What do Robert Mueller, former Director of the FBI, John Chambers, former CEO of Cisco, and Misha Glenny, a British cybersecurity journalist, have in common? They all agree that there are two types of companies today: those who have been hacked, and those who will be again. Though it may sound like an innocent platitude, consider that a company need not even realise that its security has been compromised to fit into one of these categories.
Corporate cybersecurity is more important than ever, with 54% of cybersecurity professionals predicting an increase in cyberattacks over the next 12 months.1 Cybercrime is evolving at an unprecedented pace, and many companies are struggling to develop and maintain effective security standards. The greatest security challenge faced by companies is the detection of advanced, unknown or emerging threats. On average, it currently takes a company 40 days to notice that attackers have infiltrated their networks.
As cybercrime advances, corporates of all sizes must take proactive steps to help prevent, detect, and resolve security breaches. “Cybercrime has become more sophisticated as perpetrators have realised that there is profit to be gained,” says Anton Tkachov Chief Security Architect, Financial Systems Cybersecurity, PwC. “In the 1970s, for example, computer viruses were just a prank; today, ransomware is a very lucrative market. Cybercriminals have realised the potential gain and started to operate as mature businesses with large investment and R&D budgets.”
In light of these developments, companies are showing a renewed interest in cybersecurity, and security professionals understand that corporates must take proactive steps to remain ahead of emerging security threats. “It’s a very asymmetric war,” says Alvaro Garrido, Group CIO and head of Group IT at Nordea. “We need to be right 100% of the time, and they need to be right just one time.”
1. Cybersecurity Trends Report, 2017. http://www.cybersecurity-insiders.com/portfolio/cybersecurity-trends-report/
Scandinavia has long been a hive of disruptive technology and has developed a strong innovative startup culture and a history of early consumer adoption. Much in the manner that Skype impacted the telecom industry or Spotify forced the music industry to reassess its modus operandi, we are seeing a similar level of rapid change in the transactions and payments industry.
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China’s Belt and Road initiative (or One Belt, One Road) has recently received a lot of international attention. In this Q&A, we examine this vast project, why many EU countries have been sceptical and how Nordic countries could benefit.
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We interview Erik Zingmark, Co-Head of Transaction Banking at Nordea, on the extraordinary pace of change that traditional banking service providers currently face, driven by both technological innovation and regulations. In Europe, PSD2 (the EU's Payments Services Directive) requires banks to open up their accounts infrastructure in 2018 to third parties wishing to offer financial services. This could be both an existential threat and an opportunity for banks, depending on their capabilities, mind-sets and attitudes.
You are Co-Head of the Transaction Banking business area within Nordea. How would you briefly describe your business area today?
EZ: Transaction Banking in Nordea has quite a broad scope and includes all forms of payments, including cards, as well as certain credit products like leasing, factoring and trade finance. These various units are all facing quite different business challenges.
How is digitalisation affecting payments in the economy, with electronic payment solutions gaining ground? How different is the Nordic region from the rest of the world, and why? Would you expect other countries to follow the Nordic trend going forward?
EZ: The Nordic region has been at the forefront technologically in this area for many years, but in the past five to ten years, markets that have lagged far behind have made big leaps forward, entirely skipping one technological development phase so that the Nordic region is a bit behind. Examples of such markets include Spain and the Baltic countries. If you wanted to make a comparison with the telecom sector, you could say these countries started with obsolete analogue fixed telephony, but skipped an interim technology like ADSL and went straight to modern fibre networks. But I would still argue that the Nordic region remains in the top tier globally regarding financial services sector technology, along with countries like the US, the UK, Singapore, Spain and Benelux.
We interview Thomas Ko, Global Head of Samsung Pay, Head of Service Strategy and Vice President at Mobile Communications business, Samsung Electronics, to discuss the rationale for mobile device makers to get involved in mobile payments and other services. We explore Samsung's ambitions in this field, how it could be impacted by new financial services industry regulations, and why Sweden was chosen as an early launch market for Samsung Pay.
While Samsung is the global no. 1 mobile phone maker by volume, it is clear that your ambitions go beyond just supplying the devices. Your annual report specifically highlights aiming for more customer value through targeted growth areas like payment systems (Samsung Pay, which you head), cloud, intelligence and mobile B2B services. What lies behind these ambitions? Will having the biggest hardware volumes not be enough in the future? Or does Samsung have unique competences or scale in R&D to be able to exploit service opportunities related to the devices?
TK: Samsung is an innovation-driven company, and a very customer-centric company – we strive to create the best products and services for our customers. And our ambition includes the total customer experience, not just relating to our devices, but also to the software, apps and services associated with it. To us, these are natural areas to look at, to add to the total customer benefit from our products. We want to combine core systems and apps with our unique product experience, to create differentiated and valued user experiences.
