patched and re-patched in various ways and stitched together. The teams who setup the original systems have often moved on from the firm, and their knowledge of the original body has gone with them.

The Next Steps

So how can this problem be overcome? Understanding how applications are built into the system and how they speak to one another is a crucial first step when it comes to writing security policies for individual applications. Companies are trying to gain a clear insight into infrastructure, and to create a real-time picture of the entire network.

As our society moves further away from cash payments and more towards payments technology , banks need the confidence to know that their payments systems are running, available and secure at all times. In order to ensure this, companies can install applications on a production network before installation on the real system. This involves creating a test environment that emulates the “real” network as closely as possible. Financial players can create a software testing environment that is cost-effective and scalable by using virtualisation software to install multiple instances of the same or different operating systems on the same physical machine.

As their network grows, additional physical machines can be added to grow the test environment. This will continue to simulate the production network and allow for the avoidance of costly mistakes in deploying new operating systems and applications, or making big configuration changes to the software or network infrastructure.

Due to the growth in payments data, application owners and compliance officers need to be open to talking about infrastructure, and get a clear sense of whether their critical applications are healthy, so that they can assure them and wrap security policies around them. An in-depth understanding of the existing systems will enable financial services firms to then upgrade current processes, complete documentation and implement standards to mitigate risk.

[1] http://uk.businessinsider.com/card-payments-overtake-cash-in-uk-first-time-2018-6

The 05: Do Not Honor card declined response is the most common and general ‘decline’ message for transactions that are blocked by the bank that issued the card. This week Finance Monthly hears from Chris Laumans, Adyen Product Owner, on the complexities of this mysterious and vague transaction response.

05: Do Not Honor may be the largest frustration for any merchant that regularly analyses their transactions. Although it frequently accounts for the majority of refusals, it is also the vaguest reason, leaving merchants and their customers at a loss about how to act in response.

Although unfortunately there isn’t an easy, single answer about what this refusal reason means, there are several suggestions as to what could be the cause behind the non-descript message. So what might the 05: Do Not Honor mean? From our experiences analysing authorisation rates and working with issuers and schemes, here are some plausible explanations.

Insufficient funds in disguise

In probably half of the cases, 05: Do Not Honor is likely just an Insufficient Fund refusal in disguise. Reality is that some issuers (or their processors) do a poor job of returning the appropriate refusal reasons back to the merchants. This is both due to the use of legacy systems at the issuer side as well there being no mandates or monitoring by the schemes on this, letting issuers continue to use it as a blanket term.

By looking at the data from various banks, it is easy to see how “Do Not Honor” and Insufficient Funds can often be used interchangeably. Records that show a disproportionately high level of Do Not Honor and a low level of Insufficient Fund refusals would suggest one masquerading as the other. Given that Insufficient Funds is one of the most common refusal reasons, 2^nd maybe only to “Do Not Honor”, it makes sense that “Do Not Honor” by some banks may actually represent Insufficient Funds.

Refusal due to credential mismatches

Although the words “Do Not Honor” aren’t the most revealing, sometimes other data points in the payment response can be clues for the refusal. Obvious things to look at are the CVC response, card expiry date, and, to a lesser extent, the AVS response. For lack of a better reason, issuers will frequently default to using “05: Do Not Honor” as the catch-all bucket for other denials.

Suspicion of fraud

The most appropriate use of “05: Do Not Honor” would be for declining transactions due to suspicious activity on the card. In some cases, although the card is in good standing and has not been reported lost or stolen, an issuer might choose to err on the side of caution due to a combination of characteristics on a given transaction. For example, a high value transaction made at 3am from a foreign based merchant without any extra authentication, likely will trigger a few too many risk checks on the issuer side. These types of refusals will again unfortunately be designated into the “05: Do Not Honor” category, with merchants drawing the short straw. Even though issuers may be able to point to specific reasons why the transaction was refused, issuers have no way to communicate this back to the merchant.

Some astute merchants might point out that issuers should be able to use “59: Suspected fraud” in these cases. Some issuers however remap these 59 refusal reasons to 05 before sending the response to the acquirer to protect store owners in the POS environment and avoid uncomfortable situations with the shopper standing in front of them.

Collateral damage

Finally, the reality is that your likely not the only merchant that a given shopper interacts with. Regardless of how good your business is or how clean your traffic is, a shopper’s recent history with other merchants will influence the issuers decision on your transaction. For lack of a better reason, the catch-all 05: Do Not Honor refusal in some cases be seen as “Collateral damage”. If the shopper coincidentally just made a large purchase on a high-risk website or went on a shopping spree before reaching your store, there is the possibility that the issuer may decline the transaction at that moment in time. In these cases, there is unfortunately very little that can be done, except to ask for another card or to try again later.

Hopefully this helps shed some light on the possible reasons why ‘05: Do Not Honor’ is so dominant in the payment space and that there is no single reason for this response. Adyen’s advice to dealing with these refusals is to look at the data at individual issuer/BIN levels and from there, try to distil patterns particular to those bank’s shoppers.

Online research from Equifax, the consumer and business insights expert, reveals over a third (37%) of Brits believe the UK will be a cashless society within the next 10 years. Over half (53%) of 16-34 years olds believe we’ll be reliant on digital and card payments by 2028, compared to just 22% of those aged 55 or above.

However, the research shows that while the use of cash is declining¹, it still has its fans. In the survey, conducted with Gorkana, respondents said coins are their top payment choice for vending machines (60%), parking meters (57%), charity donations (53%), and buses (52%), and paying with notes is the preference for taxis (42%).

While 46% of people use cash less often that they did three years ago, more than half (54%) of respondents use cash either as or more often, and almost three in five (59%) think shops, cafes or market stalls that only accept cash are convenient.

