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WIRED Money 2016 Startup Stage: new ways to pay

Want to save £1 every time you run a mile? How about a keyboard that lets you pay from WhatsApp?

What will be the next fintech breakthrough? On June 23, 16 startups from around the world gathered at the British Museum in London to pitch on the WIRED Money Startup Stage.

From blockchain to alternative lending and working in emerging markets, the startups had five minutes to pitch their ideas to our expert judges. On the panel, Marisol Menéndez Alvarez, open innovation manager at BBVA; Yann Kandelman, head of investment at Orange Digital Ventures and James Temperton, acting deputy editor of WIRED.co.uk.

These pitches are all focused on digital-only banks and new ways to pay.

Modern Lend

WIRED Money 2016 Startup Stage winner

If you’re coming to the US to work or study, getting credit and loans can be tricky. Kobina Ansah, co-founder and CEO of ModernLend is trying to change that. His startup uses alternative data metrics to provide credit cards and loans to creditworthy international citizens shut out of the US system.

Traditional banks may decline borrowers who lack a US credit history, says Ansah. These people, hugely creditworthy in their home countries, are unable to borrow in the US as they lack a credit history or social security number. The startup is already working with the international student offices at the University of Pennsylvania and NYU and will launch its first card for international citizens this autumn.

Oval Money

Saving is a $35 trillion global market, but only 18 per cent of young adults save with a major financial institution. Benedetta Arese Lucini, co-founder and CEO of Oval Money, wants to make it more fun. The savings app uses MangoPay to create a digital wallet that lives on a user’s smartphone.

Oval Money gamifies saving using an ‘If This Then That’ model to tap into pretty much any API: run five miles? Save £1. Buy something from Amazon? Save five per cent of the total purchase. Oval Money can also use micro-transactions, making it easy to save tiny amounts regularly to build up a large pot.

PayKey

Herzliya, Israel-based PayKey wants to make it easy to pay for goods within any app. The idea is simple, Dario Mutabdzija, president and head of business development: a white-label keyboard for iOS that lets anyone transfer money to anyone else in an app. According to Mutabdzija, incumbent banking and payment apps aren’t contextual or “integrated into the daily lives of consumers”.

As PayKey is totally service agnostic, it can work anywhere, so users can pay within Twitter, Instagram, Facebook, WhatsApp – wherever.

Robin

If you’ve got kids, there’s a chance you already provide them with financial services – but you probably call it pocket money. Robin aims to “connect kids to the financial world through their parents in a safe way,” says Robin CEO Rogelio Valdés Garcia. The app, which links a wallet with a parent’s bank account, uses gamification to encourage responsible saving and money management.

When it launches Robin will charge £2 per month to use the service and hopes to partner with banks to move children onto real accounts when they are old enough.

 


Temperton, J. (2016) WIRED money 2016 startup stage: New ways to pay. Available at: http://www.wired.co.uk/article/wired-money-2016-startup-stage-digital-banks (Accessed: 11 July 2016).

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Could you be the next victim of identity fraud?

We explain the different types, how they are committed and ways to keep your money safe.

  • ID fraud claimed more than 148k victims last year – a 57% annual rise
  • One couple had £8k stolen from their joint account by criminals
  • We explain all of the ways you can fall victim – and how to prevent it

The rate at which individuals’ personal details are being stolen by criminals is rising fast. Fraud experts say the public need to be more vigilant than ever.

Laura Shannon explains the different fraud types, how they are committed, and explains ways to keep your money safe.

Identity fraud claimed more than 148,000 victims last year – a 57 per cent rise compared to the year before. Cifas, the financial crime prevention service, says every demographic is being targeted – with fraud affecting all age groups.

But how it happens remains a mystery to many victims.

This was the case for retired couple Mike and Sheila Fairholm, both 67, who had £8,000 looted from their joint account with NatWest while they were on holiday in Berlin last December – and where they had not used their cards and only took cash.

When they returned to their home in Wallsend, Newcastle upon Tyne, they found Mike’s log-in password for online banking had been changed.

After using Sheila’s log-in, which was unaffected, they discovered £8,000 had been spent at a spread-betting company. Curiously the sum was returned to them in three instalments – all while they were still away.

The Fairholms also noticed £1,000 had been transferred from their savings account to their current account.

Despite not having lost any money, the couple are concerned about how this could happen and keen to get answers. Sheila says: ‘The bank cancelled my husband’s debit card, which had been compromised.

Mystery: Mike and Sheila Fairholm had £8,000 ¿looted¿ from their joint account while they were on holiday

Mystery: Mike and Sheila Fairholm had £8,000 ‘looted’ from their joint account while they were on holiday

‘But it seemed unconcerned that someone had been able to access our online banking details, change passwords and spend a huge amount of money leaving us overdrawn for a couple of days. We were astonished at its reaction and worried it was not taking the fraud seriously.’

It was suggested to the couple there was a virus or malware on their home computer. But they took it to PC World to be checked over, at a cost to themselves, only to be told the device was secure.

The Fairholms also use F-Secure software to help keep their information protected.

 Mike visited his local NatWest branch to discuss the fraud with a manager, only to discover the couple also had a £10,000 overdraft on their account, which they weren’t aware of and did not ask for. This has now been reduced.

The manager suggested Mike’s card had been compromised in the run-up to Christmas when he had bought items online, but Sheila says this does not explain how someone could access their account and change passwords.

NatWest says: ‘We take fraud extremely seriously. We are working with the Fairholms to ensure their accounts are kept secure.’

The couple took the computer to PC World to be checked over only to be told the device was secure

The couple took the computer to PC World to be checked over only to be told the device was secure

The different types of fraud: 

Identity fraud 

Criminals glean personal information about an individual to open accounts in their name, order a mobile phone contract, request other goods in their name or empty their current account.

Investment fraud 

Sometimes known as ‘boiler room’ fraud.

Savers are convinced by phone or email to invest in ‘unbeatable opportunities’ and with high yields ‘guaranteed’.

The fraudsters will try to build a rapport with their victims over time, and may even produce sham brochures and make false claims about how the company is regulated.

The investment itself will often be a high-risk unregulated product – such as wine, art or diamonds – if it exists at all.

Scams 

This is a general term covering a broad number of rip-offs affecting people in the UK on a daily basis.

They range from bookings for holiday homes advertised by fake landlords, a sham adviser promising to unlock money from a pension before the age of 55, or demands for payment by doorstep tradesmen for ‘urgent’ property repairs.

Scams can include demands for payment by doorstep tradesmen for 'urgent' property repairs

Scams can include demands for payment by doorstep tradesmen for ‘urgent’ property repairs

All scams and frauds combined are thought to cost individuals nearly £10billion a year – the equivalent of £202 for every UK adult and more than £300 per second.

