The financial services sector was a slow starter when it came to digital transformation. As an industry, it has typically adopted new technologies at a more gradual pace than other key consumer sectors such as retail and entertainment.
This shouldn’t come as a surprise to anyone, as security has always been a major consideration for banking and finance. There was something reassuring about seeing your money protected by thick walls and armed guards.
Of course, as money transformed from a physical to a digital asset, the concept of security changed. The financial services sector is a diverse one, with a broad risk profile. Retail banks, insurance companies, accountancy firms, stockbrokers and investment fund managers have all become dependent upon high-speed networks to move money and financial information.
The high degree of risk associated with financial data, naturally, makes financial services companies cautious when it comes to embracing digital transformation. However, the lack of initial momentum within the industry has been replaced by an accelerated use of what has become known as FinTech over the past five years.
When it comes to trading stocks and shares, time literally is money. Resilience is essential, with trading apps requiring 100% availability. Micro-seconds may make a difference in terms of trading profits and the industry has been an enthusiastic adopter of big data analytics; so high-speed, low-latency solutions are a must.
Insurance and assurance companies hold sensitive financial and personal information about policy holders. Information that is frequently shared with third-party data processors.
The world of consumer finance has been revolutionised in recent years with the advent of mobile banking, contactless payments and the consumerisation of banking applications. Customers are being actively encouraged to change banks to take advantage of better interest rates and millennial users are moving away from bricks and mortar banks in favour of on-line alternatives.
Trust still plays a major role in financial decision making. So, any “engaging” digital experience must be balanced with security and integrity of data. In an increasingly competitive industry, one with a diverse range of digital innovators gaining market share, trust and reliability can still be a differentiator.
The Cost of a Data Loss or Theft
The nature of the data exchanged across financial services networks makes it appealing to cyber-criminals. In its 2017 Breach Level Index Report Gemalto revealed that identity theft, account access and financial access are amongst the key motivators for data theft. The same report reveals that the financial services sector was second only to the healthcare industry in terms of the number of data breach incidents, with 219 breaches reported in 2017.
The damage inflicted by a data breach goes beyond the simple disruption of day-to-day business processes. The loss or corruption of data may result in a bad user experience on any digital platform. Beyond that, there are implications for future revenue-making opportunities if the data breach results in a loss of trust, or reputation.
Under new data protection regulations, financial penalties await any organisation whose negligence leads to a data breach. Worse still, individual executives could find themselves the subject of civil litigation, or class-action suits in the event that the loss of data results in quantifiable damage to a group of individuals.
Adding Value, Not Complexity
All industries have become more customer-centric in their use of technology. As a result, digital transformation is being driven by user experience or preference, as much as operational efficiency. Research reveals that a significant proportion of customers (49%) would be willing to move banks for a better mobile experience and online bill payers are twice as profitable as the average customer.
According to the 2017 EY FinTech Adoption Index, an average 33% of users have embraced digital finance apps (across 20 major world markets). The same report shows that 50% of consumers are now using digital money transfer and payment services. So, the challenge for financial service organisations is to maintain a high level of security whilst delivering the flexibility and availability of service demanded by customers.
Security, and data protection in particular, should not be seen as a tick-box compliance issue. A robust, reliable data security policy can be a point of differentiation and lead to new revenue opportunities. Of course, the opposite is also true. A recent Forrester Consulting Report, suggests that even a hint of unsafe data practices can impact on revenue by up to 25%.
Quantum-Safe Digital Trust Expertise and Services
ID Quantique offers a broad range of services and technologies to help governments and global organisations build digital trust and improve their cyber security posture in a post-quantum era.
We help you add value and drive innovation in your banking processes, while ensuring the protection of your data.
IDQ Professional Services brings our expertise together with your unique situation in order to design and deliver practical solutions that improve data security. We achieve this through a range of capabilities including:
- Design and implementation of secure architecture and crypto currencies
- Secure token generation and storage
- Quantum-Safe network encryption (including quantum crypto)
- Secure access to remote desktop applications
- Applications & customisation of quantum technologies
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For more on IDQ’s financial sector experience, visit our banking and financial institutions solutions page.