Banks need to employ the best security measures as they’re dealing with people’s money. However, big and strong vaults won’t do anything against online fraud. That’s why it’s the need of the hour to keep up with the changing environment. Over the last decade, data has become as important as money and it may be possible that open banking ends up changing the industry for good in a couple of years. Technologies don’t only facilitate endless opportunities, they also give birth to endless potential threats.
Unfortunately, most of the current security models are reaction-based. To put it in simple terms, banks and financial institutions keep developing security measures based on the types of fraud that have already happened in the past somewhere in the world. Fraudsters put in all their time and effort in deriving brand new methods of tricking people. As banks focus more and more on external threats, they are open to internal threats that can hurt the privacy of millions of people at the same time. That’s why financial institutions require constant monitoring and testing.
There are countless challenges that businesses operating under the financial industry are facing. Challenges such as:
- Old legacy systems that are hard to update
- Constant changes in KYC, AML, and other regulations
- Huge costs that come with trying to maintain security
With this growing need for securing customer privacy and data, financial institutions may need to take help of solutions based on FinTechs that understand the customer need and provide seamless and efficient solutions.
It’s tough for financial institutions to understand how to safeguard themselves against financial fraud and prepare better for future threats.
How FinTechs Can Help in Maximizing Security
- Rapid Detection of Anomalies
An efficient security program should be capable of understanding risks and potential threats. This is indicated by continuous monitoring and planning. Security measures should be monitored for their effectiveness. Solutions should be able to detect major security failures in their initial stages.
Banks and financial institutions can achieve this by applying artificial intelligence and machine learning solutions to their programs. AI and machine learning solutions can learn from previous data and learn customer spending habits, transaction history, and can detect any anomaly in real-time. This provides banks and financial institutions with enough time to verify the anomaly and report to regulatory bodies in case of fraud.
- Better Data Handling
In the last 5 years, the threat of data breaches has turned into a major problem. To successfully build customer-business relationships and minimizing the risk of a data breach, banks and financial institutions need to employ strong methods of securing data. Data protection and security relies on two fundamental pillars:
- Ensuring that data stored maintains its integrity
- Ensuring that only authorized members have access to confidential data
By understanding these two requirements, and the sensitivity of data involved, businesses can invest in solutions that can help them manage data more efficiently than a paper trail and a solution that’s not susceptible to data breaches.
One innovative solution to this offered by numerous FinTechs across the world is blockchain technology. At its core, blockchain technology is like an online ledger. However it’s not centralized on any one device, a blockchain is a decentralized ledger and it can help in protecting the integrity of data while making sure that data isn’t accessed by a third party. Any data or information stored on the blockchain is immutable, thus it can’t be changed or updated after it’s stored. This can also help prevent future risks of fraud.
- Third-Party Risk Management & Authorized Access
The vetting process is also essential to the security of your institution’s data. Before investing in any kind of third-party solution or technology, businesses need to ensure that the partner they’re choosing is trustworthy enough to provide them with confidential customer data. You’ll want to look for partners that comply with industry rules and regulations.
One way that banks can ensure security is by never selling your data. Consumer privacy concerns are growing at an alarming pace so businesses need to ensure security for their data.
- Sustainable Growth
Growing a business can be exciting but if carefully measured aren’t taken, it can lead to catastrophic security loopholes that fraudsters will exploit. That’s why businesses need to leave manual documentation, verification, and another manual process that creates unnecessary friction and doesn’t enhance security.
FinTechs all over the globe can help in developing solutions that are focused on one particular aspect of growth. Substituting manual document verification, ID verification, customer onboarding, account opening, loan approval for automated methods can help organizations scale while reducing the risk of fraud.
- Complying With Regulations
No business in the financial industry can survive without complying with regulations. KYC and AML regulations are set in place to ensure that no fraudsters gain access to the internal systems. New regulations, combined with a growing need for digital transformation are making it harder for businesses to comply with regulations. Most organizations lose sight of what’s important and get lots with the burden of maintaining, storing, and manipulating financial data.DIRO online KYC API can help banks and organizations to successfully comply with regulations. With instant document verification, it is easy to onboard customers, deter fraud and comply with regulations.