This figure comes from the UK Fraud Costs Measurement Committee, and is based on academic research by the University of Portsmouth’s Centre for Counter Fraud Studies.

Consumer group Citizens Advice is running Scams Awareness Month throughout July to help people learn more about common scams and how to spot them.

For more information visit citizensadvice.org.uk or call the charity’s consumer helpline on 03454 040506.

The methods used 

Social engineering 

Specific details about victims are taken from information freely available online, such as addresses and ages posted on social media.

Often this will be all that is needed to open an account in that person’s name or to tease more information needed from an account holder.

Phishing/smishing 

People are tricked into clicking on links in emails or texts – perhaps because it looks to be from an official source, such as Revenue & Customs, a popular shop or someone they know.

Clicking on the link downloads ‘malware’ on to a computer or phone. This is software that lets crooks see account numbers and passwords that have been used on that device.

Pressing issue: Clicking on a dodgy link downloads 'malware' on to a computer or phone, which is software that lets crooks see account numbers and passwords that have been used on that device

Pressing issue: Clicking on a dodgy link downloads ‘malware’ on to a computer or phone, which is software that lets crooks see account numbers and passwords that have been used on that device

Phone fraud 

Skilled scammers impersonate bank employees or police to find out a person’s account PIN or password.

The caller will suggest there is evidence of fraud on an account and recommend the person phones their bank’s fraud department.

When the account holder hangs up and dials the number, the original call is never disconnected.

The fraudster then plays out a script pretending to be a bank employee and once they have the householder’s trust, will ask for a PIN or password.

Hacking

Customer data, such as debit or credit card details, are traded by criminals in hidden corners of the internet not visible to the average computer user.

This information is available because of data breaches by companies or hackers targeting businesses – such as what happened with TalkTalk last October.

Hackers can also tap into public wi-fi hotspots.

Wi-fi hotspots are not secure and a fraudster would be able to see whatever other users are looking at

Wi-fi hotspots are not secure and a fraudster would be able to see whatever other users are looking at

Stephen Proffitt, deputy head of Action Fraud, the UK’s national reporting centre for fraud and cybercrime, says: ‘These internet connections are not secure and a fraudster would be able to see whatever other users are looking at – such as internet banking and passwords. It is better to use your mobile phone’s data allowance for this as it is more secure.’ 

A flaw in NatWest’s security was highlighted earlier this year by BBC Radio 4 programme You And Yours, which found it was possible to hack into a person’s account using a stolen mobile phone, with no need for log-in or password information.

The programme demonstrated how a criminal could take a victim’s phone, contact their bank claiming to have lost log-in details, and then be sent a unique activation code that gives access to the account.

The fraudster was then free to change the account password and PIN so only he or she could access it. NatWest consequently made changes to its security to address these concerns.

Card skimming and shoulder surfing 

Cloning technology on debit and credit card terminals or on cashpoints copy a user’s card details. A camera or someone hovering over a customer’s shoulder at a till or ATM will then pick up what PIN is entered – giving them easy access to the account and its contents.

Proffitt says: ‘There may be a device on a cash machine that you are unaware of. Always cover your hand when entering your PIN.’

Customer fraud and failure

Customers are often blamed for fraud as a result of being careless about their details. But sometimes the bank’s lax security and crooked employees are responsible.

The Mail on Sunday has been told privately by a bank employee that staff need to be trained about the dangers of ‘phishing’ just as keenly as their customers.

In other words, customer details have been or could be compromised just as easily by bank employees falling for fraudsters’ tricks.

Insider fraud is another problem, where rogue employees drain customer accounts.

Less than a fortnight ago a Barclays apprentice cashier working at the Kensington branch of the bank in London was sentenced to 33 months in prison at the Old Bailey for using details of 25 customer accounts to open new accounts, take out loans and request new cards and PINs.

He intercepted the post and used these new cards to empty customer accounts. Victims all received refunds but the loss to Barclays was £167,370.

Meanwhile, two bank insiders at Halifax and Lloyds were jailed on June 8 after working with a wider gang on a series of frauds to steal more than £400,000 from customers.


Shannon, L. and Laura+Shannon+For+The+Mail+On+Sunday (2016) How to spot an ID thief. Available at: http://www.thisismoney.co.uk/money/guides/article-3682199/Could-victim-identity-fraud-ways-spotting-ID-thief.html (Accessed: 11 July 2016).

 

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Balance transfer war hots up as Tesco Bank launches fee-free 24-month deal

Tesco Bank has launched a new 24-month fee-free 0% balance transfer card, matching the market-leading deal launched by Halifax earlier this week.

As with the Halifax deal, the new Tesco ‘No Balance Transfer Card’ charges no interest on debts transferred from other cards for up to two years, and there’s no balance transfer fee either.

However, people looking to shift a credit card debt might find the Tesco Bank deal the more attractive of the two, as all successful applicants will receive the full two-year interest free period.

Halifax will only offer the full 24-month 0% period to 51% of people who qualify for the card. Other successful applicants will only get a 13-month interest-free period.

The Tesco No Balance Transfer Card charges 18.9% APR once the 0% period is up, but while “most” successful applicants will receive this rate, some borrowers will be charged 20.9% APR or 23.9% APR, subject to their credit history.

Halifax’s two-year fee-free balance transfer card also charges 18.9% representative APR, though borrowers that don’t qualify for the advertised rate will also be charged higher interest rates, at 21.9% or 25.9% APR.

While this is the strongest deal, if you can repay your card debt over two years, anyone looking to pay down a larger credit card debt might want to consider a longer interest-free period. Several lenders offer interest-free balance transfers for up to 40 months.

 


Moneywise (2013) Balance transfer war hots up as Tesco bank launches fee-free 24-month deal. Available at: http://moneywise.co.uk/news/2016-07-07/balance-transfer-war-hots-tesco-bank-launches-fee-free-24-month-deal (Accessed: 8 July 2016).

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EU ban on credit card fees backfires – you’ll still pay 2.5pc to spend

Consumers are still having to pay high fees when using credit cards despite new EU regulations that have capped transaction costs.

At the same time, the rules have resulted in millions of cardholders losing popular perks such as cashback.

As of December 2015, the EU ruled that the “interchange fee” – paid in the first instance by the shop – on credit and debit cards could be no more than 0.3pc and 0.2pc repectively.

Up to then the typical fee was 0.8pc, with shops passing on the cost to customers either through higher prices or explicit credit card usage fees.

The intention of the EU’s new rules was to lower this cost and with the hope that consumers would benefit from lower prices and fees.

But many readers have contacted Telegraph Money confused as to why they continue to pay far more than 0.3pc when using a credit card. Airlines such as Ryanair and Easyjet still add a 2pc charge, for example, and some cinemas charge over 5pc –in the form of fixed-sum “card handling fees”.

