Fed to step-up focus on payment security with study, working groups: Fed's Powell

WASHINGTON (Reuters) – The U.S. Federal Reserve is stepping-up its focus on payment security as the industry reaches a “critical juncture” driven by new technologies, Federal Reserve board governor Jerome Powell said on Wednesday.

Speaking at a conference in New York, Powell said the U.S. central bank would early next year launch a study analyzing payment security vulnerabilities and also planned to create new working groups focused on reducing the industry costs associated with securing payments.

“Rapidly changing technology is providing a historic opportunity to transform our daily lives, including the way we pay. Fintech firms and banks are embracing this change, as they strive to address consumer demands for more timely and convenient payments,” said Powell.

“It is essential, however, that this innovation not come at the cost of a safe and secure payment system that retains the confidence of its end users.”

The Fed does not have complete authority over the U.S. payment system, but it has led industry efforts to make it faster and easier to use. The central bank also leads the 160-member Secure Payments Task Force.

Powell’s comments underline growing concerns among financial market participants and regulators about the risks cyber thieves pose to the financial system following a series of recent incidents.

Last year, SWIFT, the global financial messaging system, disclosed it had suffered hacking attacks on its member banks including the high-profile $ 81 million heist at Bangladesh Bank.

During that incident, hackers broke into the computers of Bangladesh’s central bank and sent fake payment orders, tricking the Federal Reserve Bank of New York into transferring the funds. [here]

Powell said on Wednesday new fintech payment companies posed “significant challenges to traditional banking business models” and that the payment system was reaching a “critical juncture.”

His comments echoed those of Barclays Chief Executive Officer Jes Staley who on Saturday warned payments would be the next battleground for banks amid increasing competition from fintech players and tech giants including Amazon and Facebook.

Reporting by Michelle Price; Editing by Chris Reese

Tech

Toshiba's accounting in focus as ISS, Tokyo bourse offer contrasting views

TOKYO (Reuters) – Proxy advisory firm ISS said on Wednesday it has recommended on that Toshiba Corp’s shareholders do not approve its earnings statements for the past financial year – the same day that the Tokyo bourse said it was taking the conglomerate off a special watch list.

The two developments offer very different views of the state of Toshiba’s accounting practices as the Japanese firm seeks to dig itself out of a financial crisis – the origins of which can be traced back to an accounting scandal in 2015.

Toshiba wants shareholders to sign off on its earnings at an Oct. 24 extraordinary meeting but the earnings have received a mixed review from its auditor.

PricewaterhouseCoopers Aarata LLC gave the report a “qualified opinion” endorsing Toshiba’s finances despite some minor problems, but made an “adverse” statement on Toshiba’s internal controls.

“It would be difficult to justify support for this resolution given the fact that the audit firm has rendered a qualified opinion, basically reflecting the auditor’s view that Toshiba’s financial statements are not accurate,” ISS said in a report.

The Tokyo Stock Exchange said earlier in the day that it would remove Toshiba from its “securities on alert” list on Thursday, adding that internal controls at the firm had improved. Toshiba had been placed on the list in the wake of the 2015 accounting scandal.

That scandal was followed by the emergence of billions of dollars in liabilities at its nuclear unit Westinghouse. It has since agreed to sell its chip unit to a consortium led by U.S. private equity firm Bain Capital for $ 18 billion.

Reporting by Makiko Yamazaki; Additional reporting by Chris Gallagher and Takahiko Wada; Editing by Edwina Gibbs

Tech

Fed Rate Hike Prospects Focus The S&P 500 In Week 1 Of October 2017

The first week of October 2017 saw the S&P 500 reach daily new highs each day through Thursday, before slightly dipping by 2.74 points (0.1%) to close the week at 2,549.33.

Since we had it set up to cover Week 1 of October 2017, let’s take one last look at our chart showing the actual trajectory of the S&P 500 during 2017-Q3 against the backdrop of our alternative futures “spaghetti chart” forecasts that differ according to how our dividend futures-based model of how stock prices predict they would based on far forward in time investors are looking.

As best as we can tell, investors are still primarily focused on 2018-Q2, although with stock prices tracking along the upper edge of the echo effect-adjusted range indicated by the red zone shown on the chart, we believe investors are also focusing on the current quarter of 2017-Q4.

The reason why we think that has a lot to do with the week’s news events, where the expectations associated with future short-term interest rate hikes by the U.S. Federal Reserve now suggest two rate hikes in the foreseeable future: one in 2017-Q4 and a second in 2018-Q2. The following table shows the CME Group’s estimates of the probabilities that the Federal Funds Rate will be set as indicated at various future meetings of the Federal Reserve’s Open Market Committee (FOMC):

Probabilities for Target Federal Funds Rate at Selected Upcoming Fed Meeting Dates (CME FedWatch on September 15, 2017)
FOMC Meeting Date Current
75-100 bps 100-125 bps 125-150 bps 150-175 bps 175-200 bps 200-225 bps
13-Dec-2017
(2017-Q4)
0.0% 9.4% 89.2% 1.4% 0.0% 0.0%
12-Mar-2018
(2018-Q1)
0.0% 5.8% 58.3% 34.4% 1.5% 0.0%
13-Jun-2018
(2018-Q2)
0.0% 3.5% 37.2% 43.1% 15.1% 1.1%
26-Sep-2018
(2018-Q3)
0.0% 2.3% 26.2% 41.0% 24.2% 5.8%

And since we’re in the business of looking forward, the following chart updates our alternative futures chart to peer through the end of the fourth quarter of 2017.

The headlines of the week reinforce the apparent influence of the expectations of future Fed rate hikes on investor expectations.

Monday, October 2, 2017

Tuesday, October 3, 2017

Wednesday, October 4, 2017

Thursday, October 5, 2017

Friday, October 6, 2017

But wait, that’s not all that happened during the first week of October 2017! For a succinct list of the positives and negatives for the U.S. economy and markets during Week 1 of October 2017, check out Barry Ritholtz’s summary of the week’s major events.

Tech

How I Use Android: Franco.Kernel and Focus creator Francisco Franco

These days, most Android devices work pretty well out of the box — but that doesn’t mean you can’t get under the hood and do some serious tinkering if your inner geek demands it.

From the get-go, Android’s been a virtual playground for power users, with a fully accessible file system and the ability to take complete control over a device. Just like other Linux-based operating systems, Android allows you to gain root access and do some insanely advanced customizations (assuming, of course, you know what you’re doing and don’t mind taking the associated risks; remember, that which is prodded can easily be punctured).

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ESPN’s new online ads let businesses focus on your favorite teams

Visit ESPN’s website after your team scores a big victory, and you may start seeing ads congratulating them on the win. 

Meanwhile, that same advertiser could be simultaneously mourning the opposing team’s loss to appease its disappointed fans.

ESPN just rolled out a new tool that lets advertisers place personalized ads based on what it knows about visitors’ favorite teams and players and the outcomes of particular games.

Brands can even build an advertisement around an exciting moment in a game — say, a far-out three-pointer from Steph Curry that has social media abuzz — then target it at fans of Curry or the Golden State Warriors for a set window of time afterwards. Read more…

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