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Understanding Why Cybersecurity is Important in Banking

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A bank is a financial institution that offers a variety of financial services in addition to taking deposits from the general public. They keep money safe by putting it in personal accounts, and one can conduct a transaction whenever they want. They also disburse loans that must be repaid with interest.

A bank’s main job is to support the economy of a nation. But physical theft and online fraud have done a significant amount of damage to the financial industry. Because hackers can access bank servers and steal customers’ personally identifiable information, banks are constantly vulnerable to cybercrime.

Today, the majority of banking by both individuals and businesses is done online, which has increased the potential of a data breach.

A cyber security threat is any malicious act that tries to access someone’s personal information and cause harm, theft, or disruption to their digital life. These threats could appear as malware, data breaches, or even denial-of-service attacks. Financial organizations deal with the same types of cyber security issues every day.

The market worth of cybersecurity in 2021 was USD 216.10 billion and will reach USD 478.68 billion by 2030 growing at a 9.5% CAGR.

Cyber Threats in The Banking

A bank faces numerous risks every day. Cyber security planners have devised a variety of strategies to safeguard their banks in light of technological innovation. Typical cyber security risks that banks confront regularly include:

Mobile Apps: As cellular technology advanced, banks released their own mobile apps. Although these apps may have saved time and effort, they have also put banking at risk. Every time a consumer uses the app, the bank is exposed to a cyber-security risk. Any malicious software present on the device or a lack of strict security measures taken when using the app can result in data theft.

Digital payments: Everything has become digital with the internet, making life simpler. Online shopping is one of them and has contributed to the continued use of mobile payment apps. But banks have yet to benefit at all from this technology.

Cybercriminals have attempted to imitate these businesses to obtain valuable information like passwords. This is a practice called spoofing. These risks might seriously impact banks, users, and their personal information if cyber security is not strengthened.

Customer Data: Safeguarding a bank’s customers’ information is the top priority for its cyber security staff. Addresses, names, and credit card information are all held by banks about their customers, which can be problematic and hurt both the customer and the bank.

In addition to stealing data, thieves can occasionally modify it. Cyber security experts are in high demand to address this issue, stop attackers from stealing and manipulating data and protect the bank and its clients.

Information that isn’t encrypted is a basic yet crucial aspect of effective cyber security. The data kept in your bank’s computers and online should all be encrypted.

Malware: End-user-owned computers and mobile devices infected with malware put the bank’s cyber security at risk each time they connect to your network. Sensitive data passes across this connection, and if there isn’t enough security, malware on the end user’s device could attack the bank’s networks.

Unsecure third-party services: Many banks and financial institutions use third-party services from other sources to better serve their consumers. Before utilizing a security solution provided by a third party, one should consider how to guard against the security threats they present.

The Responsibility Gap

Despite the growing reliance of the global financial system on digital infrastructure, it is not apparent who is in charge of guarding the institution against cyberattacks. Without focused action, the digital revolution will make the global financial system more exposed as innovation, competition, and the epidemic spread.

Improving global financial system security is an organizational task. Although more efforts to strengthen regulations and fortify defenses are needed to keep up with the rising hazards. Unlike in many other industries, most financial services community has the resources and technical know-how necessary to execute solutions. A major concern is how to most effectively structure the system’s protection among governments, financial authorities, and industry, as well as how to most effectively and efficiently utilize these resources.

The gap between the financial, national security, and diplomatic groups is very acute. Financial authorities face specific risks from cyber threats, but their relationships with national security agencies, whose assistance is required to combat those threats successfully, remain strained. This vacuum exacerbates risks in accountability and ongoing ambiguity regarding mandates and tasks in defending the global financial system. . The current geopolitical environment and high levels of mistrust, which impede international cooperation, contribute to some of this uncertainty.

Because it involves sensitive national security concerns, cybersecurity cooperation has been impeded, fragmented, and frequently restricted to the smallest circles of trust. International and multi-stakeholder collaboration is a “must-have,” not a “nice-to-have.”

Strategies to Combat the Threats

The Carnegie Endowment for International Peace published a paper titled “International Strategy to Better Protect the Global Financial System against Cyber Threats” in November 2020 to achieve more effective security of the global financial system against cyber threats. The paper, which was created in partnership with the World Economic Forum, makes specific recommendations for encouraging greater international cooperation between governmental organizations, financial institutions, and technology businesses to eliminate fragmentation.