The regulations make clear that shops and other sellers of services “must not charge consumers, in respect of a given means of payment, fees that exceed the costs borne by the trader for the use of that means.”

In other words, these fees shouldn’t be used to boost retailers’ profits.

But with some firms charging nothing, and others 2pc or more, that is precisely what Your Moneyreaders, among others, believe is happening.

James Daley, managing director of consumer campaign group Fairer Finance, said: “There doesn’t seem to be anyone policing credit card charges. Nobody is stepping up to these companies and asking them why they apply a 3pc surcharge when others process cards transactions for free.”

According to the Department for Innovation and Skills, unfair surcharges are only looked into when there is a complaint. The first point of call is consumers’ local trading standards office.

Complaints are rare, partly because the sums are often small – but also because the companies that levy the charges are quick to justify them.

The industries that charge

Richard Koch, head of policy at trade body, the UK Cards Association, said the worst offenders are airlines, cinemas and travel agents.

When paying for a flight, customers could expect to pay a 2pc credit card charge with Ryanair. EasyJet applies the same 2pc charge plus a £13 “administration fee” which it adds to all bookings. Flybe and Monarch charge 3pc.

Ryanair told Telegraph Money that the charge reflected the cost of processing credit card payments, including bank fees.

Easyjet took the same line. A spokesman said: “The 2pc transaction fee applied to credit card payments covers all costs associated with processing the transaction of which the bank charge is just an element.

“Other associated costs have increased significantly, particularly in relation to card data security.”

Online travel agents apply charges too. Customers who book a trip through Travel Republic could expect a 1.99pc surcharge if paying by credit card and Thomson applies a 1.5pc fee.

Rail firms and cinemas also charge. Everyman Cinema adds 75p to every ticket booked online.

Even the Government charges taxpayers who pay with credit cards – although here at least theses fees appear to be falling.

Until recently, the government charged a 1.5pc fee for those who wanted to pay tax by credit card. As of April 1, it has been reduced to “better reflect the costs associated with different credit cards.”

When asked about the varying costs, an HMRC spokesman said: “We don’t make a penny from credit card charges. We are merely passing on what we are charged for processing a credit card payment.

“We have introduced and published separate rates to better reflect the costs associated with different credit cards.”

A surcharge is not applied when paying for driving licences and passports. However, the DVLA does add a £2.50 fee to vehicle tax payments by credit card which it says cover the costs of processing the payment.

A number of high-profile firms, such as Trailfinders, do not charge customers for using credit cards.

A Trailfinders spokesman said: “Unlike other travel companies, we don’t charge extra for the use of credit cards or unwanted hidden extras, nor do we charge a premium rate telephone number.”

Sainsbury’s and online marketplace Amazon also do not add on a surcharge.

Homeware retailer IKEA dropped its fee in 2010.

Cashback rewards cut

While the rules appear not to have stopped some firms from levying high card fees, they have had another distinctly negative impact. This is the dramatic decline in cashback and other cardholder perks.

Capital One, one of the biggest credit card providers, was the first to cut its cashback scheme.

It withdrew all of its reward cards in April 2015, saying the EU rules meant they were “no longer sustainable.

A month later, RBS and Natwest announced the end of the “YourPoints” scheme which gave customers one point per £1 spend.

War workers queuing for a midnight show at the cinema. circa 1940

A 75p “card handling fee” applied to your cinema ticket may not seem much – but it could be 5pc of your ticket

 

Tesco Bank* was another provider which slashed its rewards scheme. In November, it announced that customers would need to spend £8 outside of Tesco to earn one Clubcard point, instead of £4 previously.

At the time, a Tesco spokesman said: “As a result of changes in the credit card industry taking affect this year, the amount that card companies earn from businesses who accept credit cards is reducing.”

M&S Bank also cut rewards. Customers were told they would earn one point for every £5 spent from February 2016, instead of the usual £2.

Instead of reducing the cashback, some providers increased the annual credit card fee – Santander’s 123 credit card* went from £2 to £3 a month in January.

Santander suggested the EU commission ruling was part of the decision.

It added: “ The European commission ruling on interchange has significantly reduced the fees banks receive.”

European Commission competition spokesman, Yizhou Ren, said it was too early to judge whether costs borne by consumers would fall.

“It is quite possible that these reductions in interchange fees have not yet been passed on to merchants,” she said.

What to do if you think the surcharge is unfair

If you feel like your credit card costs is unjustified, the first thing to do is to complain to the retailer.

If this doesn’t work, you can complain to your local authority’s trading standards officers.

Another option is to try alternative dispute resolution where an independent party will look at your case to try and help you and the retailer to reach an agreement. According to Citizens Advice, most judges will expect you to try this before taking the matter to court.

 


Murray, A. (2016) EU ban on credit card fees backfires – you’ll still pay 2.5pc to spend. Available at: http://www.telegraph.co.uk/personal-banking/credit-cards/eu-ban-on-creditcard-fees-backfires–youll-still-pay25pc-to-spen/ (Accessed: 7 July 2016).

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Barclaycard bPay turns watches contactless

Barclaycard is expanding its bPay contactless payments range through the introduction of a small case that can be attached to watches and fitness bands.

The bPay Loop is a silicon case containing an NFC chip that can be slid onto the strap of watches and fitness bands with open buckles.

Launched in 2014 bPay is available to anyone with a UK-registered Visa or MasterCard, debit or credit card, not just Barclaycard and Barclays customers. Users add funds to their digital wallet on-the-go using a mobile app, online through the bPay web portal, or set up an automatic top-up which adds funds when their balance falls below a pre-set level.

Bpay was initially launched as a wristband and is also available as a sticker and fob, with over 100,000 products sold. Barclaycard says that the latest Loop version comes in response to customer demand for a way to add payment functionality to wearables people already own.

Available to buy online for £19.99, Barclaycard has also teamed up with Swiss watch maker Mondaine and fitness tech outfit Garmin to offer Loop to those purchasing selected items from both brands.

Tami Hargreaves, commercial director, digital consumer payments, Barclaycard, says: “Thanks to the huge growth we are seeing in contactless payments, we are increasingly becoming accustomed to being able to make low-value payments throughout the day, in a quick, easy, convenient way. Loop makes that easier than ever.”


Finextra (2016) Barclaycard bPay turns watches contactless. Available at: https://www.finextra.com/newsarticle/29140/barclaycard-bpay-turns-watches-contactless (Accessed: 7 July 2016).

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Is your business prepared for the cashless economy?

The UK is on the fast track to being cash-free, but are our small and medium businesses ready?

The pounds in your pocket are destined for the museum display cabinets. This is according to new research by trade association, Payments UK, who predict that debit card and contactless payment use will overtake cash transactions by 2021 after finding that cash transactions accounted for less than half of consumer payments for the first time in 2015.

