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FINANCIAL TECHNOLOGY BEYOND COVID

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By James Mingard, Head of Retail & Finance at Maintel

 

Just like many other sectors, we have seen a sea of change in the adoption of technology amongst those in the financial world. Established banks and financial institutions have opened their eyes to the benefits of innovations such as AI and chatbots. This has enabled them to automate their services and make themselves more efficient when they needed it most. We have seen a sea of change in the adoption of technology amongst those in the sector.

Even as travel and quarantine restrictions ease and bank branches reopen, many of the innovations introduced during the pandemic still align very well with a new customer landscape, where increasing numbers of customers are happily ‘going digital’. Institutions will need to balance digital efficiency and human customer care to provide an effective and competitive customer experience.

 

Digital First

When bank branches across the country were forced to close under national lockdown measures, a swift and coordinated response was required. Even now finance and insurance organisations need to deliver an optimal blend of innovative and cost-effective technology to drive operational efficiency, whilst providing differentiating customer experiences. Any inefficiencies or gaps in the process can cause delays and stretch customer patience thin.

James Mingard

Yet using a variety of technologies and siloed solutions from disparate vendors has been complex to manage and not always cost-effective. Even after a year of digital-first banking, legacy systems and technical debt still represent an enormous share of banking’s technological infrastructure. Nearly 50% of UK banks don’t upgrade old IT systems when they should, and 43% of US banks still use COBOL – a programming language developed in the 1950s.

Fortunately, over the course of the pandemic, digital transformation has offered a convenient opportunity to simplify infrastructure and streamline processes by consolidating to a smaller number of suppliers. By replacing existing technologies with a multi-channel contact solution from a single vendor, architecture can be simplified, costs reduced, and resilience enhanced. In this way, integration solutions have made their mark on the financial services landscape, and it’s clear they have much work still to do.

Machine learning technology, such as Robotic Process Automation (RPA), has also played a crucial role in the drive for efficiency. By streamlining customer service and automating processes throughout the ecosystem, teams can focus on providing an excellent customer experience. This is particularly true in finance and banking, as real-time, personalised products demand vast amounts of data to be processed instantaneously, adding burdens in terms of time and resources which AI applications can help to alleviate.

RPA and machine intelligence will only grow in importance in the new environment. RPA is best for automating high-volume, repetitive and rule-based human to computer interactions, such as copy-paste tasks or moving files from one location to another. However, where data is unstructured, where there is a decision-point in a process or where systems are customer-facing and need to be smart, self-learning and adaptive AI is essential.

Automated decision management provides companies with the best approach to make better operational decisions based on customer behaviour and data directly within an organisation’s digital touchpoints. The use of AI at key moments of the customer journey will reduce operating costs and increase efficiency whilst improving service speed, relevance and customer satisfaction.

 

With a hint of human

However, even if financial institutions continue to operate a banking model that’s digital-first they should avoid the temptation of going digital-only. Physical bank branches and offices, as well as human customer agents, can’t simply be replaced by a digital banking app. Digital and physical channels both play a necessary role in the complete customer journey and need to be blended.

A large number of services traditionally expected of a bank can be completed online or through an app. But when it comes to financial advice and enquiries, customer agents are still the best placed to help. More than a third (34%) of British customers say they distrust digital communications from banks, with 33% of 55+ year-olds suspecting paperless banking to be more susceptible to fraud and scams. Natural language processing has advanced greatly in recent years, but when it comes to complex queries people prefer the certainty and responsiveness of dealing with a customer agent.

There is also the issue of access. A large number of customers – whether elderly, disabled or constrained by a lack of technology – can’t rely on access to purely digital services in order to manage their money. Indeed, a quarter (24%) of UK customers never used online banking in 2020. Physical branches and in-person interactions are needed to service these customers and ensure they receive the experience they deserve.

Integration technologies and AI have secured a powerful beachhead in the financial technology estate, one that will only grow larger over the next few years. However, the best and most complete customer experience depends on both the latest technologies and a strong foundation of human empathy. The appetite for a totally autonomous, purely digital banking experience remains small. Digital and physical must work together to compete and provide the most responsive, user friendly experience.

Finance

HOW FINANCIAL ORGANIZATIONS CAN PROTECT THEIR DATA

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Yuval Wollman, President, CyberProof and Chief Cyber Officer, UST

 

Top executives from Wall Street’s largest banks pinpointed cybersecurity as the greatest threat to America’s financial system, at a Congressional hearing that took place in May.

