The rise of Fintech is an opportunity for traditional financial institutions to improve security and services
Banks need to embrace Fintech companies to overcome the security challenges that exist due to their legacy IT systems and infrastructure. This is according to Phil Bindley, CTO at The Bunker, who suggests that doing so will enable banks to provide better and safer services to their customers and tackle the growing threat of cybercrime.
Andrew Tyrie, chairman of the Treasury Committee in the UK House of Commons, recently expressed concerns surrounding the security and resilience of bank IT systems. In a letter to Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA) and Sam Woods, Deputy Governor at the Bank of England, he identified two weaknesses in the UK’s banking system that show no sign of improving. These involve a frequent lack of continuity and interruptions of bank payments services, as well as the probability that cybercriminals are using sophisticated tactics to steal money from banks and their customers.
As a result, banks and other financial institutions need to start implementing measures to alleviate the existing weaknesses. For Phil Bindley, this involves increasing the collaboration and development of Fintech solutions so banks can effectively mitigate security issues and deliver vastly improved services for their customers.
He explains: “The issue of bank IT resilience and security is more prevalent than ever. Hackers have become increasingly advanced in their tactics and many banks are encumbered by ageing legacy technology, meaning 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. 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.
“In light of this, banks should embrace Fintechs and leverage the technology they are bringing to the sector to aid their own digital transformation initiatives. Fintechs are armed with ambition and innovation, which enables them to disrupt traditional ways of working in the finance sector. These companies are already starting to capture a significant market share by making innovative use of software and offering easy-to-use and compelling products. Banks and other financial institutions should grab the opportunity to work with Fintechs (and not against them) in order to combat the issues of security, user experience and business continuity.
“The challenge for Fintechs is demonstrating that they are a sound investment as implementing technological solutions within the financial sector certainly comes with complexities. 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. Financial institutions should do their 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,” concludes Bindley.