Category: Money

Consult Hyperion’s Live 5 for 2020

4th February 2020by Consult HyperionLeave a comment

At Consult Hyperion we take a certain amount of enjoyment looking back over some of our most interesting projects around the world over the previous year or so, wrapping up thoughts on what we’re hearing in the market and spending some time thinking about the future. Each year we consolidate the themes and bring together our Live Five.

2020 is upon us and so it’s time for some more future gazing! Now, as in previous years, how can you pay any attention to our prognostications without first reviewing our previous attempts? In 2017 we highlighted regtech and PSD2, 2018 was open banking and conversational commerce, and for 2019 it was secure customer authentication and digital wallets — so we’re a pretty good weathervane for the secure transactions’ world! Now, let’s turn to what we see for this coming year.

Hello 2020

Our Live Five has once again been put together with particular regard to the views of our clients. They are telling us that over the next 12 months retailers, banks, regulators and their suppliers will focus on privacy as a proposition, customer intimacy driven by hyper-personalisation and personalized payment options, underpinned by a focus on cyber-resilience. In the background, they want to do what they can to reduce their impact on the global environment. For our transit clients, there will be a particular focus on bringing these threads together to reduce congestion through flexible fare collection.

So here we go…

1. This year will see privacy as a consumer proposition. This is an easy prediction to make, because serious players are going to push it. We already see this happening with “Sign in with Apple” and more services in this mould are sure to follow. Until quite recently privacy was a hygiene factor that belonged in the “back office”. But with increasing industry and consumer concerns about privacy, regulatory drivers such as GDPR and the potential for a backlash against services that are seen to abuse personal data, privacy will be an integral part of new services. As part of this we expect to see organisations that collect large amounts of personal data looking at ways to monetise this trend by shifting to attribute exchange and anonymised data analytics. Banks are an obvious candidate for this type of innovation, but not the only one – one of our biggest privacy projects is for a mass transit operator, concerned by the amount of additional personal information they are able to collect on travellers as they migrate towards the acceptance of contactless payment cards at the faregate.

2. Underpinning all of this is the urgent need to address cyber-resilience. Not a week goes by without news of some breach or failure by a major organisation putting consumer data and transactions at risk. With the advent of data protection regulations such as GDPR, these issues are major threats to the stability and profitability of companies in all sectors. The first step to addressing this is to identify the threats and vulnerabilities in existing systems before deciding how and where to invest in countermeasures.

Our Structured Risk Analysis (SRA) process is designed to help our customers through this process to ensure that they are prepared for the potential issues that could undermine their businesses.

3. Privacy and Open Data, if correctly implemented and trusted by the consumer, will facilitate the hyper-personalisation of services, which in turn will drive customer intimacy. Many of us are familiar with Google telling us how long it will take us to get home, or to the gym, as we leave the office. Fewer of us will have experienced the pleasure of being pushed new financing options by the first round of Open Banking Fintechs, aimed at helping entrepreneurs to better manage their start-up’s finances.

We have already demonstrated to our clients that it is possible to use new technology in interesting ways to deliver hyper-personalisation in a privacy-enhancing way. Many of these depend on the standardization of Premium Open Banking API’s, i.e. API’s that extend the data shared by banks beyond that required by the regulators, into areas that can generate additional revenue for the bank. We expect to see the emergence of new lending and insurance services, linked to your current financial circumstances, at the point of service, similar to those provided by Klarna.

4. One particular area where personalisation will have immediate impact is giving consumers personalised payment options with new technologies being deployed, such as EMV’s Secure Remote Commerce (SRC) and W3C’s payment request API. Today, most payment solutions are based around payment cards but increasingly we will see direct to account (D2A) payment options such as the PSD2 payment APIs. Cards themselves will increasingly disappear to be replaced by tokenized equivalents which can be deployed with enhanced security to a wide range of form factors – watches, smartphones, IoT devices, etc. The availability of D2A and tokenized solutions will vastly expand the range of payment options available to consumers who will be able to choose the option most suitable for them in specific circumstances. Increasingly we expect to see the awkwardness and friction of the end of purchase payment disappear, as consumers select the payment methods that offer them the maximum convenience for the maximum reward. Real-time, cross-border settlement will power the ability to make many of our commerce transactions completely transparent. Many merchants are confused by the plethora of new payment services and are uncertain about which will bring them more customers and therefore which they should support. Traditionally they have turned to the processors for such advice, but mergers in this field are not necessarily leading to clear direction.