There’s no doubt that contactless technology has transformed consumer buying, and with Apple and Android Pay now available, it’s clear that the days of counting out coppers for a pint of milk and a Mars bar will soon be over.

Who has the least cash?

Citigroup and London’s Imperial College latest Digital Money Index indicates that the UK has begun to sprint ahead in the global race to becoming a cashless society after rising from 7th to 4th place in the list of countries that are most ‘digital ready’. Finland topped the list as the most digital-ready country for the third consecutive year, with Singapore and the US following behind in second and third place respectively.

Finland’s continued position as a digital leader is unsurprising considering their strong investment in digital infrastructure. Fixed broadband is available to 97 per cent of Finnish homes; this combined with affordability has helped Finland become one of the most tech savvy nations, with 91 per cent of the population being regular internet users. Furthermore, according to the Digital Economy and Society Index (DESI), Finland has one of the highest shares of eGovernment users and users of eHealth services in Europe. The Finnish government’s integration of digital and public services has further embedded digital processes into everyday life, meaning that digital payment is just another aspect of efficient modern living.

Contactless: the consumer’s choice

The rapid change in the UK’s payment habits can largely be attributed to big brands’ early adoption of contactless. In 2014 Tesco updated all 6,000 of their payment terminals in London to accept contactless payment, they announced that this would save 6 seconds for every customer that used it. For a consumer that is often time poor, 6 seconds less spent in a queue is 6 seconds less stress but more importantly for Tesco it speeds up customer service which enhances the customer experience.

However, contactless payment hasn’t always been hailed as a hero. Transport for London’s (TFL) announcement that its buses would go cashless in 2014 was initially met with scepticism. Nonetheless, since TFL has rolled out contactless across its network, more than 400 million journeys have been made using credit or debit cards or a mobile device, revealing that contactless is an option that offers consumers more, not less choice.
While Tesco and TFL helped lead the way in implementing wave and pay into our everyday lives, the increase in the contactless spend limit from £20 to £30 further pushed contactless mainstream by boosting retailer opportunities and encouraging a wider range of merchants to adapt their payment systems. In 2016, from petrol stations to pubs, consumers can go about their daily lives without having to enter their pin.
Contactless may have won London over first, but a recent study by Barclaycard found that contactless is growing fastest in Manchester, Glasgow and Cardiff. Furthermore, the study also revealed that the over 60’s, the group often deemed as ‘technophobes’, are the fastest growing adopters of contactless card payments. The popularity of contactless across generations offers further evidence that wave and pay is here to stay as more consumers look to utilise new technology that will allow them to make safer, more convenient payments.

Better for business

The swift infiltration of contactless into our everyday lives has certainly raised customer expectations of the pace and ease of service, meaning that businesses not offering customers the payment options they expect, risk undermining their reputation by appearing out of touch.
However, the new way to pay offers considerable benefits to businesses too. Sage Pay’s Payments Landscape Report 2015, found that annual cash handling costs, including allowance for fraud and theft, set UK retailers back more than £3,600 on average. By offering cashless payment options, businesses will benefit hugely from reduced cash handling costs. While digital payments are not completely free from fraud, the risk is significantly lower. Figures from the UK Cards Association show that in the first six months of 2015, fraudulent transactions were equivalent to only 2p for every £100 spent using contactless functionality.

In addition to speedier, safer transactions, digital payments also open up the possibility of integrated reward programmes and location-based marketing. Tapping into these smartphone capabilities will allow businesses to use customer data to deliver tailored marketing campaigns, enhancing customer experience and encouraging loyalty.

While the question of whether the UK will turn completely cashless remains debatable, there’s no doubt that paying for a latte with a quick swish of your wrist has become so commonplace that digging deep in your purse for cash feels like an archaic practice. Whether you’re a high street store, independent coffee shop or a local newsagent, consumers now expect to be able to pay with lightning speed. Cashless is coming, make sure you’re prepared.

 


Growth Business UK. 2016. Is your business prepared for the cashless economy?. [ONLINE] Available at: http://www.growthbusiness.co.uk/comment-and-analysis/2532811/is-your-business-prepared-for-the-cashless-economy.thtml. [Accessed 24 June 2016].

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Facebook: the latest way to transfer cash

Would you trust a social media website such as Facebook or an app such as Snapchat with your money? In America, thousands of people already do.

Facebook users there have been able to transfer money to their friends free of charge on Messenger, the site’s instant messaging service, since last year, while Snapchat users in the United States can also send money to contacts using “Snapcash”.

Snapcash is designed to enable users to exchange money quickly and easily when splitting the bill at a restaurant or paying someone back for concert tickets, for example.

And social media payments seem likely to arrive in Britain soon thanks to the relaxation of strict European laws that govern who can offer digital payment services. A revised EU directive is due to become UK law within the next 18 months, opening up the way for social media transfers.

But with new social media hacks and scams hitting the headlines every week, is it really safe to send money via Facebook or WhatsApp?

Security and scams

Cyber criminals love to exploit the security weaknesses of social media sites and apps. In 2014, for example, hackers  posted 4.6 million usernames and phone numbers online.

Facebook, which owns WhatsApp, has a big problem with fake accounts being set up in legitimate users’ names, a scam that could easily be used to trick people into sending money to the wrong account.

The website, which is reportedly working on a mobile payment feature that will allow users to make card purchases in shops and restaurants, claims that it has taken steps to ensure that Messenger payments are secure. These include asking users to create a Pin or use fingerprint ID to authorise transactions.

“We use secure systems that encrypt the connection between you and Facebook as well as your card information when you ask us to store it for you,” the company said. “Payment systems are kept in a secured environment that is separate from other parts of Facebook.”

Facebook on a phone

‘Payment systems are kept in a secured environment that is separate from other parts of Facebook,’ the company said

Dave Birch of payments consultancy Consult Hyperion backed the company’s line, arguing that storing your card details with a social media app was safer than sharing your bank details by email.

“If you wanted to make a transfer using WhatsApp, you would need both my phone and my password to do so,” he said.

Hackers  are not the only potential problem, though. The ability to send money via a social media site may make vulnerable people easier targets for confidence tricksters. There is also a danger that the speed and ease of social payments will attract criminal users.

How social media payments work

To use payment services such as Snapcash and Facebook Messenger, you must be 18 or over and have registered a debit card to your account. Credit cards, PayPal accounts and prepaid cards are not accepted.

As the services are currently available only in America, the linked accounts must also be US based. Once set up, they are quick and easy to use.

To send money via Facebook Messenger, for example, all you have to do then is open a chat with a friend, press “More” and then tap the $ icon followed by “Pay”. To receive a payment, meanwhile, you simply open the chat and click “Add card” to add a US debit card to be credited with the payment.

However, you cannot reverse a payment made in error.

