Increasing Levels of Cyber Security will be vital as Fintech Approaches "Watershed Moment"
In 1993, cartoonist Peter Steiner of The New Yorker coined the phrase: „On the internet, no-one knows you‟re a dog.‟ More than 20 years later, the issue of internet privacy and a user‟s ability to send and receive messages anonymously, remains a significant barrier to building online trust. “The reality is, as individuals, if we really knew and appreciated the risks we face when dealing with financial services online, we simply wouldn‟t do it,” suggests James Varga, chief executive officer of The ID Co. “15 years ago nobody knew about banking fraud, now everybody knows somebody who has been affected by fraud, phishing attacks, or identity theft. “High profile hacks from TalkTalk, Yahoo and dating sites have exposed our personal data to potential misuse. The fact is, a lot of that risk comes from our online activities and the need to constantly prove we are who we say are.“ With online fraud growing every year, it is now estimated to cost the UK economy more than £11bn per year, with bank-funded crime prevention group Financial Fraud Action reporting that a financial scam was carried out every 15 seconds in 2016. However, in a world where 71 per cent of millennials in the US would rather visit the dentist than open a bank account, it‟s clear that not only does the modern world of financial services face an issue with establishing trust, it must also meet market demand for convenience. As one of a number of disruptive fintech businesses headquartered in Edinburgh, The ID Co aims to meet both needs.
“No-one likes banks. However, despite damage to the sector‟s reputation following the financial crisis, everyone trusts their bank. Banks are built on the premise of trust,” adds James. “The whole business, the regulatory framework in which they operate, is built on the foundation of trust, reliance and security. As a fintech business, we aim to leverage the trust that users have with their bank and share that trust with other organisations. “We want to provide online users with the same level of convenience and security that a passport brings when you travel.” Through its DirectID offer, The ID Co connects a user‟s online profile with their bank, in effect helping the user prove they are who they say are, and allowing them to control precisely what information they share with any third party. A regulatory watershed In his role as CEO, James has spent the past five years playing an active part in the UK‟s Open Bank Working Group, “We began discussions with GSMA, the trade association for the mobile industry, as well as Verify.gov a number of years ago. As part of those discussions, we were invited by HM Treasury to participate in the development of the latest pan-European Payment Services Directive (PSD2) programme, where I co-chaired the data sub-group. For fintech businesses, the ongoing adoption of PSD2 across Europe – a two-year process that is expected to be complete by January 2018 – represents a watershed moment. The key requirement of PSD2 requires banks to provide access, via secure APIs, to their customer accounts and provide account information to third party apps, if the account holder wishes. “It establishes standardised interactions between consumers and their banks – seamlessly and securely.” The implementation of PSD2, which has been driven largely from the UK, will enable fintech businesses to accelerate disruption in a sector recognised for limited innovation and being understandably risk averse. According to data from the World Economic Forum investment in fintech has soared in the past decade – from $1.8 billion in 2010 to $19 billion in 2015. The majority of that investment has targeted the most profitable areas of global banking – namely personal and corporate finance. While fintech investment continues to be dominated by Silicon Valley, London remains the undisputed fintech capital of Europe, while pre-Brexit research by Ernst & Young singled out the UK as a whole as the world‟s leading fintech centre.
Published on Jan 13, 2017
In 1993, cartoonist Peter Steiner of The New Yorker coined the phrase: ‘On the internet, no-one knows you’re a dog.’ More than 20 years late...