We know how to strategise, design and implement the new payment options to deliver value to all of the stakeholders and our track record in helping global clients to deliver population-scale solutions is a testament to our expertise and experience in this field.

5. In the transit sector, we can see how all of the issues come together. New pay-as-you-go systems based upon cards continue to rollout around the world. The leading edge of Automated Fare Collection (AFC) is however advancing. How a traveller chooses to identify himself, and how he chooses to pay are, in principle, different decisions and we expect to see more flexibility. Reducing congestion and improving air quality are of concern globally; best addressed by providing door-to-door journeys without reliance on private internal combustion engines. This will only prove popular when ultra-convenient. That means that payment for a whole journey (or collection or journeys) involving, say, bike/ride share, tram and train, must be frictionless and support the young, old and in-between alike.

Moving people on to public transport by making it simple and convenient to pay is how we will help people to take practical steps towards sustainability.

So, there we go. Privacy-enhanced resilient infrastructure will deliver hyper-personalisation and give customers more safe payment choices. AFC will use this infrastructure to both deliver value and help the environment to the great benefit of all of us. It’s an exciting year ahead in our field!

SRC enters the secure digital commerce arena

28th October 201916th September 2020by Justin Gage1 Comment

Secure Remote Commerce (SRC) officially launched in the US last week, supported by a limited set of merchants, with more to launch by year-end and into early 2020. We’ve been tracking SRC for some time now as it moved through the specification development process within EMVCo. It has emerged at launch as a customer-facing brand called “Click-to-Pay,” unless you’re using an Amex card, where it’s also called “Online Checkout” in confirmation emails received after registering a card.

Continue reading “SRC enters the secure digital commerce arena”

4 Essential Trends in Money for your Business

21st October 2019by Consult Hyperion1 Comment

By Sanjib Kalita, Editor-in-Chief, Money20/20

This article was originally published on Money20/20.

We are in the midst of seismic societal changes of how people interact and transact. Across societies, geographies and segments, digital is the new norm. Change has accelerated, placing greater value upon flexibility and speed. Historically, money and finance have been among the more conservative and slower changing parts of society, but this has changed dramatically over the past decade by viewing money as an instigator of change rather than a lagging indicator.

Whether you are a marketer in shining armor conquering new territory, a financial wizard casting spells upon the balance sheet, or the queen or king guiding the whole enterprise, here are 4 trends about money that you should keep in mind for your business.

Platforms are the new kingdoms

Platforms are the base upon which other structures can be built. For example, App stores from Apple and Google provide the infrastructure for consumers to complete commercial transactions and manage finances through their mobile phones. While these companies develop their own digital wallets, they also enable similar services from banks, retailers and other companies. Building and maintaining the platform enables services that they would not have created on their own, like Uber or Lyft, which in turn, have created their own platforms.

Marketers trying to address customers’ needs can plug into platforms to broaden offerings or deepen engagement with target markets. Platform-based thinking implies that product and service design is ongoing and doesn’t stop with a product launch. Jack Dorsey didn’t stop when he built the Square credit card reader. The team went into lending with Square Capital. They got into consumer P2P payments with Square Cash. Their ecosystem has grown through partnerships with other companies as well as in-house development.

Digital Identities open the gates

How do your customers interact with you? Do they need to create a username and password, or can they use a 3rd party system like Google or Facebook? Are security services like two-factor authentication or biometrics used to protect credentials? Is your company protecting customer identities adequately? The importance of all of these questions is increasing and often the difference between being forced into early retirement by a massive data breach or surviving to continue to grow your business.

While identity management and digital security might not be top of mind for most marketers, they are table stakes for even the most basic future business. History is full of tales of rulers successfully fighting off armies laying sieges on castles and fortresses, only to fail when another army gets access to a key for the back door.

