The IT resilience and security of banks and financial services is a more prevalent issue than ever suggests Phil Bindley, CTO of UK data storage and infrastructure firm The Bunker, and fintech startups could offer the best route to improvement.
With legacy systems and infrastructure still in routine use there’s concern that banks need to rapidly overhaul their services in order to properly serve their customers.
Bindley claims many banks, “are not up to the challenge of effectively mitigating security risks. Financial institutions need to match end user experience with resilient security, but it is becoming increasingly difficult for them to do so due to the rapid pace of the digital economy.”
Adding: “although these systems cannot be transformed overnight, the cost of not doing so is growing day on day and could result in exposing the public to unnecessary risks.”
The issue recently saw government involvement with the chairman of the Treasury Committee in the UK House of Commons Andrew Tyrie writing to FCA CEO Andrew Bailey and Deputy governor of the Bank of England Sam Woods over concern surrounding weaknesses in the UK’s banking system.
Two areas he said showed no sign of improving are a lack of continuity and interruptions of bank payments services, as well as the probability that cybercriminals could use sophisticated tactics to steal money from banks or their customers.
Bindley says partnerships fintech startups offer the established players the best opportunity to leverage technology and drive their own digital transformation efforts.
He adds FinTech startups’ “ambition and innovation” to disrupt traditional finance means they are, “already starting to capture a significant market share by making innovative use of software and offering easy-to-use and compelling products.”
Bindley continues, “Banks and other financial institutions should grab the opportunity to work with fintech startups (and not against them) in order to combat the issues of security, user experience and business continuity.”
Striking partnerships with or making investments in fintech startups rather than competing against them is an established part of the banking industry’s digital transformation narrative.
However, with so much at stake it can be difficult for young, VC-backed companies without any established brand name or reputation to prove they can securely handle data and operate in the space.
“The challenge for fintechs is demonstrating that they are a sound investment as implementing technological solutions within the financial sector certainly comes with complexities,” said Nindley.
“The evolving regulatory landscape and the demand for robust risk management mean that fintechs need to be able to demonstrate the security requirements and compliance mandates of their customers.”
This places as emphasis on the banks to carry out comprehensive due diligence, “to ensure the fintechs they are working with are compliant with the regulatory environment in all aspects of their business.
“Once banks have the confidence that the environment, systems and services are completely secure and fully compliant the end result will be better and safer services delivered to customers.”
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