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BANKING IN THE AGE OF DATA BREACHES

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Naomi Tudor, head of corporate banking, Shakespeare Martineau 

 

In a world where data security is more important than ever, banks and financial institutions face a significant level of public and professional scrutiny about how they proactively manage cybersecurity threats, and how they respond in the event of a breach.

 

According to data released by the Financial Conduct Authority, the number of breaches reported by financial institutions rose five-fold in 2018, compared with the previous year. So, at a time of heightened sensitivity, what types of threats do banks face and how should they go about managing them?

 

Naomi Tudor

By their very nature, banks of any size are targets for criminals. They hold vast amounts of personal and financial data which can be exploited in a variety of ways, from directly transferring funds out of individual accounts, selling on customer information to other criminals or even leveraged to hold institutions hostage, with the aim of causing widespread business disruption.

 

The methods that criminals often employ to target banks are varied and sophisticated, ranging from direct attacks to computer systems and IT infrastructure, to approaches to customers in an attempt to gain knowledge of their personal data. For example, a common method employed by fraudsters uses fake email communications targeted at customers asking them to transfer funds or confirm account details. If requests are complied with and money is sent, by the time the funds reach a clearing bank it is usually too late and the money cannot be returned. The form of scam – although simple – catches many people every year.

 

However, even before the onset of new GDPR regulations last year encouraged businesses across all sectors to re-think their data protection policies, larger banks and newer funders have been investing significant amounts of money into IT infrastructure. Having as secure systems as possible in house is important, however it is essential to remember that this stringent approach should also extend to an institution’s supply chain as well.

 

Vulnerabilities further down the chain with third party suppliers can provide a route in for criminals who exploit weaknesses in order to gain access to larger parties further up the chain. Banks, in particular, have recognised how important it is to properly vet suppliers for suitability and check compliance. Any business which finds itself wanting to engage in a commercial arrangement with a financial institution will find itself faced with a lengthy and rigorous process to navigate – however, this is all in the interest of security.

 

One thing which is a certainty is that any business, no matter what precautions they have in place, can fall prey to a cyber-attack. Technology evolves at a rapid pace and with it, so do the methods which criminals may employ to gain access to personal data. However, in the event of a breach taking place, the way in which customers are informed is essential in limiting both reputational and financial repercussions.

 

In general, customers should be alerted as soon as possible if their personal data has been compromised and the majority of institutions will have processes in place to ensure that this is done in a timely fashion. Not reacting quickly enough and failing to inform customers can attract anger from both the Information Commissioner’s Office, and the general public.

 

For banking institutions and funders, regardless of size, reputation is highly important. Gaining trust from the general public and from the business world that the service provided will be secure and transparent is especially important both for attracting new customers and for retaining current ones.

 

A large part of defending against, and reacting to, cyberattacks in the best way possible comes down to training and awareness, both for internal employees and the general public. In the wake of the GDPR legislation being introduced, data protection and information security courses have become much more commonplace in the working environment and there is a general push for all employees, no matter seniority, to take a more proactive stance in ensuring that personal data is as protected as it can be.

 

Within the general public, whilst fraudsters are continually discovering new ways to trick people into handing over their personal data, there must be a greater awareness of best practice when talking about sensitive financial information. This includes, never giving out critical information, such as account numbers, over the phone and being aware of emails from fraudsters masquerading as official messages from the bank or funder.

 

The reality is that all organisations, no matter what sector they operate in, must be more in tune than ever before to the threat of data security breaches. Aside from significant financial penalties from the Information Commissioner’s Office, the lasting damage to reputation can be especially hard to repair.

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Banking

WHY THE TIME IS NOW TO BANK BEYOND BORDERS

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by Lili Metodieva, MD of Monneo

 

As our world becomes more interconnected, so too does the need for banking systems to follow suit. In the past, businesses and individuals were often restricted to banking in a single country, but the rise of borderless banking is enabling both to benefit from greater financial freedoms. In this article, we will examine why this trend is so important and explain how Fintech companies are helping to make it possible.

 

What is borderless banking?

Simply put, borderless banking refers to any bank account, which allows users to spend, send and receive money across different countries and currencies, without incurring heavy fees. The concept has become increasingly popular in recent years, with more people now working in cross-border job roles and with many businesses requiring capital in a different currency than that of their country of origin.

For customers, borderless banking is making cross-border financial transactions more efficient and cost-effective. Through its rise, businesses and individuals can gain easier access to international streams of capital, which is crucial in this current moment of economic uncertainty. In fact, 74% of companies say cross-border payments have helped their business to survive [1].

 

Where do IBANs come in?

International Banking Account Numbers (IBAN) play a crucial role in facilitating borderless banking. The globally recognised system enables cross-border transactions to happen safely, by providing each international bank account with its own unique 36-digit alphanumerical code. On account of this code, financial institutions can quickly identify where funds are coming from, as well as where they’re going to.

More recently, providers such as us have been able to deliver Virtual IBANs (vIBAN). Working alongside a network of well-established European and International banks, we’re able to offer businesses a single platform interface that consolidates the management of all IBAN accounts. In turn, our multi-currency service makes conducting global financial transactions incredibly straightforward.

 

How has Brexit affected borderless banking?

The COVID-19 pandemic has accelerated the growth of borderless banking and services related to it, but other developments, such as Brexit are beginning to stand in its way. Most notably, the drawn-out withdrawal process has seeded a growing reluctance amongst risk averse, larger organisations to settle transactions using UK bank accounts or IBANs, due to unfounded concerns around regulatory complexity.