Context rules the experience

Credit card transactions moved from predominantly being in-store, to e-commerce sites accessed from desktop computers, and now to mobile phones. As the point-of-purchase expanded, so did the consumer use cases and thought processes. In tandem, mobile screens presents less information than desktop computer screens, which in turn presents less information than associates in a brick-and-mortar environment. Companies best able to understand context and deliver the right user experience within these constraints will build loyal customer relationships.

Apps or services created for a different use cases on the same platform, such as Facebook and Messenger apps, can help achieve this. Banks and have different apps for managing accounts or for completing transactions or payments. On a desktop, you can access these services through a single interface but on the mobile, forcing users to select their use case helps present a streamlined experience on the smaller, more time-constrained mobile screen. The use of additional data such as location, device, etc. can further streamline the experience. Marketers that don’t think about the context will lose the battle before it even begins.

Data is gold

While a marketer’s goal is to generate sales, data has become a value driver. In the financial world, data about payments, assets and liabilities has become critical in how products and services are delivered. PayPal, a fintech that began even before the word ‘fintech’, has recently been using payments data from their platform to help build a lending business for their customers. Similarly, an SME lender named Kabbage has grown to unicorn status by using data from other sources to make smarter lending and pricing decisions. In the payments industry, Stripe distilled a previously complex technology integration into a minimal data set, accessed via API, to easily build payments into new digital products and services.

Those that are able to harness the power of data will be able to predict what customers want and more effectively address their needs. In some cases, it might be using data from within your enterprise or from other platforms for targeting, pricing or servicing decisions. In other cases, it might be using data to reimagine what your product or service is.

Looking for more insights on key trends in money? Hear from 400+ industry leaders at Money20/20 USA. Money20/20 USA will be held on October 27-30, 2019 at The Venetian Las Vegas. To learn more and attend visit us.money2020.com.

This article was originally published on www.money2020.com.

GDPR: Consequences, Fines and Responses

10th July 201918th December 2020by Tim RichardsLeave a comment

The UK’s Information Commissioner’s Office (ICO) has finally done what it’s been threatening to for a while and levied enormous fines on British Airways’ parent International Consolidated Airlines (£183 million) and Marriott Hotels (£99 million). While subject to appeal, these are the first signs of how the ICO now has real teeth and is prepared to use them. The question is, what lessons can we learn from this?

Well, firstly, we can observe that card payments aren’t optimised for the internet. The BA breach looks like it was at entry point – i.e. it wasn’t that the data was breached while stored in a database but that someone managed to get hacked software to intercept payments in flight and capture the details. The point here, of course, is that the paradigm of giving your card details to the merchant so they can pass them to your issuer originated in the 20^th century when we didn’t have a choice. Now, given that we have this internet thing it makes more sense to contact our issuer directly and tell them to pay the merchant. Realistically, this may be the only way we can be sure merchants won’t lose our card details – don’t give them to them.

This points to push payments a la PSD2 APIs. But given that these won’t be pervasive for a while then the next best option is to tokenise cards to either limit their use to a single merchant or even a single transaction. Both of these are areas we’re seeing lots of interest in, and ought to be high on the agenda of heads of IT security and payments everywhere.

Secondly, we can note that static credentials are a sitting target. Seeing email addresses and passwords breached opens up companies to all sorts of horrible consequential damages under GDPR – let’s face it, most people reuse the same combinations across multiple sites so a breach on one site can lead to exposure on another. Any company relying on static credentials should basically assume they’re going to get some level of breach.

Fixing this requires two factor authentication and we have a ready-made, state-of-the-art, solution here in the EU. PSD2 SCA is about as strong an approach as you could ask for and we have banks and authentication providers drowning in relevant technology. There simply is no excuse for a company using static credentials if they get breached. We’ve been working closely with providers to look at how to take these solutions into the wider authentication market, because there’s been a certain inevitability about the way a lot of companies have dealt with their data breach protection.

Finally, note that the point that BA have made – that they haven’t seen any impact due to their breach – needs to be quantified: “yet”. Hackers tend to sit on breach data for 18 months before using it, waiting for the identity protection schemes that are often engaged post these events to expire. GDPR allows affected companies and individuals to sue – up until now the costs of a data breach have been borne by banks having to deal with fraud and issue new cards and consumers having to sort out identity protection. The ICO fines may yet be just the be tip of a very expensive iceberg as GDPR ensures that the costs more appropriately allocated to the offending parties.