The findings also highlight that although the use of digital payments via contactless cards and online transactions is growing rapidly¹, some people are still wary about security. Over a quarter (27%) of respondents don’t feel confident payments via websites or contactless cards are secure, and 26% think it’s difficult to track money spent using digital methods.

Sarah Lewis, Head of ID and Fraud at Equifax, said: “We’re in the midst of an exciting smart payments revolution. We can pay for our lunch with our watches and passers-by are now able to donate to buskers via contactless. This growth of new payment technologies is drawing us closer to a cashless society, but long standing preferences for cash remain in certain situations, particularly among older consumers.

“The shift to digital payments in the new economy raises important questions about the role of different payment methods, and highlights the need to balance the convenience people want with security. As digital and online payments continue to grow, so too does the associated fraud. It’s vital that new technology is maximised to give people the reassurance they need as they change the way they spend.”

(Source: Equifax)

Multi-currency payments provider FairFX has revealed that since the Brexit referendum, the Euro has decreased 13% against the pound increasing financial pressure on businesses who operate cross border.

Uncertainty over future trade agreements alongside fluctuating currency rates have put the spotlight on the cost of doing business internationally and highlights the importance of monitoring foreign currency transactions.

An estimated 17% of UK based SMEs are doing business internationally, boosting their own bottom line, as well as the UK economy.  Whilst international expansion offers access to new markets, ambitions for growth need to be well planned financially, starting with the basics.

35% of SMEs state cashflow is a barrier to growth, making smart currency moves essential when it comes to international payments, and by getting the best value for every international transaction, both business ambition and cashflow can be supported.

FairFX Top tips for getting the best value when making international payments:

1. Know what you want

To get the best international payment provider for your business you need to know what you want. Consider how regularly you’ll be sending and receiving money overseas, how many currencies you’ll need to transact in and understand the costs associated with making both singular and regular transactions.

Fees and charges can vary by transaction type, day, time and speed you require the transaction to be completed in, so list out the different transaction types you may want to make and understand how the fees and charges can vary so you don’t get caught out. Understand how currency rates are set and how they compare to other providers. This can be confusing to unpick so speak to a currency expert if necessary.

2. Review your current payment package

High street banks don’t offer the best value when it comes to international business payments. Using your current banking provider to handle international as well as domestic transactions may be convenient but defaulting to them might mean you’re missing out on better rates and lower fees.

As your business grows and develops, your business banking needs will also evolve and if you’re transacting regularly small charges can add up, meaning you could be paying a high price for an unsuitable service. 

3. Select a transparent, convenient and consistent service

If you’re regularly buying from and selling abroad, fees could soon take a portion of profit from your bottom line. Pick a provider whose fees are transparent and made clear upfront so you can better manage your expenses. Look for a service where rates are consistently good – don’t be lured with teaser offers that expire and leave you trapped or unaware of post introductory fees and charges.

4. Understand the market you’re operating in

Keeping track of currency movements can be easier said than done, so sign up for a reliable rate watch service, like the one provided by FairFX which alerts you when currencies you operate in have moved in your favour. This way you can make international payments when rates give you a commercial advantage.

5. Maintain your standards

The rigorous standards you set for expenses and payments at home don’t stop when your employees pass border control, so find a solution where you are confident in who is spending what. Consider prepaid corporate cards which allow you to transact with competitive exchange rates and top-up in real-time, giving your staff the funds they need to travel for work, providing peace of mind and control over expenditure on a global scale.

6. Watch the way your employees pay

When it comes to travel, regardless of whether your staff are hosting meetings or need to cover the cost of their own accommodation and essentials, make sure you’re in charge of the exchange rate they are using for their payments.

If staff are currently paying their own expenses and then claiming back, make sure they don't fall into any exchange rate traps. Advise them to always pay in the local currency when travelling and avoid exchanging at the airport.

The FairFX corporate prepaid card allows staff to pay for expenses with the amount of money you have approved them to spend, whilst you can track and report on spending on the integrated online platform, so there is no reliance on employees using their own payment methods, choosing the exchange rate and fees charged and reclaiming the cost from your business.

7. Benefit from the best rates

Exchange rates fluctuate from day to day with the euro currently 13% lower than before the Brexit referendum announcement, a sum that on a large transfer could make the difference between profit and loss. Consider a forward contract to ensure you can benefit from peak rates by fixing international transactions up to a year in advance.

8. Ask an expert

If you are regularly making international payments it is worth finding an expert to help you with services not offered by your bank to help minimise risk and maximise the return of doing business overseas.

9. Set up a stop loss or limit order

Protect your business against market downturns with the aid of a Stop Loss, which will ensure any losses are limited if you’re aiming for a higher rate and the market takes a turn.

Also consider a Limit Order where you set up ‘target’ exchange rates and ask your currency dealer to process the transaction when the rate you’ve set is achieved to give you certainty over how payments will affect your bottom line.

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Ian Stafford-Taylor, CEO of FairFX said: “Easy access to international currency at market-leading rates whether travelling abroad or sending and receiving payments is vital for businesses breaking into and operating successfully internationally, especially in a market where rates are constantly fluctuating.

“Many small and medium sized businesses settle for high street bank accounts which can charge extortionate fees for international transactions and offer poor service. The right account and sensible planning could add up to big savings, something that SMEs can ill afford to waste in a competitive marketplace.

“As future trade agreements post Brexit become clearer businesses could find themselves with heavy workloads as they adjust the way they operate, so finding a trusted payment provider and reaping every possible benefit when it comes to currency will continue to be crucial for success.”

(Source: FairFX)