The concern of financial industry leaders with cyber-attacks is neither surprising, nor new. The attraction of cybercriminals to banks and other financial institutions makes sense, given the fact that the financial sector functions as gatekeepers – not just of financial assets, but also of valuable Personally identifiable information (PII).

Threat actors are attracted to attack financial institutions to earn a profit through increasingly sophisticated attacks that range from ransomware attacks to identity theft. But while the threat continues to grow, there is much that can be done to mitigate the risks.

 

The Downsides of Digital Banking

The number of attacks on financial institutions increased sharply in the last two years due to the upheavals wrought by COVID-19, which prompted a dramatic rise in the number of online transactions.

With so much of today’s financial transactions done on both web and mobile devices, threat actors have more opportunities than ever before. Take, for example, the growing importance of Man in the Middle (MITM) Attacks, which impersonate another party online and give criminals access to personal data, passwords, and banking details.

With the widespread adoption of digital banking, consumers have become increasingly worried about cyber-attack. As a result, there’s growing demand to create better consumer protection laws that respond to the rapidly evolving technology. The U.S. Federal Trade Commission (FTC), for example, recently strengthened security safeguards for consumer financial information.

 

It’s Not “Just” About the Money

Financial organizations are at risk not just from threat actors looking for profit, but also from nation-states and hacktivists acting out of idealistic motives or as a means of achieving specific political ends.

The most famous examples of this type of attack include Russia’s 2016 attack on Ukraine’s electric grid and North Korea’s 2017 attack on Britain’s National Health Service.

Because of the extent of the damage that this type of attack could cause, NATO established cyberspace as the “fifth domain of warfare” in 2016. It developed a definition of when foreign factions are banned from attacking financial institutions, due to the fear that this type of attack could directly lead to a country’s destabilization.

 

Recognizing Risk Factors

The digital transformation of financial services helps banks and other financial institutions provide more a more convenient customer experience.

And while significant customer demand has led many banks to implement changes such as the transition from legacy to cloud-based solutions, these shifts also have the potential to create additional security risks.

For example, if we’re talking specifically about cloud migration, there’s need for additional security layers to protect organizations working with public cloud providers from the range of attacks targeting the financial sector: ransomware, account takeover, data theft and manipulation, phishing attacks, identity theft, and more.

Another example is the extensive use of third-party vendors, which has increased the risk of attack for organizations in the financial sector. Because third-party vendors enlarge the attack surface, they create more entry points to the system and make it harder to protect customer data.

 

Accelerating Detection & Response

By adopting an agile approach that supports continuous improvement, financial organizations can facilitate proactive identification of evolving threats and vulnerabilities in the wild. More specifically, by placing an emphasis on use case optimization – which starts by mapping out an organization’s threat detection gaps to a framework such as MITRE ATT&CK – enterprises can prioritize threats and invest their time and resources in mitigating risk more effectively.

For organizations transitioning to the cloud, what’s key is managing the migration process in a way that provides optimal visibility in the cloud and supports ongoing optimization at the enterprise level. Digital playbooks are a crucial tool in providing improved detection and response, creating automated or guided responses that allow faster, more effective, collaborative action.

The development and regular review of incident response plans similarly allows for efficient response in emergency situations and helps reduce the business impact of cyber-attacks.

 

Targeted Threat Intelligence

Threat intelligence that’s tailored to the financial services sector is another key component of timely detection and response. By working with expert Cyber Threat Intelligence (CTI) services, organizations can obtain up-to-date information about industry-specific threats in real time – information that is a highly valuable tool in strengthening the defense of an enterprise.

 

Cyber Hygiene

Employees make mistakes; after all, it’s only human. But these errors can lead to massive data breaches. For example, when someone clicks on a phishing email or leaves passwords for a company computer on a slip of paper that’s easily seen by the wrong person, the damage can be astronomical.

Providing regular cybersecurity training programs for employees can help minimize the risk of an accidental or careless action leading to cyber-attack. To be effective, training programs should not only explain how to spot cybersecurity risks like phishing emails but should also discuss how and where it’s safe to access company information.

Aside from employee training, there are fundamental cybersecurity-related decisions that should be implemented at the enterprise level such as Zero Trust, DevSecOps, and multi-factor authentication (MFA). From a policy perspective, for example, it’s crucial to enforce MFA for all applications. Moreover, technology-related vulnerabilities can be minimized through frequent patching and updates for systems. Audits, as well as vulnerability and penetration tests, must be conducted regularly.