SCA: the end of merchant liability, and other authentication factors

2nd July 201918th December 2020by Tim Richards2 Comments

The EBA’s recent Opinion on the elements of strong customer authentication under PSD2 was, apart from moving the goalposts on when SCA will be enforced, full of interesting information about what constitutes a valid SCA element. It closes some doors, opens others and ends any notion that merchants can take liability and not do SCA themselves.

Taking the final point first, there’s been a view that Article 74(2) of PSD2 permits merchants to carry on without implementing SCA as long as they take liability. We at Consult Hyperion have long argued that that is an optimistic and overly legalistic reading of the regulations and this has now been confirmed. The EBA states:

In addition, even if there were a liability shift to the payee or the payee’s PSP for failing to accept SCA, as articulated in Article74(2) of PSD2, this could not be considered an alleviation of PSPs’ obligation to apply SCA in accordance with and as specified in Article 97 of PSD2.

Basically, Article 97 takes precedence – PSPs (aka Issuers) must apply SCA so if the merchant chooses not to then rather than end up with a payment for which they’re liable they’ll end up with no payment at all. Which, you’d imagine, would rather miss the point of being a merchant.

Beyond this point the Opinion has lots of interest to say about inherence, possession and knowledge elements.

On inherence two points stand out. Firstly the Opinion unambiguously states that behavioural biometrics can be a valid factor: this opens up a world of possible low friction SCA, and we expect to see lots of innovation in this area. Secondly it states that 3DS-2 does not support inherence as none of the data points being gathered relate to biological or behavioural biometrics but – and we view this as important – 3DS-2 is a valid means of supporting SCA.

This is critical because the dynamic linking process behind 3DS-2 is not straightforward and there have been differences of opinion over whether this is compliant. Given that 3DS-2 appears to be the only game in town for CNP transactions having a statement that it’s OK is mighty important.

On possession, the EBA clarifies that OTP SMS is valid and also that mobile app based approaches can be – but only if the app is linked to the device. We’ve been arguing that this is obviously the case for a while, so it’s good to see this confirmed: although there are going to be a few app developers out there that need to revise their approaches pdq (we can help, of course!).

Also on possession the EBA has stated something that really should have been obvious to anyone taking more than a moderate interest in the topic – printed card details such as PAN and CVV or user ids and email addresses are not valid possession or knowledge elements. As a number of prominent industry players have been taking the opposite approach this could lead to some interesting developments in the coming weeks, particularly as the Opinion states that if the CVV is not printed on the card and is instead sent on a separate channel, then it is a valid knowledge element.

Overall, the analysis and discussion in the Opinion on valid SCA elements is welcome, if a trifle tardy. To be fair to the EBA, we don’t see anything in their analysis that a proper reading of the RTS wouldn’t have produced. However, it’s been clear for some time that many industry players have been making a highly liberal interpretation of the requirements usually based on a legal opinion. But PSD2 and the RTS are about principles, not rules: if you need advice on this you need to talk to the people who understand this stuff. Which, by the way, is us, not law firms.

Alchemy at Money 20/20 Europe

17th June 201928th May 2020by Stefan StafraceLeave a comment

The most sought goal in alchemy is turning metal into gold. Our colleagues at Money 20/20 Europe chose this as the apt theme for this year’s event. What better way exists, other than alchemy, to describe a congregation of pretty much everyone that matters in the financial community, experimenting with propositions, skills and technologies, catalysed by their unwavering dedication, to determine the right mix that creates that metaphor? A symbolic representation of a continually evolving and innovating financial ecosystem that will yield a golden age of solutions for financial services. As I witnessed this event, numerous inspirational people spoke about different aspects, goals and aspirations of such an evolving ecosystem, hopefully grounded in adequate regulations that don’t stifle innovation.

Various sessions described the ongoing architectural paradigm shift in the ecosystem towards cloud-based platforms for acquiring, banking, issuer processing and digital wallet solutions, which enable existing and new players, including airline operators and retailers, to enter the market to provide financial services to their customer base with relatively less capital and operational expenses. These platforms are built using microservices, which allow for various functions to be developed and deployed in a modular fashion with minimal impact to existing services. Such a paradigm allows a banking system, for instance, to easily scale to the demand as required, whilst being resilient in an agile manner to changing product requirements and needs of their stakeholders including regulatory authorities.