‘I’m interested but fraud worries me’

Facebook user Kate Evans (pictured above) likes the idea of being able to send money to friends via the website but is worried that it would leave her open to fraud.

Ms Evans, 40, a teacher from Derbyshire, said: “Sending cash to friends via Facebook Messenger is something I would be interested in trying when it becomes available here.

“However, I would want to know more about where my card details were being stored and whether I would be refunded if something went wrong.”

She said she would keep an eye out for any stories about problems with Facebook Messenger payments in the US.  “If there are any scandals, it would definitely make me less likely to use the service myself.”

 


The Telegraph. 2016. Facebook: the latest way to transfer cash  . [ONLINE] Available at: http://www.telegraph.co.uk/money/consumer-affairs/facebook-the-latest-way-to-transfer-cash/. [Accessed 24 June 2016].

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New criminal gadget can clone up to 15 contactless bank cards a second from victims who are simply standing nearby

 

  • Hi-tech device steals info such as the card number and name and address 
  • Details then written onto a blank card which is used on for speeding spree 
  • Ready-made con kits sell for £500 on London and south east black market
  • Device first to target contactless, which is becoming increasingly popular

 

A new gadget can be used by criminals to clone up to 15 contactless bank cards a second – from victims who are simply standing nearby.

The hi-tech device steals details such as the card number and the person’s name and address contained on the credit or debit card.

The scanner – called the Contactless Infusion X5 – extracts the information where it can be written onto blank cards, which can then be used by thieves to go on spending sprees.

Ready-made con kits, including the device, special software and 20 blank cards, are being sold on the streets of London and the south east for £500, according to the Daily Star Sunday.

The device is thought to be the first sold on the black market to specifically target the increasingly-popular contactless bank card.

The technology enables customers to pay for goods with a single tap of their card on a reader, without the need to provide a signature or enter their PIN number.

Card use is being boosted by the rising popularity of contactless ‘tap and go’ payments, with mobile payment services such as Apple Pay making payments ever more convenient.

Industry experts predict that by 2025, notes and coins will be used for just one in four payments, while credit, debit and charge cards will account for more than half of all payments made.

The tipping point at which cash will no longer be king is expected to come in 2021, when it is predicted 14.5 billion debit card payments will be made, overtaking the 13 billion cash payments forecast for the first time.

The device is thought to be the first sold on the black market to specifically target the increasingly-popular contactless bank card (stock image)

The device is thought to be the first sold on the black market to specifically target the increasingly-popular contactless bank card (stock image)

 

Looking specifically at consumer payments, the average UK adult made 20 card payments per month in 2015, with around two payments per month being contactless.

By 2025 people are predicted to use a debit, credit or charge card virtually every day – at 30 times per month.

The UK Cards Association has said that contactless card spending topped £1.5 billion in the space of a month for the first time in March.

The milestone was reached just four months after contactless spending reached £1 billion for the first time in November 2015.

 


Mail Online. 2016. New criminal gadget can clone up to 15 contactless bank cards a second nearby | Daily Mail Online. [ONLINE] Available at: http://www.dailymail.co.uk/news/article-3637553/New-criminal-gadget-clone-15-contactless-bank-cards-second-victims-simply-standing-nearby.html. [Accessed 24 June 2016].

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Card fraud up 20% – you’re at risk without even leaving the house

How fraudsters take your money without touching your cards.

You may think you’re taking all the right steps to protect yourself from card fraud. You might guard your PIN at the cashpoint, keep your wallet in a bag worn across your body, and never let your card out of your sight. However, while these are sensible steps, they are only protecting you from the risk of having your card stolen, and a new study has highlighted that thieves don’t need to snatch your card from you in order to take your money.

It’s not just the theft of your card you need to guard against – it’s stolen phones and tablets too. Matt Sanders, from Gocompare.com Money explains: “Fraudsters continually seek new ways to scam unsuspecting people. Our increasing use of technology to do everything from holding our address book and diary to online shopping and banking means that criminals are also logging-on to find new ways to steal our personal information and raid bank accounts. To thieves, the personal data held on a smartphone or tablet can be more valuable than the device itself.”

This means we need to protect our devices, not only by keeping them close when we’re out and about, but also by PIN protecting them – to make them less useful to thieves who steal them.

The other theft risk to be aware of is your documents. If you have thrown out statements, letters or receipts without shredding them, or have a driving licence taken from your wallet, then a thief can use this information to apply for cards and loans in your name.

Alternatively, they might steal your card while it is transit, and spend before you even know you card is missing.

Reaching into your home

Fraudsters also have a number of ways of reaching into your home. One common approach is to use a number of tricks to get you to reveal your card details. This includes phone and email scams where they contact you, pretending to be from a legitimate organisation, and asking you to ‘verify your details’.

In some instances they will cut straight to the chase and get you to reveal your account number, password and PIN. In other cases, they will ask for personal information, and use this to take over control of your account or card.

Your computer use can also open you up to risks. Fraudsters may send an email with a link in it – this contains a virus, which downloads to your computer and will recognise whenever you access internet banking. It will then automatically send back any information it gleans to the fraudsters, who can raid your account.

Sanders says: “Social media sites can also provide a rich seam of personal information which can be used for identity theft and financial fraud. Social media platforms encourage users to provide as much personal information as possible, including users’ full names, birth dates, relationship status – even pet names. Crooks can use this information to build up a personal profile and guess the answer to bank and payment card provider security questions. So, we would recommend users of these sites to use privacy settings to protect their personal information.”

Protect yourself

Sanders suggests five vital steps to protecting yourself.

1. Protect your personal information
Never provide personal information in response to an unsolicited email, online or telephone request. Genuine banks and card providers never request information in this way.
Protect your personal information on social media, use privacy settings and don’t accept friend requests from people you don’t know.
Don’t use the same passwords for social media sites and online banking.
Buy a shredder to dispose of card statements and other documents containing personal or financial information you no longer need.
Always PIN protect smartphones and other mobile devices.

2. Protect your PIN
Choose a strong PIN. Don’t use obvious numbers, for example, the year you were born, your wedding anniversary, telephone or house number.
Memorise your PIN – don’t write it down or disclose it to anyone else.
Don’t use the same PIN for all your payment cards.
When using an ATM or other card reader always shield your PIN with your hand.

3. Take online safety measures
Regularly update your computer’s firewall or antivirus software.
When shopping online, always look carefully at the site for secure transaction symbols. The web address should start ‘https’ and the page should display the secure payment ‘lock’ logo.
Always log-off from a site once you’ve completed a transaction.

4. Regularly review card and bank statements
Check statements on a regular basis and look out for unusual or unauthorised transactions, and contact your card provider immediately if you suspect fraud.

5. Pay attention to card delivery
Note when you should be receiving a new payment card. If it doesn’t arrive when you expect it, contact the card provider as soon as possible.

