News roundup: April 2019

FIS-Worldpay merger signposts greater consolidation for payments sector. Plus, OBR man forecasts post-Brexit business investment woes

FIS snaps up Worldpay in blockbusting merger

In a deal worth $35bn, leading technology solutions firm Fidelity National Information Systems (FIS) Ltd is set to buy out payments services provider Worldpay Inc. Unveiling the mammoth merger in an 18 March statement, the parties explained that they are looking to unlock $500m of revenue synergies, $400m of run-rate expense synergies and around $4.5bn of free cash flow in the next three years, driving “significant value” for shareholders.

In combining major forces in technology infrastructure for the finance sector and innovation for the payments industry, the deal aims to raise the bar for “best-in-class” capabilities serving the high-growth e-commerce market. According to projections, the firm created in the merger will have pro forma 2018 annual revenue of around $12.3bn. FIS chairman, president and CEO Gary Norcross said that the merger promises “a customer-driven combination of scale, global presence and the industry’s broadest range of global financial solutions”. Pending regulatory approval, the deal is expected to close later this year.

According to data compiled by Bloomberg, the new firm will be the largest in the processing and payments sector. The FIS-Worldpay merger follows closely on the heels of Fiserv’s $22bn purchase of First Data earlier this year – a similar tie-up between a financial services tech player and an e-commerce firm.

The activity suggests that consolidation in the payments field will pick up this year – a trend predicted in an October report from SWIFT and The Boston Consulting Group. In their analysis, an acceleration of mergers in the industry will have the effect of “further condensing an already concentrated space, as providers look for ways to address deteriorating margins and fund new digital capabilities”.

OBR predicts post-Brexit business investment slump

Business investment may take several years to recover in the wake of Brexit, according to Office for Budgetary Responsibility (OBR) economist Sir Charlie Bean. In an 18 March session of the Parliamentary Treasury Committee, Bean pointed out that business investment in the UK is lagging behind that of other G7 nations – with the OBR forecasting a drop in the course of this year as investors struggle to finalise their decisions amid prevailing uncertainty.

“I would attribute most of the [current] shortfall to the effects of uncertainty [and] the Brexit effect,” he told the Committee – adding: “I think the likelihood, to be honest, of resolving that uncertainty is close to negligible.” Bean said that if there were a clear and timely political resolution on the final shape of Brexit, “you might expect a reasonably quick bounce-back … [but] I think the more plausible story is it comes back over several years.”

Bean’s message to the Committee echoed an 11 March speech from Bank of England Monetary Policy Committee member Jonathan Haskel, who said that “to make long-term investments, an investor… needs to know the future trade relationship that we strike. That is far from certain since… it is not covered in the Withdrawal Agreement”.

Haskel added: “The longer-term question is whether investment will eventually bounce back after uncertainty is resolved… In the MPC’s forecast, the economy ends up (in 15 years) at the average of three trade deal outcomes, all of which mean less trade – and, therefore, a lower level of output (but the same growth rate). In standard growth models, a lower level of output means less capital… hence, investment does not bounce back fully since less capital is required… At least for the next few years the prospect of low investment seems possible.”

Invoice fraud in 2018 stung UK firms for £93m

Invoice fraud hit British business hard last year, according to UK Finance, with firms losing almost £93m to the offence. A cousin of authorised push-payment scams, invoice fraud involves people making false representations to companies as bona-fide payees by sending in bogus bills for goods or services. In large firms, those bills will typically end up in the hands of finance department workers, who could then act on the instructions and transfer the requested funds.

In its Fraud the Facts 2018 report, published on 24 March, UK Finance notes that invoice scammers stung UK businesses for £92.7m in 2018, across 3,280 separate crimes. Only £29.6m of the cash was returned. The scale of the fraud was compounded by low levels of awareness: in separate research drawn from a poll of 1,500 companies, UK Finance found that more than four in 10 (43%) had no idea that invoice fraud existed.

Breaking the problem down by business size, the trade body found that just 55% of sole traders were aware of invoice fraud, compared to 68% of small businesses and 84% of large firms. Only around one in seven (14%) sole traders have taken steps to protect themselves from these scams, compared to just under half (47%) of small businesses and two thirds (63%) of large firms.

UK Finance head of economic crime Katy Worobec said: “It’s vital that all employees are trained to identify potentially fraudulent transactions and follow the advice of our Take Five to Stop Fraud campaign. The gangs behind this type of fraud are increasingly sophisticated and will often get hold of details that allow them to pose convincingly as regular suppliers.

“If someone contacts you asking for a supplier’s bank account details to be changed, always verify with that supplier separately – on the phone or in person – using the contact details you have on file. If you suspect you’ve fallen victim to fraud, contact your bank immediately and report it to Action Fraud.”

Corporates caught up in banking Trojans surge

Antivirus software provider Kaspersky Lab has revealed that attacks on its users by banking Trojans rose by 16% last year, hitting 889,452 individuals. Almost 25% of the affected group were users based at corporates. In a statement, the vendor explained that malware of this type typically steals identification credentials for e-payment and online banking systems, intercepts one-time passwords and then sends the data it has accessed on to the human beings behind the attack.

The provider’s findings show that Russia was the most targeted nation last year, accounting for more than 22% of the global user base that was struck by banking malware. Germany was a close second, with a share of just over 20%. According to the firm, Zbot and Gozi are the “kings” of all banking Trojan software families, hitting 26% and 20% of the relevant users respectively. They are followed by SpyEye, which hit 15.6% of the affected group.

Kaspersky Lab principal security researcher David Emm said: “2018 didn’t give individuals much respite from financial threats. Our research demonstrates that infamous banking Trojan attacks are still increasing in number and hunting for money… In the wake of these findings, we urge people to maintain caution when conducting financial operations online from PCs. Never underestimate the professionalism of modern cybercriminals – and never leave your computer unprotected.”

UniCredit plugs into for Italian-first transaction

Italy’s banking sector has witnessed its first-ever transaction via the blockchain platform, it emerged on 21 March. In a statement, Milan-based bank UniCredit announced that it had facilitated a tinplate trade between metal packaging producer Gruppo ASA and its supplier Steelforce, with support from Belgium’s KBC Bank. The payment was automatically triggered through the creation of a smart contract, in line with agreed terms, as soon as Gruppo ASA confirmed delivery of the goods. As a result, the transaction was much faster and more transparent than would have been the case under traditional methods.

UniCredit head of global transaction banking Luca Corsini said: “ is a success story in the field of interbank collaboration, and we are glad to announce the first transaction of its kind on the Italian market. We believe that can contribute to redefining business relationships among SMEs, removing obstacles that typically make international transactions costly and complex while delivering concrete benefits for our clients.”

Gruppo ASA chief financial officer Guido Cicognani added: “Our group is always looking for the best production technologies. With this in mind, we decided to extend our thirst for innovation also to the financial sphere and be the first company in Italy to use, thus pursuing a completely digital – and therefore more linear, transparent and easy to monitor – order-management process. Steelforce is the first partner in this initiative, and we will extend the use of this platform to other interested suppliers and customers in Europe.”

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