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Home » Daily Briefing » Daily Briefing - 20 April 2017

Daily Briefing - 20 April 2017

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Mobile phones have been getting slimmer over several years, with new offerings such as the 'light phone' literally slipping into your wallet. Now cards are getting some of the technology that we've come to take for granted on mobiles. Some cards already offer a constantly changing three-digit CCV code, but now Mastercard is introducing fingerprint authentication and using South African retailer Pick'n'Pay and South African bank Absa to trial the new cards. Users register their fingerprint with the bank. The card, now storing a digital version of the fingerprint, can be inserted as usual at a payment terminal, with the user's fingerprint validating user identity. Here's the clever part: as the fingerprint sensor is on the card, the merchant does not require any upgrade to an EMV-enabled terminal. "We are very proud to be the first bank in Africa to test — in a real payment environment — the single-touch authentication technology that will unlock the benefits of biometrics," said Geoff Lee, head of card and payments at Absa Retail and Business Banking. "The technology will effectively enable our customers to rely on their unique fingerprints to make payments in a face-to-face environment. Following the test period, we will make it available to our customers in a way that is affordable, reliable, and convenient and, most importantly, extremely secure."

The next major piece of US financial regulation is now taking place, following publication of the legislative text of his Financial Choice Act by House Financial Services Committee chairman Jeb Hensarling. "Title V of the Choice Act contains numerous provisions long sought by the American Bankers Association as part of the Blueprint for Growth," writes the ABA Banking Journal. "These regulatory relief measures would provide a Qualified Mortgage safe harbor to mortgage loans held in portfolio, tailor supervision to banks' risk profiles and business models, raise the small bank holding company policy statement asset threshold to $5 billion, create an independent exam appeals process, provide charter flexibility for thrifts, stop data collection on small business loans, clarify the QM rule's points and fees test, expand the short-form Call Report, enhance mortgage relief for smaller banks and smaller mortgage originators and prevent future 'Operation Choke Point' activities." Among the other major provisions will be a reform of the Consumer Financial Protection Bureau and the repeal of the Durbin Amendment. See also this roundup from The Hill.

Goldman Sachs came in last as the US Big Five announced results for the first quarter of 2017, with analysts speculating that Goldman took the Trump bounce too literally, although Goldman's new CFO blamed the poor earnings on lack of volatility. The New York Times observes that the results put added pressure on Marcus, the bank's online lender, which the newspaper dubs Goldman's fintech division. "Goldman's fledgling Main Street operation is a bright spot," according to the paper's Dealbook column. "With more than $115 billion in deposits, [Marcus is] already one of the top 25 banks in the United States by that measure. Marcus...is experiencing 'demand more robust than we thought,' the unit's boss, Harit Talwar, said recently. Marcus, like fintech rivals, offers a simpler, quicker, more flexible service than many traditional banks. But it also benefits from Goldman's deep pockets and cheap funding. That ought to give it an edge. Consumer lending can earn at least a 3 percent return on assets — triple what Goldman has been managing as a whole of late. And Mr. Blankfein's firm doesn't have branches and legacy technology costs to worry about."

Cybersecurity is a major issue for financial institutions simply because so many financial transactions take place online, offering armchair criminals a chance to work in comfort as they look for cracks in the edifice. Usually, human gullibility, frailty or laziness is the fastest way into a system, though the global corporations looking to solve your cybersecurity problem will not necessarily focus on that. "Whenever I give advice to clients on this subject to business or at a national level to formulate national security policies, the client emphasis is always around finding expensive technical solutions," explains Brian Lord, former GCHQ deputy director for intelligence and cyber operations. (Lord is now managing director for PGI Cyber.) "The unfortunately more boring but more realistic (however considerably more effective and cheaper) solutions reflect a blend of technology, human education and procedural measures. And that blend depends entirely upon the type of threat a company faces." Or, as Izabella Kamiska concludes, it's "human stupidity" that is the toughest challenge in cybersecurity. Are we shocked that there's a lot of hype surrounding cybersecurity? We confess we are not.

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