Samsung Pay was launched in 2015, and was developed from the intellectual property of a start-up company you acquired earlier the same year. What are the key features of Samsung Pay – in terms of simplicity, security and merchant coverage – that make it attractive to users, also compared with competing mobile payment services?
TK: Samsung Pay is anchored in the three core principles of simplicity, security and merchant coverage.
To us, any kind of application or service must strive for simplicity. We want the process of grabbing your wallet, taking your card out, and paying to be almost mimicked in your phone, but in a fun and easy way.
As for security, you could say that card payments have not really been that secure. You can use various reactive measures to protect yourself when being skimmed or defrauded, but you cannot really prevent it from happening. We aim to make mobile payments completely secure, through tokenisation, biometric authentication such as iris or fingerprint scanning, etc. And security enablement is through software, so merchants do not need to have any additional hardware for security checking purposes.
Merchant coverage is a critical factor, and we have found that acceptance of a digital payment solution is greatly helped by merchants being able to receive payments in existing, card-based, infrastructure. Our hardware being able to connect with their terminals instead of having to replace them, is a big selling point. We originally invested in LoopPay to develop a strong mobile payment solution, and then acquired it and brought it into what is today Samsung Pay. We have put a huge development effort into making our solution connect wirelessly with card reading terminals. And we are keen to expand our capabilities from pure payment to online, membership, transit, rewards and many other things.
With challenging growth conditions in the Nordics and Europe in general, the number of Nordic corporates exploring the potential for growth in Asia and opportunities arising from the increased intra-Asia flows is increasing.
However, as with any region, Asia has its own unique set of intricacies, local regulation and risks. To explore these in depth, we asked Christopher Emslie, Country Treasurer in Singapore for ABB, Jonas Falk, Managing Director of SKF Treasury Centre Asia & Pacific and Corrado Lillelund Forcellati, General Manager in Nordea’s Asia operations, how they view the current environment in Asia from a corporate perspective.
Circumstances are arguably better than ever for Nordic corporates looking at entering the Asian market. Several factors are driving these new opportunities, notably the internationalisation of the renminbi, improved consumer purchase power with extra focus on sustainability and quality, the Chinese-driven One Belt, One Road initiative and a thriving fintech environment. “We’re experiencing that all the above factors are currently resulting in a number of strategic initiatives from Nordic corporates. These are being triggered by a clear ambition to channel even further resources to Asia in order to exploit the growth potential in the region,” explains Forcellati.
“From the start, any company thinking of entering the Asian market has to be aware that complexity and ambiguity need to be assessed differently in Asia compared to the Nordic countries. This should be reflected in a companies’ risk framework to assess and manage the sustainability of businesses carried out by Nordic companies. This could mean assessing the US impact on Asia trades and local currencies, which can have local regulatory consequences, such as China cross-border rules, Indonesia local currency requirements and Malaysia’s restrictive offshore funding constraints,” he continued.
China's new international development program, the Belt and Road initiative, could mean opportunities for Nordic companies, especially those with experience in infrastructure and construction. However, to be successful it is important to understand the financial and political risks associated with large-scale development projects in Asia.
The Belt and Road initiative (B&R), originally proposed by Chinese President Xi Jinping in 2013, is an international development initiative composed of the Silk Road Economic Belt and the 21st Century Maritime Silk Road.1 B&R seeks to upgrade and develop railways, roads, energy pipelines, communication links, ports, waterways, bridges and other infrastructure in order to promote trade, travel, and communication between China and its partners.
The B&R initiative hit the mainstream news in mid-May when Chinese president Xi Jinping hosted a two-day event in Beijing, attended by 29 heads of state. The many voices of support in the audience included British chancellor, Philip Hammond, who was quoted in The Guardian as saying: “I commend President Xi ... for setting in train such a bold and visionary project. This initiative is truly ground-breaking … with the potential to raise the living standards of 70% of the global population.” Noticeably, however, only one G7 leader, the Italian prime minister Paolo Gentiloni, attended the showcase. This low attendance could reflect international concerns that the B&R initiative will mean a boon for Chinese companies at the expense of non-Chinese competitors and that it will allow Beijing to boost its geopolitical power regionally and further afield.
President Xi’s proposal is incredibly ambitious. As described, it would connect China to over 60 different countries throughout Asia, the Middle East, Europe and Africa, mimicking the far-reaching success of the historical Silk Road. China itself has said it will invest 4 trillion USD into B&R projects, and some experts have predicted a cumulative investment of up to $8 trillion.
1The Silk Road Economic Belt comprises initiatives to connect Asia, the Middle East, and Europe via infrastructure development, increased trade and cultural exchange. The 21st Century Maritime Silk Road is a complementary proposal connecting Southeast Asia, Oceania and North Africa via the Pacific and Indian Oceans. Together, they are known as the Belt and Road inititative, the Belt and Road (abbreviated B&R), or One Belt, One Road (abbreviated OBOR).