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Modern Banking: Handle with Care

It’s a tough time for financial institutions. These organizations are facing mounting pressures from clients, employees, and competitors. Customers want to do business with firms that prioritize client service. Employees want to work for firms that invest in technology and innovation. And competitors continuously push one another to see who can introduce new products and services faster.

This new reality has caused many financial institutions and banks to embrace the new age of tech. Leadership wants employees to maintain productivity at all costs while also keeping the needs of customers top of mind. Modern finance and banking require a modern mindset; firms have started to understand the benefits of transformation, and many have already started their new and improved digital journey. But going all in on digital does not come without risks related to security and compliance.

In this quest for gaining a competitive edge, it’s important for finance leaders and IT professionals to understand that when it comes to modern banking, please handle it with care.

Bringing New Meaning to Work-from-Anywhere

Enterprise collaboration applications – think Teams, WhatsApp, Zoom, and even social media platforms like LinkedIn – are critical for business productivity. In fact, 45% of business communication happens in digital channels outside of email. And the COVID-19 pandemic forced us to adopt new, more flexible ways of work. As such, enterprise communication and collaboration tools have spiked significantly. Consider the numbers:

  • The entire fiscal year 2020 witnessed Slack hit 12 million daily active users, with resulting revenue spike to $630M
  • 115 million daily active users on Microsoft Teams reflected a 50% increase in less than a year
  • By early 2021, Zoom users reached 350M daily meeting participants (for comparison, daily participants averaged 10M in 2019)

The increasing need for these tools has not gone unnoticed – especially in the eyes of cybercriminals. Targeted attacks leveraging business communication tools as an entry point to the enterprise are growing in popularity – the more we’ve come to rely on forms outside of just email to get work done, the better for those with nefarious intent. Yet, it’s unfair to put the blame solely on these apps for introducing risk; if we are being honest, humans using and even managing these collaboration apps are naturally prone to error. For example, 85% of breaches in the last year involved an element to exploit a human vulnerability.

Financial institutions have embraced the adoption of these applications as a way to adapt to this new post-COVID normal, modernize operations and meet the increasing demands of clients.

Giving the People What They Want

According to industry research, since 2022, US bank technology spending is expected to grow faster year over year than ever before. This might come as a surprise to many, given shaky markets, continued political unrest, and a looming recession. And yet, with spending calculated to grow to almost $112 billion by 2026, it’s clear that financial institutions are doubling down on whatever it takes to gain a competitive edge. These firms need new and innovative ways to attract and retain clients. Take JP Morgan for example; this banking giant is committing $12 billion to technology alone. This requires leadership to make decisions on when/how to digitize operations for the benefit of making the lives/experiences of their customers easier.

Institutions that have expanded their digital footprint are giving customers what they want by using modern technology to drive new, innovative outcomes such as:

  • Hyper-personalized banking
    • Data-driven insights from customer calls and mobile chat logs give relationship managers real-time information to support customer intimacy and drive more qualified referrals.
  • Natural relationship-building opportunities through social media
    • Social media is being used to drive better, more meaningful communication with customers.
  • Simplified loan purchasing with embedded financing solutions.
    • The adoption of APIs are helping banks to move away from legacy systems and applications for faster, real-time middle office processing capabilities.
  • AI/ML-powered intelligence for new applications and workflows
    • AI-based or machine learning-powered solutions are giving internal processes and workflows the boost they need to take legacy processes to the next level.

Gone are the days when legacy approaches to banking and finance were enough – the competition is fierce and to stay relevant, financial and banking institutions need to keep up. Disruptive technologies, although riddled with risk, have the power to reinvent customer and user experience. We can expect many institutions will find themselves at a crossroads – digitize or disappear.

Bankers Beware

Digital transformation is a step forward in the right direction – but bankers, beware. Security risks and compliance issues aren’t too far off. And with legitimate reason. Cybercriminals are increasingly attracted to financial firms and institutions for two main reasons: 1) the massive amounts of money at stake and 2) the potential economic disruption in the event of a financial breach.

Ransomware, social engineering, remote work-related risks, and the rise of cloud-based cyberattacks will continue in cadence and severity. In fact, according to industry data, financial firms and institutions fall victim to cyberattacks 300 times more than other industries. These statistics justify the need for digital transformation in banking practices and standards. And when it comes to areas in need of immediate improvement, the following should catch the attention of financial leaders and IT professionals working in financial institutions.

To Tweet or Not to Tweet?

A way to build natural relationships with clients, social media platforms present security and compliance challenges. Securing these platforms, whether its Facebook, Twitter, or LinkedIn, should be a priority. The solution isn’t to ban these channels, but instead, IT and compliance professionals should enforce policies that require all forms of communication to go through a centralized monitoring system that can automatically detect violations of corporate policy. Just remember that it’s not enough to simply detect – mitigation is also critical and must be considered as the final step.

Out with the Old…

It’s time for banks to admit that many are simply technologically behind. Legacy hardware, software, and processes have got to go. What might have “worked” ten years ago in the back office is now considered obsolete in the face of today’s connected digital environment. A shift is required to transition from dated and disparate legacy banking systems to a more modern, digitally-connected environment. This evolution will require time, resources, capital, and plenty of patience. New applications, customer processes, integrations with external systems, security, and maintenance will enable banks to evolve away from old-school areas of thought.

Scalable Security Solutions

Yes, social communication channels are risky. But let’s not overlook the importance of securing actual IT infrastructure and all that data it contains. Solving security issues at scale will remain to be one of the most problematic areas of digital transformation for banks and financial institutions. Simple, network perimeter-based security is no match for today’s cybercriminal. In fact, the perimeter is really wherever data exists – and that spans from networked computers, connected devices, social channels, the software supply chain and of course, the cloud.

Breaking Down Barriers

Silos continue to be problematic for banks. Different departments leveraging disparate systems eliminate transparency, stunt growth, limits scalability, and decrease customer satisfaction. Digital transformation can help course-correct this antiquated approach by centralizing data and connecting multiple systems and departments. Implementing integrated solutions is one way of embracing digitization without compromising security and compliance.

Overall, embracing digital transformation should be viewed as a necessity. But financial firms need to understand that digitization can only work if it’s approached holistically. The management and mitigation of security and compliance-related risks demonstrate a firm is putting the needs and wants of its employees and customers first. Yes, the journey is challenging and will require significant time and investment. But, where other markets see obstacles, banks should see opportunities to provide better services and establish a great relationship with their customers. At the end of the day, that’s what matters most – the customers’ satisfaction and trust.

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