Accelerating Security Modernization

Accelerating Security Modernization

Why digital transformation is critical to today’s financial systems

In recent years, the term “digital transformation” has been one of the most frequently used buzzwords across industries. On its most basic level, it refers to the reimagining of how an organization leverages its technology systems to improve business processes.

Within the financial and banking sectors, digital transformation is also synonymous with the increasing shift to mobile and online banking and the more extensive adoption of cloud-based services to support customer engagement and internal processes.

The retail banking industry is undergoing tremendous change. What was once a straightforward business now faces implementation of new technology and innovation, increasing risks or threats, regulatory complexity, consolidation and evolving customer’ expectations. The market evolution is forcing banks to address the fundamental question of what a financial institution is — and what value it provides. As demand for more digital banking options increases, the definition of a bank has changed.

The days of handing out lollipops to children and sending envelopes filled with checks and cash in a cylindrical canister through a pneumatic tube system have ended. Still, the good news is that a modernized bank structure has far more benefits than before.

Changing Consumer Trends
Technology has been critical to the growth of the banking market over the last several years. Chase reported that as of Q3 2021, the financial services group had roughly 44 million mobile active and nearly 58 million digitally active customers.

Customer habits have changed dramatically over the last decade, with customers expecting instant access to various banking needs. Customers prioritize digital self-service via mobile and the internet far more than in-person branch or phone banking, and the COVID-19 pandemic only accelerated this trend.

Although digital channels are rising in importance, the ability to converge channels is equally important. Customers can engage through their preferred channel without the bank or agent losing the interaction context. This approach is a win-win for both parties as it results in better engagement and richer lines of communication.

Elevated Customer Experience
Competition continues to intensify. Banks and credit unions must ensure their customer experience is the top priority to stay ahead.

Organizations must employ the right talent, focus on the diversity of their team, and apply the right technological capabilities to examine customer data, improve products and services, and win the confidence of existing and prospective customers. Banks must collaborate openly across business units, including product development and design.

The bottom line is that in today’s market, financial services providers need to think about improving service, reducing latency and enhancing the customer experience.

The Cloud
The adoption of cloud technology in the financial sector is still early, but the good news is that migration is gaining momentum. Many banks have expressed that they expect to transition some workloads to the cloud in the coming years.

Cloud migration is uniquely complex for financial institutions, and there is a good reason for this hesitancy. Financial institutions' IT and hardware landscape is exceptionally varied, with old-fashioned, legacy applications running alongside more modern systems. That fact makes cloud migration a significant undertaking.

Where can the cloud be most valuable? Leaders can break down benefits through lower maintenance, operational costs, and scalable infrastructure. Not to mention the overarching business benefits, such as faster innovation, lowered costs, and the ability to scale on demand. Banks can place less emphasis on the perceived value of the cloud and use proven business cases as a guide to the pure cloud, making it easier to understand and support migration goals.

New and Evolving Risks
While the COVID-19 pandemic opened the door to new functionalities dedicated to a digital experience, it has also led to more opportunities for criminals to find new ways to breach bank infrastructure. The low-risk and high-reward nature of ATM "hook and chain" attacks are growing across the country. These crimes lead to significant loss.

Attack perpetrators cause damage to ATMs and surrounding structures that cost as much as $45,000, and if successful, the bad actors can get away with upwards of $150,000 in cash. Moreover, those numbers do not consider the value of the ATM itself.

To combat these issues, we must come back to technology. The organized nature of ATM attacks and modern security risks make a layered approach to security more critical. It is no longer viable to rely on traditional security methods on their own; criminals are more sophisticated, and banks' security must follow suit to protect the bottom line.

From the deployment of cloud and mobile applications to the use of artificial intelligence to automate processes, there has never been a more robust future for banks and their clients than now. This is not the end of the road: Capabilities will only improve over time as mobile banking and AI-based options becomes more prominent.

The fact is digital transformation is upon us whether we like it or not. Are you ready to adapt and make the changes necessary to support the new way of doing business?

This article originally appeared in the March / April 2023 issue of Security Today.

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