The plan is built on four guiding concepts. First, there needs to be more clarity regarding roles and duties. Only some nations have successfully established connections between their financial regulators, law enforcement, diplomats, other key government players, and business. International collaboration is hampered by the current fragmentation, which also reduces the capacity for response, recovery, and resilience of the entire international system.

Second, there is a critical need for international cooperation. Individual governments, financial institutions, and tech corporations cannot properly prevent cyber threats if they operate alone due to the scope of the threat and the system’s worldwide interdependence.

Third, minimizing fragmentation will allow resources to address the issue. The efforts to help safeguard financial institutions are numerous, but they are still fragmented. Some of these initiatives overlap, raising transaction expenses. A few of these projects are developed enough to be merged, better organized, and further globalized.

Fourth, safeguarding the global financial system might serve as an example for other industries. One of the few arenas where nations are interested in collaboration is the financial system, even when regional tensions are high. Emphasis on the financial industry offers a place to start and might pave the path for future improvements in other sectors’ security.

The research suggests that the FSB creates a fundamental framework for overseeing cyber risk management at financial institutions as one step toward enhancing cyber resilience. Governments and businesses should improve security by exchanging threat data and setting up CERTs for financial computers, modeled after Israel’s FinCERT.

The financial sector’s resilience to attacks aimed at data and algorithms should be a top priority for financial authorities. This should feature a safe, encrypted data vault where members can safely store their regular backups of customer account information. It is important to regularly practice simulating cyberattacks to find vulnerabilities and create attack plans.

The research suggests that countries clarify how they would implement international law in cyberspace and improve rules to protect the financial system’s integrity to strengthen international norms.

Cyber resilience and enhanced international rules can aid in collective response via law enforcement operations or multilateral responses with industry. Sanctions, arrests, and asset confiscation are all possible responses.

Governments can aid in these efforts by setting up organizations to help with threat assessment and response coordination. Threats to the financial system should be a primary priority of intelligence gathering, and governments should share this information with friends and other like-minded nations.

 

Source: https://www.imf.org/external/pubs/ft/fandd/2021/03/global-cyber-threat-to-financial-systems-maurer.htm

https://www.businesstechweekly.com/finance-and-accounting/fintech/cyber-security-banking/

https://www.strategicmarketresearch.com/market-report/cyber-security-market

 

Banking

How banks can help customers during the cost of living crisis

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 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree

 

Surging energy and food prices are significantly driving up household expenditure, which means living standards in the UK will fall to 2.2% this year, according to the Office for Budget Responsibility. This is the biggest drop in any single financial year since the records began in 1956-57.

It’s a tough situation for many consumers who are still struggling with financial hardship following redundancies and pay freezes from the pandemic. According to TSB’s Money Confidence Barometer, 82% of people have experienced an increase in the day-to-day cost of living. This resulted in almost a quarter of them using their savings, while one in five changed their usual spending habits and behaviours.

As the financial situation worsens, consumers are increasingly relying on their banks for help and support. But, while banks can’t control inflation, energy or food prices, they can play a more supportive role by adapting their services to offer stronger customer service, better tools for financial management and be more flexible with loan repayments.

 

Strengthen customer service with intuitive AI solutions

Since the pandemic, consumers have changed the way they bank, using more mobile apps for primary banking rather than going into physical branches. This provided an opportunity for banks to accelerate their investment in digital services including automation and offer customers more support during the cost of living crisis.

Lavanya Kaul

Effective tools include AI-powered chatbots which respond intelligently to customer enquiries to quickly help troubleshoot problems and provide useful advice. But to be successful, you need to ensure you strike the right balance between an efficient and convenient process and creating a personalised experience. Customers need to feel like you understand and care about their problems and are here to help, rather than just fobbing them off with a monosyllabic bot. To avoid this, banks need to embrace intuitive AI solutions to ensure that empathy comes across in all automated interactions with customers. While doing that, messaging is key. In times of stress, we don’t function as well and financial struggles are a huge stressor. The clearer the message and the simpler the instructions, the better.

Financial education, when combined with technology solutions such as open banking, can offer more long-term solutions for people to navigate their finances. This can help put more information into the hands of the consumer to help them grasp their financial situation better. Some banks have cracked this with innovative solutions like HSBC’s Financial fitness score tool that can analyse your money habits and signpost you towards ways to improve your financial health. This may include joining one of the financial education webinars run by the bank or having a ‘financial health check’ with a member of staff.

 

Launch money management features & apps

Introducing money management features and apps to increase the visibility of a customer’s financial situation, empowers them with the information they need to make smarter choices.