Despite leaving the EU, the UK remains a member of the Single Euro Payments Area (SEPA), so it’s unclear why these concerns around British IBAN accounts exist. Regardless, this unfortunate development must be addressed quickly as it has the potential to adversely affect the livelihood of businesses and individuals at a time of critical need.

 

What does the future hold for borderless banking?

There’s clear demand for borderless banking and borderless payments, but the discrimination of certain IBAN accounts represents a major obstacle, which could stand in the way of their widescale adoption. Moving forward, there needs to be a push towards borderless IBANs, which will make international financial transactions more reliable. At the end of the day, this is what IBANs were originally created for, so it’s important the current problems are rectified quickly.

To ensure this can happen, the industry needs protection and clarity from regulators. Likewise, it’s now time for membership organisations to stand up on behalf of the sector and lobby for the financial inclusion of businesses.

If the confusion regarding UK IBAN accounts can be sorted in a timely manner, businesses across the nation, as well as those further afield can look forward to a future of more streamlined and effective financial services. With this support, the diverse sector can deliver further access to innovative financial services and products, which improve outcomes for businesses and consumers alike.

As a sector, Fintech has the potential to provide vital assistance to the wider economy, particularly in an era of increased cross-border business. At Monneo, we’re committed to being part of that change and as a part of organisations like ‘Accept my IBAN’, are working towards reporting and ending IBAN discrimination.

[1] – https://www.mastercard.com/news/research-reports/2021/borderless-payments-report/

 

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Banking

IT’S TIME FOR BANKS TO SIT THEIR CUSTOMERS DOWN AND TALK OPEN BANKING

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Eugene Danilkis, CEO at Mambu

 

We are living in an experience economy, and banking is no different. Customers need innovative payment and finance management solutions. New entrants are edging into the landscape and challenging existing players. This should mean users have a better view of their finances and the tools they need to manage their money – but banks are failing to deliver.

Personal finances are a complex beast, emotional pulls are strong, and the worry of financial security is always on the mind. It’s the job of banks to be the shoulders customers can lean on and trust.

Open banking was supposed to take this to the next level, enabling banks to deliver personalised products and services based on improved data sharing and customer insights. But three years on, adoption remains sluggish. So, why is open banking failing to live up to its promise?

 

A missed opportunity

Open banking was introduced to the UK in 2018, but consumers are still mired in confusion as to what it means and how it helps them. According to Mambu’s global open banking survey, 61% of consumers say they’ve never used open banking, despite more than 8 in 10 using one or more mobile banking apps.

Eugene Danilkis

This is a problem for banks and consumers alike. Lack of understanding around the technology is hindering its adoption, despite this being in the best interests of both. By enabling the secure sharing of financial information, open banking creates an improved customer experience. Not only does this minimise friction and make online payments faster and easier, but allows for personalised services and greater automation, enabling customers to take advantage of tools like budgeting apps.

For banks, open banking is an opportunity to build innovative new products that will improve the customer journey, helping them retain accounts and acquire new ones. By collaborating with third parties, banks can hyper-target customers and build services that address specific user needs, increasing customer satisfaction and in turn brand loyalty.

It’s true there’s been a recent spike in open banking users. According to Juniper Research global, open banking users rose from 18 million in 2018 to 40 million in 2021. But this can be traced to the necessities of a pandemic rather than any sudden clarity in communications.

 

Putting customers at the heart of communication

Mambu’s research shows more than half of consumers (52%) have never heard of open banking. COVID-19 may have increased the uptake of the technology, but it hasn’t increased understanding among users.

So, what can banks do to encourage consumers to embrace open banking? Fundamentally, they must better educate their customers in terms they understand. This means talking to them like human beings, using clear and transparent language to simply explain the personal benefits open banking brings and why it’s really just smart banking.

The understanding gap between technology and terminology shows that consumer demand is there, but better communication is needed. Making sure consumers truly understand the tools they’re using, the control they now have over their finances and how open banking improves the customer experience is vital to dispersing the current fog of confusion. It’s the benefits of this technology that banks need to hone in on: customers ultimately care about what open banking can do for them and how it’s going to make their lives easier.

Centering the customer and their needs in this way will allow banks to fully realise open banking’s potential. The technology has already given them the opportunity to develop valuable services for customers that help build brand loyalty. But the industry has failed to put the customer at the heart of their communications and processes, and show them how much better banking can be.

 

Building trust

Key to reversing this trend is addressing consumer concerns around data privacy and financial safety. Yes, banks need to prioritise simplicity and clarity in messaging, but this isn’t an excuse to shy away from important conversations. Just because there’s an understanding gap around open banking doesn’t mean consumers aren’t switched on about tech and financial issues.

Mambu’s survey found nearly three in five customers have concerns about privacy and security in relation to open banking. So, it’s vital that banks provide reassurance and relevant information about data sharing from the outset if they’re to assuage these fears.

The industry can also encourage greater adoption by developing and improving open banking interfaces. Banks are the gatekeepers to how easily end-users can authorise certain actions, manage third-party access and navigate different open banking functions. If the interface is user-friendly, customers will have a better experience of the technology and be more likely to use and recommend these services.

 

Time to get talking

Customer communication is holding the industry back.. The ability of open banking to transform financial services is a concept that industry players are well-versed in. But the feeling isn’t mutual for customers.

Banks are failing to capitalise on the open banking opportunity by engaging with new and existing customers about what the technology can do for them. Debunking  common myths can open the door to increased growth and trust for banks, as they seek to open up new revenue streams post pandemic..

Make no mistake, open banking isn’t going away. But customers will if banks don’t get talking.

 

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