A 21st century discourse on banking which doesn’t spread to cyber security is not complete. Cyber-security has become the concern of all and sundry in the financial institution due to many reasons. The world has moved from analogue to digital, so also is every activity that aligns with it. While financial institutions have shifted attention to internet banking to make their services readily accessible to their customers, so also has criminals intensified efforts in depriving people of their hard-earned money. This means that any firm that rests on its oars will meet itself on the ugly side of business. From the foregoing, you will also discover that cyber-security is a matter of importance to banks.
Before going deeper on the relationship between banks and cyber-security, let me state five major reasons why the concept is so important to banking.
Everyone seems to be going cashless, using digital money, i.e. Debit Cards and credit cards. In this context, it becomes very important to ensure that all measures of cyber-security are in place, to protect your data and your privacy.
Data breaches can make it difficult to trust financial institutions. For banks, that’s a serious problem. A weak cyber-security system can amount to data breaches that could easily cause their customer base to take its money elsewhere.
You often tend to lose time and money when a bank’s data is breached. Recovering from the same can be time-consuming and stressful. It would involve cancelling cards, checking statements, and keeping your eyes open for complications.
Your private data in the wrong hands can do great harm. Even if the cards are cancelled, and fraud is immediately taken care of, your data is sensitive and could reveal a lot of information that could be used against you.
Banks need to be on their guard more than most businesses. That’s the cost of holding onto the kind of valuable personal data that banks do. Your data with the bank can be breached if not protected from cybercrime threats (HDFC Bank, 2019).
Now that you know the importance of cyber-security to the banking sector, let’s consider some few common trends that of the concept that will most probably shape the future of global banking.
The ‘internet of thieves’ is going global.According to the Q1 2018 Cybercrime Report from ThreatMetrix, there were 210 million cyber-attacks worldwide in just the first three months of the year—a 62 percent increase over 2017 (Teruel, 2018). Isn’t this alarming? Any major investor will catch cold on seeing this figure; this means there is virtually nothing that is protected in the industry from the reach of criminals.
A key driver behind these numbers: the dissemination of and easy access to the pilfered identity credentials around the globe. There’s even a tempo to it—sharp spikes in attacks after major data breaches, followed by sustained assaults that wind their way around the planet. Exacerbating the problem is the growing pool of consumers and businesses seeking access to goods and services from around the world. And thanks to identity- and location-spoofing cyber-thieves are eagerly waiting rendering cross-border transactions that are now 5.4 times more likely to be fraudulent than those made domestically.
Look for attack origins—and their targets—to shift with each new quarter. For example, the EMEA region, in Q1 had elevated attack rates and is the source of 65 percent of all login attacks targeting banks and fintechs worldwide. In India, financial services transactions are four times more likely to be attacked than transactions in other nations. Other hotspots include Brazil, Vietnam and Singapore (Teruel, 2018).
New models emerge with novel mayhems: According to Information Age, there are already 3.8 billion Internet users worldwide and there was a forecast that a billion more could join at the end of 2018. In fact, ThreatMetrix data shows that 55 percent of global financial services transactions now originate from a mobile device, highlighting the fact that mobile is increasingly driving engagement throughout the customer journey.
There’s a flipside to this, of course. In emerging markets with large numbers of unbanked and underbanked customers, people who’ve never even owned a bank account are rapidly finding themselves managing their entire financial lives on mobile devices. Many may lack familiarity with fraud risks and easily fall prey to social engineering attacks. Even in advanced economies, there are growing pains. As consumers embrace peer-to-pear mobile payments platforms, for instance, cybercrime is “flourishing.” According to the New York Times, one bank offering P2P payments recently experienced fraud rates of up to 90 percent (Teruel, 2018).
Need for smarter fraud-fighting solutions: The cost of mobile and online fraud on banks and fintechs is adding up fast. According to the 2017 True Cost of Fraud Study from LexisNexis® Risk Solutions, financial services companies earning at least half of their revenues through digital channels incur up to $3.04 in costs for every dollar lost to cyber-fraud. Think chargebacks, fees and labor. For online lenders, it can be even worse. But it’s not all doom and gloom. According to the same study, global banks that employ a multi-layered approach to cyber-security that includes modern, digital identity-based authentication technologies can experience total fraud costs that are less than 50 percent of the sector average (Teruel, 2018).
Just as the cybercriminals are always on the look-out for new ways to attack, financial institutions and fintech are increasingly embracing technology innovations and new data sources to ensure they stay one step ahead. Top innovative approaches that financial institutions are embracing all over the world include:
- Insights from crowd-sourced digital identity intelligence, which has been shown to be 2.5 times as effective than device-centric data in financial services
- Advanced behavioral analytics that goes beyond assessing typical user behavior patterns to detect anomalies for a specific individual based on their historical norms
- Using clear-box machine learning to significantly improve fraud models – to detect more fraud, with simpler rule sets and less intervention
- Integrating risk-based authentication with low-friction strong customer authentication techniques, for additional assurance without negatively impacting the user experience (Teruel, 2018).
References
Alvarez, C (2018). How Banks Work To Enhance Cyber-Security. Retrieved from https://www.bbva.com/en/banks-work-enhance-cybersecurity/
HDFC Bank (2019). 5 Reasons Why Cyber Security is Important in Banking. Retrieved from https://www.hdfcbank.com/personal/learning-center/secure/5-reasons-why-cyber-security-is-important-in-banking
Teruel, F (2018). Three Top Cybersecurity Trends Shaping the Future of Global Banking. Retrieved from https://www.threatmetrix.com/digital-identity-blog/cybersecurity/three-top-cybersecurity-trends-shaping-future-global-banking/