 


Coles, S. (2016) Card fraud up 20% – you’re at risk without even leaving the house. Available at: http://money.aol.co.uk/2016/06/20/card-fraud-up-20-you-re-at-risk-without-even-leaving-the-hous/ (Accessed: 21 June 2016).

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UK banks face $2.9bn loss to mobile apps

British banks could lose at least £1.45 billion ($2.68 billion) in payments revenue within the next few years as retailers develop revolutionary mobile apps for people to shop and bank at the same time.

Retailers, financial technology groups and others are planning to offer customers the ability to pay for goods, check their balance and monitor transactions through their own app or online site, in order to shop and use banking services in one place, according to Accenture, the consultancy.

For merchants, it means they can facilitate payments directly from customers’ bank accounts cost effectively, without relying on traditional card networks such as MasterCard and Visa in a process that involves interchange fees and charges.

The latest payments innovation, which is set to sweep across Europe, has been spurred by European regulation called the Payments Services Directive 2. This requires banks to provide third parties with access to customer data, with their permission, to allow for the creation of such apps. However, a report by Accenture forecasts that merchants and other businesses offering their own payments services will erode about 33 per cent of online debit card transaction volumes by 2020, and 10 per cent of credit cards.

This means banks, which get the interchange fee when merchants use card networks, are set to lose £1.45 billion of card transaction revenues by 2020 as a result of this app development. Interchange fees are retained when a payment is sent by the consumer’s bank to the retailer’s bank, to cover the cost of operating card services.

SENSITIVE DATA

Jeremy Light, a managing director at Accenture, said that another attraction for retailers in accessing bank accounts directly was that they did not have to handle sensitive bank card data, which could leave them liable in the event of fraudulent transactions. UK banks were “at a critical juncture” and had to decide how to deal with these new threats.

This was “a defining moment at which changes in the payments industry are forcing them to make a key strategic decision: whether to become a banking ‘utility’ supporting other providers’ customer-facing solutions, or an ‘everyday bank’ playing a central role in customers’ daily lives”.

The developments come soon after the UK’s Payment Systems Regulator said it wanted to encourage innovation and competition in the payments sector and help companies “find new and ever more convenient ways for people to pay”.

Hannah Nixon, managing director of the regulator, said: “In fact, we want the UK industry to become a centre of innovation, to lead the world in the development of payment systems.”

Worldpay, the UK’s largest payments processor, has launched a “digital till” that allows businesses to take payments anywhere on the shop floor using a tablet. It includes other services for the merchant, from ordering stock to checking payment records digitally.

 


GTH, G.H. (2016) UK banks face $2.9bn loss to mobile apps. Available at: http://www.afr.com/business/banking-and-finance/uk-banks-face-29bn-loss-to-mobile-apps-20160516-gow0kh (Accessed: 16 May 2016).

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Small businesses “don’t trust” alternative payment providers

59% of small business owners favour banks for payment services compared to online services (40%) and telecoms companies (11%).

Many small businesses are still sceptical of using alternative payment services but retain confidence in banks, according to new research from Visa Europe.

The survey of 750 UK small business owners found that 59% trust their bank or building society as their payment provider, with alternative providers such as telecoms companies (11%), social media providers (6%) and online payment services (40%) lagging behind.

Only 30% of respondents claimed to be “completely satisfied” with the range of payment options available, increasing to 40% amongst sole traders.

Sole traders are the most comfortable with alternative payment methods, with 56% using online banking and 32% using their debit card online to make online payments.

Despite this, just 9% of these sole traders said they accept online card payments from customers, with 36% of all small businesses using debit cards to make payments but only 22% accepting such payments in return.

Kevin Jenkins, managing director of Visa UK, said: “The banking and payments proposition for small business is different and has to be treated so. Resources are scarcer and the time to invest in and consider these kinds of issues is typically less.

“Given the top three barriers to change are cited as perceived cost, risk, and other priorities being focused on, that suggests we need to start with making these products as accessible and useful for this audience as possible.”

 


Williams, H. (no date) Small businesses ‘don’t trust’ alternative payment providers – startups.Co.Uk: Starting a business advice and business ideas. Available at: http://startups.co.uk/small-businesses-dont-trust-alternative-payment-providers/ (Accessed: 10 May 2016).

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We don’t need challenger banks – there’s enough competition already

Pressure on Britain’s largest high-street banks is at an “all-time high” after profits slumped 40 per cent last year, according to a study…

etro Bank. TSB. Virgin Money. Clydesdale. Handelsbanken. Atom. Williams & Glyn – the list of “challenger banks” goes on and on.

From Atom’s Apple app-only offering – which counts out all those who do not own an iPhone or an iPad or do not want to use one for banking – to Metro’s weird obsession with offering free water for dogs, each has their own quirk. Between them they make a significant noise about what they offer and how they do things differently.

And, some would argue, rightly so. But the whole point of the challenger mantra, much loved of former business secretary Vince Cable, was to provoke the incumbents to deliver a better service and better range of products.

However, there is little evidence to date. Take Metro Bank. It prides itself on shiny glass-lined branches open seven days a week. For customers interested in popping in on a Sunday afternoon, that’s a useful offering. But for the majority, it’s neither here nor there. Equally it hasn’t encouraged incumbents to follow suit. Lloyds Banking Group – one of the dominant “Big Four” banks whose brands include Halifax and the Bank of Scotland – said that 55pc of customer needs last year were met digitally, through its website and range of apps, the first time that figure had passed 50pc.

While Metro is spending significant amounts opening a branch network – its 41st branch opened last week on Chelsea’s Kings Road, not a cheap place to sign a lease – others, like Lloyds, are closing branches due to a lack of demand and a change in customer habits.

Handelsbanken 

Handelsbanken has almost 200 UK branches CREDIT: ALAMY

Or take Handelsbanken. The UK arm of the Swedish bank has been around longer than some of its other challenger brethren – it entered the UK in 1982 – but has accelerated its expansion since the crisis. From 60 branches in 2008, it had 197 operating by the end of last year. It prides itself on doing things differently. It does not pay bonuses, there are no sales targets, it has no long-term goals and has no central marketing spend. More importantly, it prides itself on the knowledge of the branch manager, who takes all key lending decisions, even for business customers, and has no credit scoring system.

Although many larger banks have, in the wake of the PPI and other mis-selling scandals, refocused branch staff away from bonuses and targets, they have not done so simply to follow in Handelsbanken’s footsteps. None, to my knowledge, has decentralised lending decisions, or done away with credit scoring.

Although the Swedish bank remains a financial success story in its home market – and the UK is one of its fastest growing overseas businesses – it is not changing the way the Big Four banks are acting or operating.

And that’s a bad thing, right? Wrong. Take a look at the latest current account switching data, and you will see that it is the incumbent banks, not the challengers, to whom both retail and business customers are switching.

