The growth of the digital economy has completely changed consumer habits. Consumers have come to expect a hyper-personalized experience that is fast, convenient and secure. It is no different in banking, where digital-only banks are growing rapidly. Digital-only banks and Fintechs are expected to grow “at a compound annual rate of about 23.41%” from 2021-2026. According to Fortunly.com, “The total transaction value of digital payments grew from $4.1 trillion in 2019 to $5.2 trillion in 2020.”
To compete, financial institutions are investing heavily in digital transformation. Banks have adopted technologies to enable:
- Secure, remote, multi-device banking transactions
- Secure digital payments leveraging biometrics, tokens, and context-based security
- The full digitization of contracts, subscriptions and consumption of services
This drive towards digital transformation allowed financial services to be one of the sectors that better weathered the Covid 19 pandemic. A recent survey by JD Powers showed that US banks successfully navigated an historic transformation in which a record 41% of customers are now digital-only, while increasing overall customer satisfaction.
Banks profitability under pressure
However, bank profitability continues to be under pressure. According to CNBC: In its latest “Global Financial Stability Report,” the IMF found banks across nine advanced economies will struggle to generate profits over the next five years as the coronavirus pandemic causes a sustained period of low interest rates.
In addition to the costs of digital transformation, the significant uptick in consumers’ use of mobile apps and websites for their banking transactions in 2020 creates a prime target for hackers. Because of this, banks and credit unions are pouring resources into digital security to protect consumers’ information and proprietary information.
According to a survey by Deloitte, 71% of bank leaders expect their organizations to increase cybersecurity spending, with cloud computing/storage and data privacy rounding out the top three areas of needed improvement to combat the risk of data breaches.
Financial institutions find themselves in a difficult situation. The digital customer experience, openness of modern banking, and flexibility of hybrid IT are essential to their business success. But they create data protection vulnerabilities which can no longer be ignored, because privacy regulations, such as GDPR, and financial data security regulations, such as PCI DSS, not only obligate financial institutions to protect sensitive personal and financial data, but they also levy substantial fines for not doing so.
How Thales can help
Thales works with more than 3,000 financial institutions around the world, and the main challenges our banking and financial services clients share with us are:
- The cost and complexity of data protection across hybrid IT
- The increased risk of non-compliance with government regulations and industry mandates
- Concerns that cybersecurity implementation and operations will slow digital transformation
Our new ebook; “Win the digital banking race by accelerating digital transformation while reducing costs and risks”, reviews all three of the challenges above and provides proven strategies for:
- Strengthening security while controlling costs
- Reducing risk and complexity
- Accelerating digital transformation
Discover how to accelerate digital transformation while reducing costs and risk. If you have any questions, get in contact with a Data Protection Specialist.