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How Banks Can Upgrade Security Without Affecting Client Service

New protective measures work behind the scenes, with little impact on the customer experience.

Every bank and financial institution is having a serious conversation about security. In 2021, data breaches grew 79%, impacting 300 million people in the US. Simultaneously, more people are banking online than ever before. Today, 67% of banking customers access and manage their accounts digitally, either through a mobile app or a computer. Banks have the salient task of renewing customer confidence and creating secure digital platforms — but it can't come at the cost of customer experience. Through a robust technology platform, best practices, and financial technology (fintech) partnerships, banks can amplify the safety of online banking without derailing the industry's explosive growth.

Debunking Myths About Digital Banking

There is an ugly rumor going around that digital banking is less secure than traditional brick-and-mortar banking — but nothing could be further from the truth. Reputable online banking platforms are backed by the same Federal Deposit Insurance Corporation (FDIC) coverage as any other banking institution, meaning individual accounts are protected against fraud for up to $250,000.

Moreover, digital banks are built with sophisticated technology, and they already have the infrastructure in place to implement layered security and data protection. This makes them inherently less vulnerable to cybercrime than traditional banks. In digital banking, two-step authentication and data encryption are already a standard, and online banks are adopting advanced technologies like smart fraud monitoring systems that use machine learning and advanced data gathering to identify fraudulent activity. Financial institutions across the board are making the biggest investment in AI technology as a key to fraud prevention.

Many of these protective measures are happening behind the scenes, and operate with little impact on the customer experience. They work in real time to verify customer identity, protect information, minimize human error, and block fraudulent transactions.

Creating a Frictionless Experience

Security must be integrated into the customer journey, from the moment a customer opens a bank account through routine banking activity. Banks collect and store personal information as well as handle transactions with direct parties and counterparties, making it critical to have fraud prevention measures at each touchpoint through the customer experience. Standard best practices start with vendor management, risk assessment, and ongoing compliance monitoring.

Proper vendor management creates a protected platform and mitigates the risk of a cyber breach by securing front-end systems and conducting thorough due diligence of each partner. This process is a natural foray into strong risk assessment practices, which involve a deep review of partners, existing compliance disclosures, and financial risk. Compliance monitoring is the final piece of the puzzle. A survey from Ncontracts found that nearly 90% of financial institutions are concerned about regulatory compliance, but banks should think of regulators as partners in establishing a solid security program. Quality compliance ensures banks better understand and anticipate emerging risks before they have an opportunity to impact security or the customer experience.

The Importance of Fintech Partnerships

Fintech partnerships are an optimal way to access the technology infrastructure required to build a secure network. Last year, 65% of banks partnered with a fintech company; 35% of banks invested in a fintech; and 89% of banks said that fintech relationships were important to the institution.

This symbiotic relationship is becoming a mainstay in the industry because banks can leverage existing technology to develop strong data modeling and data governance practices rather than building the technology from scratch — and they work. Among banks that partnered with a fintech to improve fraud losses, 83% said the partnership helped the bank meet that objective. Fintechs also benefit by tapping into the bank's data to create a robust tech stack between the two enterprises.

While fintech partnerships have a lot of benefits, they are not a solution for every organization, and alignment of objectives, culture, and business strategy is critical to making the relationship successful. Vetting prospective fintech partners should explore the mechanics of core and digital systems integration, confirm relevant technology experience in tools like application programming interface (API), and identify key points of contact to ensure there is a dedicated staff to oversee the partnership.

By leveraging technology, pursing fintech partnerships, and establishing best practices, banks can protect their digital platform from cybercrime and data breaches without diminishing quality service and convenience. Security will become a seamless part of the customer experience. The only hint it's happening will be missing fraud alerts in your inbox.