TSB offers Spend & Save and Spend & Save Plus current accounts which include a savings pot that enables customers to put extra money aside when they can and an auto-balancer feature that automatically transfers money from the savings pot into their current account if their balance falls below a certain level. This allows them to start building up savings and protects them from unnecessary overdraft charges.

Personal financial management (PFM) apps also help customers get a better understanding of their finances. These connect with a customer’s bank account and enable them to keep a close eye on their spending habits and track upcoming bill payments. An example is Prism, a PFM app which allows customers to manage bill payments by sending them reminders about due dates. It also provides a summary of their income, account balance and monthly expenses at a glance, therefore consolidating all their financial information in one place and saving time on bill payments.

Lloyd’s Banking Group and HSBC launched a subscription management tool for all customers on mobile, allowing them to see and cancel recurring card payments for things like TV subscription services. HSBC says that during the first quarter of the year, it led to customers dumping around 200,000 subscriptions.

 

Introduce payment holidays

While improved customer service and financial management tools are important support tactics, they might not be enough for more vulnerable customers. For example, those who are about to default on mortgage payments or loans due to redundancy or periods of ill health need banks to do more, like offering payment holidays. Banks relaxed the rules for payment holidays during the pandemic, so they should consider doing it again to help more vulnerable customers through the crisis. Customers need to understand that they are not alone when experiencing financial difficulties and that help is available

 

Ride out the crisis together

As inflation reaches a 30-year high, customers are now more reliant than ever on banks for guidance and support. But to provide the right level of service, they need to move away from their traditional ways and behave more like technology companies by embracing automated solutions to create the right products and services for customers. Then layer on top of that the need for more personalised and empathetic customer interactions, as well as consider additional support for more vulnerable customers.

While we don’t know how long the cost of living crisis will last, what we do know is that the pressure on household finances is likely to get worse before it gets better. Therefore, banks need to step up, be the supportive partner and do whatever they can to help customers. After all, the only way we can ride out the crisis is by supporting each other and working together.

 

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Banking

Coreless Banking: How banks can thrive in 2023

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By

Hans Tesselaar, Executive Director of BIAN

 

In recent years, banks have faced immense disruption and struggled to transform with technology. In fact, our research with IBM found that 88% of banking executives are troubled by their bank’s commitments to multi-year projects, interoperability across technology environments and theft of sensitive data. A lack of industry standards is also causing significant problems and hindering the organisation’s ability to bring new services, at the desired speed, to market.

While banks have made significant advancements in recent years, in order to truly embrace digital transformation throughout the industry,and meet the needs of today’s digital first-customer, banks must focus on adopting a coreless banking model.

In 2023, coreless banking approach will enable the delivery of banking services that aren’t longer dependent on legacy systems, and will support the digital-first customer, bringing real transformation to the industry.

Hans Tesselaar

Putting the Customer First

Without the comprehensive digital infrastructure necessary for today’s environment, financial services organisations are unable to bring services to market as quickly and efficiently as they would like – and need. The extensive use of legacy technology within banks meant that the speed at which these established institutions could bring new services to life was often too slow and outdated. This challenge is also complicated by a lack of industry standards, meaning banks continue to be restricted by having to choose partners based on their language and the way they would work alongside their existing ecosystem. This is instead of their functionality and the way they’re able to transform the bank.

To move forward into the ‘digital era’ and continue on the path to true digitisation, banks need to overcome these obstacles surrounding interoperability. Additionally, with today’s digital-first customer in mind, financial institutions need to take advantage of faster and more cost-effective development of services. Failing to provide these services may force customers to take their business elsewhere. One thing is certain, consumers will continue to prioritise organisations that can offer services aligned to both their lifestyle and needs.

Coreless Banking 

The concept of a ‘Coreless Banking’ platform is one that supports banks in modernising the core banking infrastructure.

This empowers banks to select the software vendors needed to obtain the best-of-breed for each application area without worrying about interoperability and being constrained to those service providers that operate within their language. By translating each proprietary message into one standard message model, communication between financial services is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data.

With the capacity to be reused and utilised from day one, and the ability to be used by other institutions, Coreless Banking provides these endless opportunities for financial services industries to connect, collaborate and upgrade.

Banking in 2023 and Beyond

Throughout 2023, banks must prioritise their digital transformation journey and adopt a Coreless Banking model. This approach will empower technology leaders to tackle problems head-on knowing they aren’t tied down by the usual restraints caused by outdated legacy systems.

After the last few years, it is impossible to predict what is around the corner, but banks will rest easier knowing their architecture can modernise and change as needed with a Coreless Banking model.

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