There was also a focus on highlighting the benefits of collaboration and partnerships at various levels to innovate and to fight crime, whilst ensuring fair competition amongst existing and new players. Partnerships between BigTech and FinTech companies provide the required resources, including the right talent to maximise the use of latest technologies and access to various data sources, to build innovative value propositions and commercial models that deliver enhanced and personalised financial services that meet customer needs.

The concept of being open has featured heavily in various sessions throughout the event. Of course, this included the Open Banking track, brilliantly chaired by our own global ambassador, Dave Birch, where the current state of the matter was discussed, along with the opportunities and challenges that Open Banking has presented. However, the concept of openness extended beyond that, with panellists at the Financial Crime Summit calling for open collaboration, amongst financial institutions and regulatory authorities, to efficiently share AML and KYC data to combat financial crime, particularly to reduce identity theft, fraud and money laundering. This was reiterated when discussing real-time payments which could benefit from access to different data sources and techniques for detecting fraud in real-time and, as a minimum, keeping one step ahead in this adversarial game with fraudsters. Speakers sanctioned the idea of open communication, with an aim of unifying the ecosystem through standardisation, to circumvent challenges, break down barriers and plug vulnerabilities that fragmentation brings about.

The future of commerce was discussed, including the role of data along with ubiquitous and reliable connectivity, made possible through 5G. They will be key in providing personalised customer experience and engagement. I was thrilled to see innovative on-demand insurance models from WeFox and Lemonade, leveraging Machine Learning (ML) and IoT, to dynamically tailor their products to their consumers. It was only a couple of years ago that Consult Hyperion started discussing the possibility of pay-as-you-go commercial models revolutionised by technologies like IoT and ML. In fact, Dave Birch has even highlighted these predictions in our Live 5 this year, including the need to understand the risks these models incur.

The correct use of AI was an interesting panel discussion covering various points. They pointed out the need to leverage and operate technologies, like ML, in a transparent and accountable manner, addressing issues like ensuring customers know when they are dealing with an AI agent or a human and, addressing potential data bias by ensuring proper breadth and depth of data being sourced to fuel ML algorithms.

Various speakers emphasised the importance of placing the consumer at the centre of this evolving ecosystem. It is the key factor that ensures we design consumer-centric, personalised services, which help improve their quality of life, whilst protecting them and rewarding them for their loyalty. This was corroborated by OVO when they presented the incredible work they accomplished, in Indonesia, by deploying innovative mobile-based, instant credit and lending solutions to aid businesses and help boost the developing economy.

In an era of fake news causing a reputation crisis, digital identity and authentication schemes warranted a whole track, which was insightfully chaired by our COO, and resident Identity expert, Steve Pannifer. Various speakers and panellists discussed the importance of such schemes to enable data security and privacy controls in line with increasingly demanding privacy regulations.

Ultimately, I was glad to have come across various sessions promoting the need for diversity and equal opportunity in this financial ecosystem, so that we can capitalise on skills from a talent pool, without regard to gender, race or age, and better reflect the society that we serve.

Indeed, Money 20/20 have enabled dialogue and championed collaboration amongst different players in the financial ecosystem for the betterment of financial services. Therefore, in the spirit of this year’s theme, aim to be an alchemist and surround yourself with ones at the next event, and maybe you too can experience the magic! As Consult Hyperion, we are proud to have taken part in this dialogue, shared our knowledge and experience, and will continue with our hard work in helping various clients evolve along with the financial ecosystem.

P.S. If you missed out on the winner announcement of the wacky payments race around the world between cash, crypto, card and mobile. I am glad to report that Team #mobile emerged victorious, revealing that Seattle, home of some of the big tech companies, was ironically the most challenging location in accepting mobile payments. Team #crypto found it the most difficult – the fact that the value of a crypto coin changed every five minutes probably didn’t help! 😊

The Yin Yang Twins: SRC and W3C’s Payment Request API

7th March 20198th January 2021by Assad UmarLeave a comment

In the world of online payments (card not present), two issues that seem to be unavoidable are:

• Continuous rise of card-not-present fraud. Fraud rates for card not present are running at between four and ten times greater than card present depending on merchant sector

• High cart or basket abandonment rates. Average e-commerce abandonment rate is of the order of 65%, with 24% of customers at merchants using 3DS 1.0 abandoning the transaction after starting the checkout process.

