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Industry roundup: 24 November

Buy Now Pay Later (BNPL) transactions heighten risk of fraud

Buy Now Pay Later (BNPL) payment providers and online retailers must implement defense mechanisms against possible fraudulent activities posed by this new emerging payment option. LexisNexis® Risk Solutions, a global provider of information and analytics for businesses across industries, forecasts a substantial surge in BNPL transactions, particularly this Black Friday and Cyber Monday, and cautions of heightened fraud potential.

Online shopping has significantly increased due to the pandemic, resulting in an increase of BNPL transactions by 182%, from June 2020 to June 2021, according to the LexisNexis Risk Solutions Cybercrime Report H1, 2021. The main risk is that fraudsters can open new accounts with credentials stolen from trusted customers. Fraudulent activities, such as associating email addresses or mobile numbers with a given applicant, are not likely to be detected because BNPL providers usually execute "soft" credit or identity checks. In order to identify and prevent these types of fraudulent activities, BNPL providers and retailers must equip themselves with a defense system to confirm instantaneous validity during the application process.

Additional risk is posed where the fraudster has taken over the account and is able to make purchases from the stolen credentials of the existing BNPL user. According to LexisNexis, adding layers to the verification process and using a mix of physical and digital characteristics to verify a person’s identity can substantially reduce fraud risk for payment providers and retailers. Merchants can minimize point-of-sale (POS) scams and chargebacks by carrying out an identity and fraud verification process on the front-end.

Internet robotic (Bot) attacks have increased 41%, while human initiated attacks fell 29% (June 2020-June 2021), according to a recent cybercrime report. More details can be found at Cybercrime Report | LexisNexis Risk Solutions. Digital fraud continues to be on the rise where fraudsters are keen to utilize dark web intelligence, sophisticated automated tools, and organized networks spread throughout industries and borders to conduct fraudulent activities.

With the constant evolution and flexibility of emerging payments and e-commerce, both payment providers and retailers must take precautionary steps to install defense mechanisms into their current processes to ensure consumers and businesses are protected from potential fraud risk. Technologies should be able to decipher between a trusted consumer and a fraudulent one in a seamless transactional way.

Fraudsters are continuously looking for ways to exploit, particularly during busy seasonal times, according to Kate Dunckley, Senior Solutions Consultant, Fraud and Identity, LexisNexis® Risk Solutions. In addition, fraudsters are aware that newer online businesses may have lower defense mechanisms, adding to more fraudulent attacks. Bottom line: businesses need to be ahead of the game with the most sophisticated tools to fight against fraudsters.

 

KeyBank continues to progress in the digital innovation space: KeyBank buys B2B fintech company, XUP

XUP stands for Transactions “up” and is a BaaS (Banking as a Service) platform enabling banks to regain their merchant business. The alliance between US$187 billion-asset Cleveland based bank, KeyBank, and XUP will boost KeyBank's nationwide “digital first” solution for its customers and will help expand its technology capabilities.

According to XUP, the technology engineering team developed a cohesive and seamless payments system for banks to partner with processors, third parties, client management systems, and other fintech services. KeyBank, an early investor in XUP, will be able to cross-sell more services to its small-business and middle market customers, according to Ken Gavrity, Head of Enterprise Payments and Analytics, KeyBank.

With the flexibility of this technology, businesses will have the ability to enroll in a variety of treasury, merchant and other banking services easily. KeyBank continues to embrace digital innovations as shown by earlier acquisitions: AQN strategies to improve data analytics, Laurel Road’s digital student loan refinance platform, AvidXchange, BillTrust, Bill.com, to name a few providing customers with a dynamic financial technology and superior payments services experience.

As software innovations continue to spread across the financial services industry, Gavrity further commented how acquiring XUP sped up KeyBank’s ability to create connectivity throughout their systems, partners and clients, making it simpler to do business with KeyBank.

 

Financial connectivity between China and Singapore grows more robust despite pandemic

The initiative, China-Singapore (Chongqing) Connectivity Initiative (CCI), is the third government-to-government partnership venture between China and Singapore to help facilitate economic transformation and encourage financial services innovation in Western China. During 2021, this program has aided in accelerating US $3 billion in multi-currency financing transactions from the western region (in addition to the US $17 billion cross-border transactions achieved since 2015).

A two-day summit is still underway between ASEAN central bank reps and financial leaders to continue discussions on key financial topics, including cross-border transactions, green finance and fintech.