The latest data, out today, show that Santander, Nationwide, Halifax and TSB were the main beneficiaries, with Santander gaining some 51,002 accounts in the third quarter of 2015.

The biggest losers, by number of accounts lost as opposed to percentages of accounts which are not provided by BACS, were also the incumbents; namely Barclays, NatWest and RBS.

The challengers barely register on either side of the ledger, with Metro and Handelsbanken having failed to provide data for the period.

Santander bank advert

Santander used F1 driver Lewis Hamilton to helpe with its rebranding CREDIT: GETTY

Of those who are winning in the battle for accounts, Santander, which spends significant amounts on marketing its popular 1,2,3 account (which comes with a handy £125 for new customers) can hardly be called a challenger. Formed from merging the old Abbey National business with the branch networks of Alliance & Leicester and Bradford & Bingley during the crisis, the Santander business may seem shiny and new, but is far from it.

The same can be said for Halifax, part of Lloyds, or TSB, which was spun out from Lloyds in 2013 and is now owned by Spain’s Sabadell. Both offer advantageous interest rates for savers.

The most intriguing part of the switching data is the allure of Nationwide, until you realise Britain’s biggest building society offers £100 to customers if they persuade a friend to open a current account, and £100 to the new joiner.

What is clear is that competition is already in train. A record number switched their current account to rival lenders last month, with almost 125,000 using the switching service, up 13pc on the month, with some 2.8m customers having switched since September 2013, equivalent to 4.5pc of the 61m of current accounts used regularly in the UK, according to official data.

In the face of this, the argument for more challengers appears somewhat flawed. The other aspect worth considering is that very few of these challengers are really new institutions. TSB was carved out of Lloyds due to a European competition diktat; Williams & Glyn is being removed from RBS for the same reason; while Virgin Money is based partly around the old Northern Rock branch business.

That is not to say that change and innovation isn’t needed. It is. But much of it is coming from the incumbents, aware of the perils of the past, and the need to change to hold on to customers.

While all this has been going on, the Competition and Markets Authority continues to opine on competition in the current account market. It has raised some noble ideas around overdraft fees, and increased promotion of the switching service.

But when it does finally report in August, it should simply admit that the British retail banking market is a competitive place, and one which does not need further intervention.

 


We don’t need challenger banks – there’s enough competition already. 2016. We don’t need challenger banks – there’s enough competition already. [ONLINE] Available at: http://www.telegraph.co.uk/business/2016/04/20/we-dont-need-challenger-banks—theres-enough-competition-alread/. [Accessed 26 April 2016].

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Facebook payment system will change banking forever, but it comes with its own price tag – your privacy

If you know where people have been, what sites they visit, what apps they download, and also their spending habits, you know a massive amount about them – much more than their bankers, the credit and debit card companies.

Is plastic on the way out? More specifically, could the credit and debit card be going the way of the fax machine – useful technologies in their time but overtaken by something more convenient?

The reason for posing this now is the news slipping out that Facebook is joining Samsung, Apple and Android in becoming a payments mechanism. There is nothing wrong with Apple Pay, which has been running now for 18 months, and its equivalents. But many users feel these are a bit clunky – and it is faster to whip out a credit or debit card. Indeed with contactless it is almost too easy. But if Facebook gets into the act, with its 1.6bn regular users, then it will give Visa and MasterCard more of a run for the money.

The prize is huge. If you know where people have been, what sites they visit, what apps they download, and also their spending habits, you know a massive amount about them – much more than their bankers, the credit and debit card companies, and more than their mobile phone operators. Instead of the crude contextual advertisements of the moment, or the even cruder points-based credit scoring systems, a company could not only target users with sensible advertising, but also be able to make a judgement as to whether people were a good credit risk or not.

The level one challenge is to the credit card companies, but level two is to the banks. The banks, unsurprisingly, are extremely concerned. They know that fringe bits of their business are being chipped away and that will continue, but for them the issue is how much of the core can they retain. Low interest rates make the problem worse, because banks no longer have much of the endowment effect of holding non-interest-bearing cash balances. They still hold the balances, but in a world of ultra-low interest rates they are not worth much. The danger for them is that they will be left with high-cost legacy bits of business, such as cash-handling, and have margins squeezed on everything else.

The challenge is that a Facebook could become a better assessor of credit-worthiness than a bank or a credit card company and so be able to facilitate peer-to-peer lending. Credit card margins in particular are too big. It is not reasonable in a world where a bank’s cost of money is 2-3 per cent to be charging upwards of 20 per cent interest – or nearly 40 per cent as some cards for people with bad credit records advertise. If a lender knew enough to be able to determine whether people really could service a debt or not, the 40 per cent club would not exist. People would either be getting much cheaper credit, or not be able to borrow at all.

There is a further twist here. It is the impact that the combination of social media and payments mechanisms might have on behaviour. The impact of credit cards has been to encourage borrowing: people in countries that have relatively low use of credit cards, notably Germany, tend to borrow less and save more. The opposite applies to the US. Maybe if all your payments are being tracked with a cross-ref to your location, you may become more cautious about spending. Or maybe not.

So what happens to cash? It is slowly shrinking as a payments mechanism. In other words a smaller amount of our spending each year. But while it accounts for less than 5 per cent of business payments, it is more than half of personal payments. There are some transactions where the proportion of spending is lower, with only a quarter of petrol and diesel purchases being cash. But there are others where cash is still king, for it accounts for more than 80 per cent of money spent in pubs.

Yet the amount of cash in circulation continues to rise. There are now about £1,200 worth of notes and coins in circulation for every man, woman and child in Britain. In Europe there are even keener on cash, with €3,200 for each person in the eurozone – though this reflects the fact that the euro is an international currency with a much larger role outside the area where it is legal tender. The same applies to the dollar, with $4,300 for every person in the US – but with a huge and unknown amount actually overseas. But then euros and dollars are much more attractive currencies for the international drug trade and other criminal activities than poor old pounds.

And there’s the rub. At one extreme there are transaction mechanisms that reveal everything about you: who you are, your monthly income, where you are, what you are buying, and who from. And at the other there is a transaction mechanism that reveals nothing: it is called cash.

We all make trade-offs between convenience and privacy every day. This column was researched with the help of Google. You may have found this article via Google or another search engine. But revealing that we are interested in the numbers of euros in circulation does not trouble us. Whether we would like Facebook, or any other social media company, to know everything about every penny we spend – well, that is another matter.

 


Facebook payment system will change banking forever, but it comes with its own price tag – your privacy | Voices | The Independent. 2016. Facebook payment system will change banking forever, but it comes with its own price tag – your privacy | Voices | The Independent. [ONLINE] Available at: http://www.independent.co.uk/voices/facebook-payment-system-will-change-banking-forever-but-it-comes-with-its-own-price-tag-your-privacy-a6997636.html. [Accessed 25 April 2016].