Continue reading “The Yin Yang Twins: SRC and W3C’s Payment Request API”

Why can’t I use Apple Pay for everything online?

11th January 2019by Consult Hyperion1 Comment

Pottering around on Twitter, I noticed an interesting question:

Why can’t I use Apple Pay for everything online? Shouldn’t there be some way for me to hold my phone up to the screen when I get to an order page online and scan a QR code and hold my thumbprint or something? — Joe Weisenthal (@TheStalwart) January 2, 2019

Joe has a point. Apple Pay is far more secure, and far more convenient, than messing around typing card numbers in to web pages as we did back in 1998. And globally, merchants lose some $20-$30 billion per annum in card-not-present fraud, so why aren’t we using our (secure) mobile payment systems to pay for things we buy on the (insecure) web already?

Well, first of all you can use Apple Pay to pay for things on the web but only if you are using Safari and only if the merchant has implemented Apple Pay. The merchants, however, don’t want to implement a solution that only works for a small proportion of their customers (ie, people who use iPhone, Safari on the web and have Apple Pay configured correctly). Merchants would prefer a more universal solution such as W3C or SRC.

Change, however, may be just around the corner.

Barclays Equity Research put out an interesting note on payments in November. Called “Sleepwalking into 3DS2.0 and PSD2”, it kicks off by saying that “the mandated 3-D Secure 2.0 and the requirement for two-factor Secure Customer Authentication (SCA) are around the corner, but the industry does not seem ready for this major change in transaction processing protocols”.

Well, quite. I’m glad to see they agree with our decision to make SCA the highest priority of our “Live 5” areas for our clients to focus on in the coming year.

In this note, Barclays say that an unintended consequence of PSD2 will be a better e-commerce experience on mobile, where biometrics are a convenience technology, rather than the desktop, and this should benefit digital wallets (again as we note in our Live 5). In the store too, mobile may have the advantage. Contactless payments will require a PIN entry every five transactions or €150 (depending which the issuer mandates), unless an online transaction in the interim authenticates the card and restarts the counter.

However, an Apple Pay or Google Pay mobile transaction would be authenticated every time and because of CDCVM, can ignore the contactless limit (currently £30 in the UK). While a card is arguably marginally easier than mobile wallets today for contactless, this may be enough to shift the advantage to mobile.

Thus, the future of secure retail transactions will converge on the smartphone, irrespective of whether those transactions are physical or virtual.

IATA Pay and the unintended consequences of PSD2

10th January 2019by Consult HyperionLeave a comment

The Irish central bank’s decision to authorise Google Payment Ireland under the second Payment Services Directive (PSD2) attracted a fair bit of comment, some of it informed. As Finextra pointed out, this does not grant Google with the ability to offer a full banking service including bank accounts, but they don’t need to because with a PI licence they can obtain API access to bank accounts under PSD2.

The licence means that Google can offer PSD2 Payment Initiation Services (PIS) and Account Information services (AIS)

It’s an obvious move for Google. My good friend Simon Lelieveldt noted in his blog on the subject, that this makes “Google Brexit-proof and PSD2-proof” which would be reason enough to do it, but it’s important to understand just how disruptive this licence might be.

I wrote about this back in 2017 for Wired, pointing out that changes in regulation “mean the tech giants will soon be able to access customers’ bank account data” and that companies such as Google would take this obvious step in order to gain access to financial services infrastructure without the overheads and scrutiny that a banking licence involves. Similarly, I’ve commented before that it makes sense for Amazon to get such a licence, not a banking licence because there is nothing that the banks can do to stop Amazon from becoming a neo-bank. PSD2 means that bank customers will give Amazon permission to access their bank accounts, at which point Amazon will become the interface between the customer and financial services.

