Fintech Insider Podcast by 11:FS
00:07:14 · James A. Brown
[00:07:14] S5: Yeah, I mean, I totally agree with what Wincie and Clive have said. It's interesting, isn't it, that when new technology comes into the marketplace, is actually sort of governed by the same rules, especially in the financial services sector like the banks are. You look at buy now, pay later, it's been around for quite some time, but it's only very recently actually that that's been regulated. So I'm not overly shocked that this incident has occurred. Do I think it will be the last? No. And I think Clive and Wincie are spot on that, you know, we as people are fallible. But I think also when you're a CEO of big organisations dealing you know, people's money, you actually have to make provision for that. And I think that's where a lot of organisations are not leaning into the investment in the technology piece as much as they should. So although you could argue technology it's thing, it's the human in the loop that's not making the decision to put the sort of the guardrails in place in order to protect the people, the customers that they actually deal with. So yeah, mean, it's very unfortunate and certainly we wouldn't want to see too many instances of these, but I think, you know, Wincie and Clive are right. You know, we just need to be very mindful that our, you know, as big as these campuses are for the likes of Amazon and Google and Facebook and Meta, whatever else, there's the replication of that somewhere else with bad actors trying to get sort of into their systems. And that's the level of investment that they are willing to put in and spend in order to do what they've just done.
00:08:55 · Wincie Wong
[00:08:55] S4: I just wanted to talk about also what was interesting, I think, in the story is that everyone is talking about how 2.8% of those deposits were being withdrawn. And then, of course, Quickly Binance kind of stopped the ability to withdraw. And this is something that financial institutions that are regulated have been dealing with for many, many years as well. What we're not hearing so much about in the news is the 97.2% who have stayed. And, again, with all financial institutions, it's a combination. It's not necessarily that they have so much trust and belief in Binance that they've stayed. It is because maybe they didn't move fast enough or they're maybe trapped in that ledger and they can't get the Bitcoin out or or whatever other crypto they're holding in Binance into other, depositories. And that probably is also worth noting. So it's almost... They're held a little bit in captivity as well. So it's stickiness of that deposit. I think that's really important. One of the things that has happened over and over and over in financial services in the past are runs on banks, for example. You know, we had savings and loans and everything where we had people running to long queues out the door. I mean, in 2007, I think it was Northern Rock in The UK and, where people were just trying to get their money out into a safe place. But in the end, what actually resolved it is not the not the bank saying, don't worry. We will cover it for you. It is the financial services compensation scheme that actually came in and said, actually, we're an independent regulated, body that will insure your deposit. And that is what kind of steadied that shit. And that will be really interesting to see, I think, in this perspective because Binance has that SAFU situation where they say, you know, we will cover things if something happens and we lose your crypto. But that's probably not... I I don't wanna say not good enough in the long run, but maybe it's not enough of an reassurance to give to their customers, I think, in the in the longer run. There might be some regulation or other bodies coming in to help police that maybe in the future as a response.
00:11:20 · James A. Brown
[00:11:20] S5: Yeah. I mean, if I take us back just for a moment, just let's say pre COVID, you know, the majority of the world was chasing down let's move away from cash, you know, who is going to be the first country in the world to be a cashless society? And then lo and behold, what happened, COVID hits and that conversation disappeared because we were all forced into the digital world, whether we liked it or not. In The UK, you know, there wasn't the abundant use of QR code technology as there is now. And nowadays, it's just we just take it for granted. We get our phone out, we scan it and off we go. But back to my point, do we actually know what we're scanning? Do we know what data we're actually giving away at that point? Do we actually read terms and conditions when we sign up for things? No. So there's lessons, I suppose. So, you know, not necessarily always dwelling on the negative, but let's look to the positive. Will this maybe get organisations to sort of maybe stop and think actually about what they need to do to actually improve their security levels? I would hope that it probably would for some, especially in, you know, the sort of like the financial services sector, but we're talking about crypto just for the moment. And, know, I've seen some great companies coming out of APAC and some great companies coming out of New Zealand. The first thing that they sort of started with, so that main point was how secure is their platform before they then went to the marketplace. And I think we just need to sort of like turn the conversation on its head over slightly.
00:12:57 · Kate Moody
[00:12:57] S0: Yeah, no, absolutely. I mean, Clive, I'll probably give you the last word on this story before we have to move on but fundamentally, what do you think Binance and and other platforms in this space at this similar scales need to do differently to one, like, you know, prevent these types of things happening in the future and also to kind of build that trust in customers that an episode at this scale isn't gonna happen again?
00:13:21 · Clive Summerfield
[00:13:21] S3: Well, I I think the problems of this scale are are gonna happen again, because at the end of the day, the the weak link in all of these, these types of processes is the human coming back to the call center discussion earlier. It was always the human agent that was the source of the problems I've been involved in a couple of fraud cases where it's a human agent actually in the bank that was defrauding the client's accounts. And really, the only way to strengthen that process is really, stronger verification over the identity of individuals that are actually accessing services. And of course, with the advent of deep fakes, the notion that you've gotta check to see if the the person interacting with a particular service is real and not a not a synthetic, individual. And we've seen now numerous, hacks where essentially high net worth individuals have been cloned, and that has been used to, defraud the bank. There was the famous case that, Arup, the manufacturer whose CEO and various senior executives were cloned, who instructed the staff to then transfer funds. They lost 25,000,000 in that particular incident. And these are not isolated incidents. These are becoming real and every day. And we've seen this particularly in things like private banking, wealth management, where, you know, there is a lot of money to be had by from tools that are relatively cheap and easy and quick and effective to use in order to create a realistic likeness of a, say, high net worth individual or a person with a lot of influence and power. And coming back to it, fraudsters and particularly the state actors, I mean, they're particularly interested in crypto because it bypasses all the sanctions. Very easy to to launder that crypto via other chains. So you can convert that crypto very, very quickly. And they're also patient. So, you know, they don't mind taking their time social engineering software developers, planting particular individuals into organizations, the famous incident of all the fake jobs or software engineering jobs that were being undertaken by North Korean operatives. So this this is, yeah, this is not gonna go away anytime soon, and it always come back to the human element.
00:16:18 · Clive Summerfield
And I say technology, and this is where, my particular interest is, technology that one validates identity and secondly validates that identity is real is becoming kind of central to any cybersecurity, profile, for many of these organizations.