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Reality Check: Has the UK given up its tax and banking veto?

The claim: The EU wants more control of UK banks and taxes and we have lost our veto over this.

Reality Check verdict: Britain has a veto over tax measures, but for some issues that affect UK banks and financial institutions can be out-voted by other EU members.

Earlier this week, Michael Gove said that the European Union wanted more control over the UK’s taxes and banks. And he suggested that Britain would be powerless to stop it from inside the EU, because we’d given up our veto on such matters.

Is he right? The EU has no control over the most important taxes, such as income tax and National Insurance, as well as taxes such as stamp duty, inheritance tax, duties on alcohol, fuel and tobacco. All national governments within the EU have control over setting these taxes.

Nor does the EU have any say over how the taxes governments collect should be spent. There are no plans to change that.

On another important form of taxation, value added tax, (VAT), the EU has a say because EU countries co-ordinate their VAT rates, to avoid distorting competition across national borders.

The current rules mean EU countries can only apply zero or reduced VAT rates to an agreed list of goods and services. That list can only be changed by unanimous agreement of all 28 governments, meaning everyone has a veto over what’s on it.

For example, all 28 members had to agree to new VAT proposals, which would pave the way for the UK to remove VAT from sanitary products – the so-called tampon tax.

There are no plans to scrap the power of veto in this area either.

Similarly, the power of veto is in place if a new tax is to be introduced across the EU. For example, in the wake of the eurozone crisis, the EU proposed a new EU-wide tax on financial transactions.

The UK government opposes this tax and David Cameron vetoed it at a summit in 2012. Instead, 11 EU states, including France and Germany, decided to introduce the tax in their own countries.

Banking union

So what was Mr Gove talking about?

Well, when it comes to rules governing banks and financial institutions, the situation is different.

Many of the issues affecting financial institutions do not require unanimous agreement. That means no country has a veto as they are decided by qualified majority voting, which requires the agreement of at least 55% of the member states, representing 65% of the population of the EU.

For example, the UK government was outvoted in 2013 when the EU decided to put a cap on bankers’ bonuses, despite strongly opposing such a move.

If Britain left the EU, the UK government would be free to decide on this itself.

It is also important to mention that, in the wake of the eurozone crisis, the 19 EU countries that had adopted the euro agreed to integrate their banking systems more closely. This process started in 2012 and it is still continuing.

The UK is not part of the eurozone and is not taking part in eurozone banking union or in other forms of closer financial integration.

Nevertheless, the eurozone’s union will have an impact on the UK financial and banking sectors.

 


Reality Check: Has the UK given up its tax and banking veto? – BBC News. 2016. Reality Check: Has the UK given up its tax and banking veto? – BBC News. [ONLINE] Available at:http://www.bbc.co.uk/news/uk-politics-eu-referendum-36101443. [Accessed 22 April 2016].

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Misconduct ‘has cost UK’s banks £53bn over 15 years’

Research shows that costs of PPI scandal alone have reached £37bn, four times the bill for the London Olympics.

Persistent misconduct and an aggressive sales culture has cost the UK’s banks and building societies £53bn in fines, compensation and legal fees over the past 15 years.

According to research published on Monday the cost of the payment protection insurance (PPI) misselling scandal has reached £37.3bn – about four times the cost of the 2012 London Olympics.

The New City Agenda thinktank, which published the research, said the second most costly scandal – misselling of interest rate swaps – had cost £4.8bn.

John McFall, the former Labour MP who used to chair the Treasury select committee, said: “The profitability of UK retail banks has been imperilled by persistent misconduct and an aggressive sales-based culture. This has made every citizen poorer through our pension funds and our ownership of the bailed-out banks.”

Top 10 financial scandals in UK retail banking
Type of misconduct Provisions
PPI mis-selling, 2010-15 £37.3bn
Interest rate hedging products mis-selling, 2012-15 £4.8bn
Endowment mortgages mis-selling, 2002-06 £1.9bn
Consumer Credit Act breaches, 2013-15 £1bn
Investment products and advice mis-selling, 2003-15 £0.9bn
Packaged bank account mis-selling, 2014-15 £0.8bn
Mortgages, 2002-14 £0.7bn
Pensions mis-selling, 2000-02 £0.6bn
Unfair unauthorised overdraft charges, 2006-07 £0.6bn
ID theft and card protection insurance mis-selling, 2014-15 £0.5bn
Other issues / miscellaneous, 2000-15 £3.6bn

McFall, one of the co-founders of the thinktank, called on shareholders to take a lead in forcing banks to change their culture. “They should demand public and transparent assessments of the progress each individual bank is making. Where senior executives preside over misconduct, shareholders must ensure that they are held accountable and demand significant clawback of bonuses,” said McFall, who sits in the House of Lords.

The report builds upon the thinktank’s warning in November 2014 that the culture of banking would take a generation to clean up after calculating that the UK’s banks had incurred £38.5bn in fines and redress for mistreatment of customers in the previous 15 years.

The report focuses on the retail market so does not include the scandals that have hit the investment banking industry for rigging Libor or foreign exchange markets. It describes the fastest growing retail scandal as the sale of packaged bank accounts, where customers are sold insurance and other products alongside their current accounts. So far it has cost the banks £850m.

Lloyds Banking Group – still about 9%-owned by the taxpayer – has incurred the largest bill of the high street banks for misconduct in the five years between 2010 and 2014. It has put aside £14bn to cover its errors and paid £2.1bn in bonuses over the same period.

The bank – bailed out with £20bn in 2008 as it took over HBOS – has paid out £500m to shareholders, although it was banned from making dividend payments for part of this period.

New City Agenda’s report said that excluding the misconduct costs, the major retail banks would be profitable. “This makes it even more important for shareholders to engage and monitor the progress made by banks in changing their cultures,” it said.

Measuring culture in banks has proved to be contentious. A Banking Standards Board was set up amid the Libor rigging scandal in an attempt to monitor culture in the industry. Its annual report published in March showed that it has not yet published any formal standards for banks.

The Financial Conduct Authority last year faced criticism for dropping a formal review of culture but last week said it continued to regard monitoring cultures as one of its key roles.

Last year, the ratings agency Standard & Poor’s warned that the big four banks faced another £19bn of conduct and litigation charges by the end of 2016 – on top of £42bn incurred in the five years to 2014.

 


Misconduct ‘has cost UK’s banks £53bn over 15 years’ | Business | The Guardian. 2016. Misconduct ‘has cost UK’s banks £53bn over 15 years’ | Business | The Guardian. [ONLINE] Available at: http://www.theguardian.com/money/2016/apr/11/misconduct-has-cost-uks-banks-53bn-over-15-years-ppi. [Accessed 13 April 2016].