Comments from Mrs. Josephine Teo, Minister for Communications and Information and Second Minister for Home Affairs, Singapore, addressed the importance of the financial industry in the current economic challenges and goals towards to meeting sustainability. Teo further added that leveraging technology is important to enable trade and investments, particularly in connecting Southeast Asia and Western China (through the CCI New International Land-Sea Trade Corridor, CCI-ILSTC). The CCI-ILSTC is a method for traders to transport goods between these two areas, Western China and Southeast Asia. Trade flows increased by almost 30% in 2020 despite the pandemic. The summit advised to make the CCI-ILSTC into a major regional trade route, but challenges will need to be addressed.

Enhanced electronic trade documentation processes would assist in verification, reduce fraud and manual errors, and reduce costs, commented Mr. Ravi Menon, Managing Director of the Monetary Authority, Singapore. In addition, Menon suggested ways to structure financial activities to meet environmental (ESG) needs in a secure and logical method between Singapore and Chongqing.

 

International trade is forecasted to grow by 70% (US $30 trillion by 2030)

According to the latest collaboration research by Standard Chartered and PwC Singapore, global exports are projected to increase to approximately US $30 trillion (nearly double from US $17 trillion currently) over the next 10 years. Analysis was derived from past data and forecasts along with key visions from over 500 global financial company leaders. Furthermore, the report identifies 13 markets driving much of this growth, noting the key corridors involved (figure 1 below).

Figure 1. Forecasted trade growth driven by 13 markets:

Market

Exports in 2030 (USD)

Average annual growth rate

Key corridors

Bangladesh

51bn

7%

India, UAE, USA

Hong Kong

939bn

5.7%

Japan, Mainland China, USA

India

564bn

7.6%

Hong Kong, Singapore, USA

Indonesia

348bn

8.1%

India, Mainland China, USA

Kenya

10bn

7.6%

Pakistan, Uganda, USA

Mainland China

5,023bn

7.1%

Germany, Malaysia, Vietnam

Malaysia

499bn

8.3%

India, Mainland China, Singapore

Nigeria

112bn

9.7%

India, Indonesia, Mainland China

Saudi Arabia

354bn

7.6%

India, Mainland China, South Korea

Singapore

687bn

7.4%

Indonesia, Mainland China, Malaysia

South Korea

972bn

7.1%

India, Mainland China, Vietnam

UAE

299bn

6.1%

India, Mainland China, Singapore

Vietnam

535bn

7.0%

India, Mainland China, USA

In addition, Standard Chartered classifies the following five trends that will shape the future of international trade:

  • Widespread adoption of sustainable and fair-trade practices
  • Promoting more comprehensive participation
  • Increased risk diversification
  • Increased digitization
  • Realignment to fast-growing emerging markets

Standard Chartered reported that nearly 90% of financial managers are in agreement with these trends to shape the trade future and are in line with their five-to-ten-year cross-border development plans.

As trade and technology continue to connect the world, a growth movement (globalization) towards regions becoming more interregional (expansions such as Africa-East Asia, ASEAN-South Asia, East Asia-Europe, East-Middle East, South Asia – US) is rapidly taking precedence around the world. Continents considering other locations for their manufacturing and production needs will see an increase in their investment flows. This further underscores the trend towards emerging markets and increasing supply chain risk diversification.

Sustainability actions continue to trend in trade functions to meet ESG concerns. According to the report, ninety percent of business leaders recognized the need to adopt and pursue sustainable practices in their supply chains. However, about thirty-four percent prioritized it as a “top three” to execute in their business within the next five to ten years.

Standard Chartered has been committed to making global trade more sustainable and focused on shifting to NetZero. In an effort to assist businesses reach a sustainable and robust supply chain, Standard Chartered released a Sustainable Trade Finance proposal and sustainable finance solutions to help businesses allocate funds efficiently towards attaining their NetZero goals.

Simon Cooper, CEO Corporate & Institutional Banking and Europe & the Americas, Standard Chartered, commented that globalization is still operational despite recent disruptions as shown by the expectation that global trade will double. Standard Chartered continues to promote a more sustainable and comprehensive model of international trade to small businesses and multinationals with an emphasis on globalization.

By providing sustainable financial products, companies will be able to follow suit by instilling sustainable practices across their chains of supply.

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