Hence my point just how disruptive this might be. Only last month, banks in Spain were complaining (with some justification) that there are considerable implications to Google, Amazon and Facebook entering the financial services industry. This is because the introduction of PSD2 means that these new “big tech” entrants can benefit from asymmetric regulation and extend their appeal to consumers. The regulation is asymmetric, as my colleague Tim Richards I discussed in our “fireside chat” last year, because it means that tech companies can access banks’ customer data but the banks do not get to access the tech companies’ customer data.

The impact of open banking is, of course, not limited to the tech giants. IATA Pay is an industry-supported initiative to develop a new payment option for consumers when purchasing airline tickets online. It uses PSD2 to instruct transfers direct from customer accounts and I think it might turn out to be one of those things that economists call a “weak signal” of change? Looking back, I think we’ll see a kind of inflexion point where major retailers started to bypass the card networks and use open banking to go straight to the customer account.

“Hello this is British Airways. Click here to pay by IATA Pay and get double Avios”.

We spend a lot of time speculating on what might happen when the internet giants get access to bank accounts, but it could be just as big a deal across major retail categories. A year ago we wrote “platform-provided strong authentication to retailer apps will allow them to bypass the existing card infrastructure (with some projections indicating that a third of European card volume could disappear in the coming years) and perhaps even the physical POS itself”.

We’ve said it before and we’ll say it again: open banking is a much bigger deal than many people think.

Consult Hyperion’s Live 5 for 2019

10th December 20182nd September 2024by Consult Hyperion2 Comments

It’s that time of year again. I’ve had a chat with my colleagues at Consult Hyperion, gone back over my notes from the year’s events, taken a look at our most interesting projects around the world and brought together our “live five” for 2019. Now, as in previous years, I don’t expect you to pay any attention to our prognostications without first reviewing our previous attempts, otherwise you won’t have any basis for taking us seriously! So, let’s begin by looking back over the past year and then we’ll take a shot at the future.

Goodbye 2018

As we start to wind down 2018, let’s see how we did…

1. Open Banking. Well, it was hardly a tough call and we were bang on with this one. We’ve been working on open banking projects in the UK, on the continent and beyond. What seems to be an obviously European issue, is of course a global one and we’ve been helping the global payment brands understand the opportunities. Helping existing market participants and new market entrants to develop and implement responses to open banking has turned out to be intellectually challenging and complex, and we continue to build our expertise in the field. Planning for the unintended consequences of open banking and the potentially un-level playing field that’s been created by the asymmetry of data, was not the obvious angle of opportunity for traditional tier one banks.

2. Conversational Transactions. Yes, we were spot on with this one and not only in financial services. Many organisations are shifting to messaging channels for customer support and for transactions, in both the banking and retail sectors. The opportunity for this continues with the advancements of new messaging enablers, such as the GSMA backed RCS. But as new channels for support and service are introduced to the customer experience, so are new points of vulnerability.

3. The Internet of Cars. This is evolving although the security concerns that we spoke about before, continue to add friction to the development of new products and services in this area. Vulnerabilities to card payments or building entry systems are security threats, vulnerabilities to connected or autonomous vehicles are potentially public safety threats.

4. Artificial Intelligence. Again, this was an easy prediction because many of our clients were already active. Where we did add to thinking this past year, it was about the interactive landscape of the future (i.e. bots interacting with bots) and how the identity infrastructure needs to evolve to support this.

5. Tokens/ICOs. Well, we were right to highlight the importance of “tokens” (the basis of Initial Coin Offerings, or ICOs) and our prediction that once the craziness is out of the way, then regulated token markets will become significant looks to be borne out by mainstream commentary. At Money2020 Asia in Singapore, I had the privilege of interviewing Jonathan Larsen, Corporate Venture Capital Manager at Ping An and CEO of their Global Voyager Fund (which has a $billion or so under management). When I put to him that the tokenisation of assets will be a revolution, he said that “tokenisation is a really massive trend… a much bigger story than cryptocurrencies, initial coin offerings (ICOs), and even blockchain”.

As we said, 2018 has seen disruption because the shift to open banking, starting in the UK,has meant the reshaping of financial services while at the same time the advance of AI into the transaction flow (transactions of all types, from buying a train ticket to selling corporate bonds) begins to reshape the way we do business.

