With a new year underway, a key question echoes across the financial industry: Is technology making banking safer or more dangerous?
Depending on who’s wielding the power, technology is a two-edged sword: On the one hand, technological innovations in banking enable financial services management to fortify security and compliance programs faster, more accurately, and efficiently, at a lower cost than ever imagined. On the other hand, technology in the wrong hands can drive obstructions through bank branch and head office operations, endangering accounts and exposing customers’ confidentiality.
In short, the banking arena today is a raging Star Wars-type battlezone where the custodians of billions of dollars in assets take on cybercriminals ensconced in unregulated jurisdictions around the world. The latter’s goals of damage and destruction clash with the defense strategies of aiming to offer customers complete peace of mind.
How, then, will bank technology trends impact financial services management moving forward?
Technological innovations in banking
While most of us prefer to speak to another human being about sensitive financial matters, banking as an industry has always aligned with technology. Now, with the meteoric rise of data enabling so many options accelerated by machine learning and generative AI, personal banking has taken a backseat to the faster, more efficient, and less emotional digital interfaces.
In my research, I explored over a hundred shifts that technological triggers kick-started but settled on three that have created seismic strategic movements in the institutions themselves.
Sources for these insights include mainstream conferences such as Money 20/20, AFP, ABA, Natcha, BAI, and American Banker; talking to bankers; attending focused webinars; and unpacking virtually every financial services resource connecting to AI.
The two yardsticks that separate the blockbuster catalysts from the “iffy” boil down to customer experience (CX) and employee experience (EX) interacting with the techno-banking mechanisms and functions. The telltale signals I looked for were an escalation of customer/employee brand loyalty (i.e., buyer/worker happiness) and the bank’s resultant bottom-line improvement.
Be aware I may raise technology trends that some may say are “old hat.” However, with AI streaming through the system, the tried and trusted methods are often unrecognizable as they receive a tech-related jolt. Thus, fresh investment aimed at springboarding the old to “much better” plays a primary role in banking businesses today.
Cybersecurity in banks: Protecting customers’ assets and IDs
Data protection in banks goes deep and wide, addressing nightmare stories fueled by rife cyberspace malpractices coming at us via scams, viruses, ransomware, and cloud security threats. The hacker threat is all around us, and nobody is immune. With so many scares in the news, average consumers dread the seemingly inevitable moment of becoming the victim of a cybercrime — anything from a fraud alert on a credit card or opening a bank statement to discover an unexpectedly empty account.
New viral intrusions using ML and AI spotlight the fact that while banks spend so much time and energy applying digital advancements to create technological protection, criminals are utilizing the same technologies for darker purposes, like duplicating voice recognition as passwords and unraveling traditional passwords.
And that’s only half the story. The following are stirring the pot to a boiling froth:
- Intentional and unintentional insider threats/indiscretions
- Legacy system attacks
- Internet of Things (IoT) compromises
- Cryptojacking
- Supply chain attacks
1. IT Abuse Testing – a modern counter-attack
Nothing can replace the value of a painstaking vulnerability assessment and penetration testing using AI-driven software to wade through the digital networks around account and credit card transactions. However, it’s not enough to close all the gaps. As a result, savvy communal banks have gone so far as to hire a cutting-edge third-party cybersecurity firm to abuse-test the entity’s IT systems, looking for cracks and breakdowns in risk levels.
The process – ethical hacking – deploys every known criminal virtual intrusion technology to penetrate networks, ports, databases, emails, and more in real-time. Everything in this phase revolves around simulating cyber-criminal activities with methodologies designed to trump Avant Garde digital protection systems customized to banking needs.
Notably, it takes extraordinary remediation measures (as described above) where modern technology jumps to the front and center of banking operations – striving to stay steps ahead of crooked intentions. Dynamically changing things within the protection framework, not leaving anything in the system too long, underlies how the bank’s IT teams function today. They harness the following functions to make things challenging for cybercriminals by creating a moving target – the opposite of a complacent and stagnant fortification:
- Installation of new and varying firewalls
- Anti-keylogging encryption software
- Endpoint ML-driven protection
- Multi-factor authentication
- Password and SSH key management converge on rendering criminal access to the system extremely challenging
2. Hybrid Cloud Technologies
Cybersecurity frameworks and policies are technology-centric through and through. IT input is crucial to developing policies, procedures, and best practices to meet contemporary demands and is not worth the files they occupy unless they embrace:
- Practical, adequate data backup, recovery, and insurance
- Software update frequency, vulnerability assessment, and penetration testing intervals (as described above)
- The latest digital threat vectors and software/app protections, defining access limitations to sensitive data (i.e., eyes only protocols) and all that goes with it (like password management directives)
- Ways to introduce new and eliminate technologies from the system
- Getting the team and relevant vendors on board with the policy from corner to corner
According to IBM, cloud computing has quickly become the go-to technology for fintechs and most of the financial services industry, including community, credit unions, savings and loan associations, and investment/commercial entities. These institutions have been progressively deploying a combination of traditional IT, public, and private cloud options.
As we move into 2024, enterprise-wide hybrid cloud strategy has gained traction, thus allowing banks to move seamlessly between different cloud formats that significantly favor data security, governance, and compliance while reducing costs, accelerating operational efficiency, and welcoming innovation.
IBM further reported that tightening security with cloud flexibility resulted in 75% of bankers confirming it expanded its product and services menu to a range of new customers with the confidence of improved protections. Consequently, it opened new revenue streams and boosted ROI.
3. Robotic Process Automation (RPA)
Aside from minimizing human error on a massive scale, RPA is the optimal solution for logging automated processes in detail, meeting stringent compliance parameters, and supporting mandatory auditing services with accurate and timely reports. Moreover, community banks and credit unions in particular must develop substantial lists of pre-programmed rules to address structured and unstructured data, inevitably circling back to fortifying client accounts and ID security.
RPA slots into the role described above perfectly with ML and AI-assisted automation that quickly identifies errors, learns from previous actions and data patterns, and “thinks for itself” to make astute decisions while still running. Thus, it has proven to reduce administrative and regulatory process costs by more than 50%, with significant quality and speed advancement.
Finally, as robotics becomes more and more intuitive, it’s even easier to re-program and adjust processes to align with updated regulations.
Conclusion
The technological impact on banking trying to establish steadfast cybersecurity has been profound and a lifestyle changer for users of financial services. It comes at us through online services, mobile devices, independent money-centric apps, and SaaS innovations.
The one clear conclusion is that change in the banking framework gallops at a furious pace, latching on to digital innovation wherever it rears its head – sometimes banker motivated and other times thrust on the bank by the customer. As a result, only those institutions ready to adjust to the protection challenges and opportunities coming at them from various angles will stand out to customers in the marketplace.
Whether you work in the financial services industry or not, technology likely plays a role in your work. Are your technology choices working for your customers? When you’re ready to find out, Sogolytics can help you get the feedback you need to elevate customer experience! Connect with our team today to learn more.