 

For the Financial Sector, “Best Practices” are Key

With the growth in number and complexity of cybersecurity attacks on financial organizations and the increased risk of nation-state attacks, proactively approaching the question of cybersecurity and implementing “best practices” makes the difference in reducing the degree of risk to an enterprise.

By modernizing the SOC with a carefully navigated migration to the cloud, adopting continuous improvement of use cases and the development of digital playbooks that improve detection and response – as well as by leveraging targeted threat intelligence and maintaining strong cyber hygiene – enterprises can put themselves in a stronger position to minimize the potential business impact of a cyber-attack on their organizations.

 

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Business

IDENTITY SECURITY IN THE ERA OF SOX

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By Steve Bradford, Senior Vice President, EMEA, SailPoint

 

The Sarbanes-Oxley Act (SOX) is a federal law that mandates practices in auditing and financial regulations for public companies. Its original intent being to restore trust in a corporate and financial system that had been rocked by major accounting scandals such as Enron, WorldCon and Tyco. Legislators believed if there was no trust in the major corporate institutions of America, then the whole fabric of capitalism could be brought into question.

Initially only applying to American companies, every major institution that dealt with America had to comply with SOX. It was a huge a success with the number of financial scandals emanating from the US dropping dramatically since compliance. But can The UK follow suit?

 

Preparing for “SOX UK”

The UK has had its own high profile business collapses – notably BHS and Carillion. So, the government has launched a consultation programme that mimics the US SOX rules. The consultation on reforms aims to ‘restore trust in audit and corporate governance’ and applies to auditors, companies, directors, audit committees, investors, other stakeholders, and the regulator.

A focus is on companies with a significant public interest, otherwise known as Public Interest Entities (PIEs). These include financial institutions, banks, insurance companies, underwriters, and alike – many of which are already familiar with a high degree of financial scrutiny. A noteworthy difference is the stated preference to expand the UK SOX controls beyond public interest companies, which could include large companies in retail, manufacturing, logistics and automotive.

UK SOX may seem like a massive undertaking if unfamiliar, but with the right technologies in place manual tasks can become automated, reducing time which can be then redirected to greater priorities or risks, and everyday operations will be guided by a strong set of well-defined controls.

 

A growing threat

The Sarbanes-Oxley Compliance 9-Step checklist provides a series of recommendations to protect the validity of all reported information and help businesses to ensure they are following the rules. This includes the need to establish controls to prevent data tampering, track data access, test the effectiveness of safeguards and detect security breaches – any of which need to be reported to SOX auditors on time.

As both physical and digital information are affected, accurate management is an integral part of compliance. Remote working, blockchain integration, and the emergence of cloud-based banking (Banking as a Service) have led to growing cyber threats, privacy concerns and compliance requirements through the complexities of connectivity.  For example,  multiple devices now connect to networks from different locations, accessing the vast amount of information in the cloud. There is now critical need to close security gaps outside the perimeter.

Some of the greatest threats lie within an organisation – either human error or more likely, the rise in risk facing the access today’s workforce has to technology. Complex corporate structures and departmental silos hinder management’s visibility into workforce roles, responsibilities, and data access. Traditional reliance on spreadsheets and manual processes for tracking data access and user identities leads to inaccuracies and inconsistencies.

Apart from being an auditing and reporting nightmare, the situation creates system gaps that are ripe for exploitation by threat actors.

 

Maintaining security through identity

To meet security and compliance regulations, companies and organisations must act smarter in how they protect their “perimeter”, which is centred on its people – the new threat vector of choice. Companies must prepare to automate business processes and embrace new security practices that fully protect the workforce and the tools they need to  do their job.

Staying in compliance with regulation is important for the safety of the company, but it is crucial that the right safety measures are in place. Identity access management can reduce the risk of insider threat, data breaches and human error for financial reporting – enabling automated logging and report generation for companies to make smart decisions whilst uncovering and remediating hidden or unknown issues that pose inherent risk.

 

The countdown to SOX

One commodity companies don’t have is an abundance of time. With less than 18 months to go until the SOX recommendations deadline, any form of automated access system is an essential first step in ensuring companies are prepared. Starting early is critical – given an implementation programme can take 18-24 months for a company that is used to stringent financial regulations. It’s time to get identity and access compliance right – automation can save a significant amount of effort and money, whilst improving the accuracy of identity management processes.

As seen in the US, UK companies not used to financial compliance procedures will have to catch up or ask for help – learning from the financial sector – and scale up their auditing and control to comply with more stringent regulations. The rules are there to help provide the security that regulators need for a secure commercial environment. Now is the time to act in order to reduce the risk.

 

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