Hello 2019

This year we are organising our “live five” in a slightly different way, listing them by priority to our clients rather than as a simple list. So here are the four key technologies that we think will be hot throughout the coming year together with the new technology that we are looking at out of the corner of our eyes, so to speak. The mainstream technologies are authentication,cross-sector digital identity, digital wallets for ticketing and secure IoT in the insurance sector. The one coming up on the outside is post-quantum cryptography.

So here we go…

1. With our financial services customers we are moving from developing strategies about open banking to developing implementation plans and supporting the development of new systems and services. The most important technology at the customer interface from the secure transactions perspective is going to be the technology of Strong Customer Authentication (SCA). Understanding the rules around which transactions need SCA or not is complicated enough, and that’s before you even start working out which technologies have the right balance of security and convenience for the relevant customer journeys. Luckily, we know how to help on both counts!

As it happens, better authentication technology is going to make life easier for clients in a number of ways, not only because of PSD2. We are already planning 3D Secure v2 (3DSv2) and Secure Remote Commerce (SRC) implementations for customers. Preventing “authentication friction” (using e.g. FIDO) is central to the new customer journeys.

2. Forward thinking jurisdictions such as Canada and Australia have already started to deliver cross-sector digital identity (where in both cases we’ve been advising stakeholders). New technologies such as machine learning, shared ledgers and self-sovereign identity, if implemented correctly, will start to address the real issues and improvements in know your customer (KYC), anti-money laundering (AML), counter-terrorist financing (CTF) and the management of a politically-exposed person (PEP). The skewed cost-benefit around regtech and the friction that flawed digitised identity systems cause, mean that there is considerable pressure to shift the balance and in the coming year I think more organisations around the world will look at models adopted and take action.

3. In our work on ticketing around the world, we see a renewed focus on the deployment of real digital wallets. Transit and other forms of ticketing (such as for sporting events) are the effective anchor tenants of the digital wallet, not payments. In the UK and in some other countries there has been little traction for the smartphone digital wallet because of the effectiveness of the deployment and use of contactless cards. If you look in your real wallets, most of what your find isn’t really about payments. In our markets, payments alone do not drive consumers to digital wallets, but take-up might be about to accelerate. It’s one thing to have xPay put cards into a digital wallet but putting your train tickets, your sports rights and your concert passes into a digital wallet makes all the difference to take-up and means serious traction. Our expertise in using the digital wallets for applications beyond payments will give our clients confidence in setting their strategies.

4. In the insurance world we see the business cases building around the Internet of Things (IoT). The recent landmark decision of John Hancock, one of the oldest and largest North American life insurers, to stop selling traditional life insurance and instead sell only “interactive” policies that track fitness and health data through wearable devices and smartphones is a significant step both in terms of business model and security infrastructure. We think more organisations in the insurance sector will develop similar new services. Securing IoT systems becomes a priority. Fortunately, our very structured risk analysis for IoT and considerable experience in the practical assessment of countermeasures, deliver a cost-effective approach.

5. In our core field of security, we think it’s time to start taking post-quantum cryptography (PQC) seriously not as a research topic but as a strategic imperative around the development and deployment of new transaction systems. As many of you will know, Consult Hyperion’s reputation has been founded on the mass-market deployments of new transactions systems and services and this means we understand the long-term planning of secure platforms. We’re proud to say that we have helped to develop the security infrastructure for services ranging from the Hong Kong smart identity card, to the Euroclear settlement system and from contactless payments to open loop ticketing in major cities. Systems going into service now may well find themselves overlapping with the first practical quantum computer systems that render certain kinds of cryptography worthless, so it’s time to add PQC to strategies for the mass market.

And there you have it! Consult Hyperion’s Live 5 for 2019. Brexit does not mean the end of SCA in the UK (since PSD2 has already been transcribed into UK law) and SCA means that secure digital identities can support transactions conducted from digital wallets, and those digital wallets will contain things other than payment instruments. They might also start to store transit tickets or your right to travel, health and fitness data for your insurance company. Oh, and all of that data will end up in the public sphere unless the organisations charged with protecting it start thinking about post-quantum cryptography or,as Adi Shamir (one of the inventors of public key cryptography) said five years ago, post-cryptographysecurity.