Data privacy could be the next competitive battlefield for banks

The history of money is inextricably linked to the history of the banking sector. Banks and banking operations have existed for some time. Even if the method we bank has evolved, the fundamental concepts remain the same. Some banks we know today have existed for longer than others. Perhaps this is why consumers believe their banks will keep their money safe.

Financial rules are continually evolving to meet the demands of modern banking systems. While banks have traditionally kept enormous volumes of personal and financial information on their clients, that data is now freely available to anybody with authorization. Over the last several decades, the advancement of financial technology has resulted in numerous breakthroughs and developments, such as wire transfers, credit/debit cards, internet banking, and mobile payments. Banks have had to modify their systems to meet these developments and alter their operations to assure the continuous security of new technologies. 

Protecting sensitive information and establishing security measures to avoid cybercriminal assaults, such as phishing and malware, are also critical nowadays. While Banks have a legal obligation to safeguard client data and protect it from hackers or illegal access, they need to move away from the idea that privacy is purely a defensive play – all about compliance and data breaches. Of doubt, these two issues are critical, but this goes beyond privacy and building a "data fortress." There are numerous reasons for this.

First, privacy remains a top worry for most customers, and it appears to have gotten stronger since the outbreak. People are less eager to reveal more personal information unless they are given a clear rationale why the information is required, how it will be used, and what they stand to gain. Addressing these issues will be difficult since privacy encompasses far more than Social Security numbers and bank account information. 

Data privacy has emerged as a competitive difference. Consumers want to know what is being gathered, how it is being managed, and how safe it is. They want to be able to provide authorization to use the data in a certain way. Ultimately, the idea would have been to control one's data and for banks to get consent. It's essential to now break down organizational silos. All of this being said, financial institutions must build a cohesive effort across Marketing, Risk, and Compliance to make privacy management a competitive differentiator. Proactively managing privacy is a significant potential for banks to create loyalty and expand their business.

To enable this, banks must take a 360-degree strategy to guarantee that no data breaches occur, either internally or outside. This entails safeguarding both the customer-facing and internal banking procedures connected to workers, vendors, technology, and processes. Here are some examples of how this is accomplished: Authentication for every transaction in the bank occurs after the identity of the individual initiating the transaction is confirmed. This applies to clients who use online or mobile banking services, visit the bank in person, or use credit/debit cards at POS terminals and ATMs.  It also applies to bank personnel who have access to data about consumers and banks. It is essential to safeguard the infrastructure, which refers to the database systems and servers where data is kept, as well as the boundaries that are set up to secure these. In most fundamental banking systems, production data is encrypted. Bank personnel are typically provided with specialized technology restricting access to social media, personal emails, and USB ports. 

Employees can only connect to the banks' network via a VPN when accessing public Wi-Fi. Banks have devised many methods to guarantee that security is applied and assessed. This includes client KYC (Know Your Customer) updates, NDA (Non-disclosure agreement) updates, and securing particular zones inside the premises and distant data centers. Banks may limit insider risks and protect customers' personal data, such as names and credit card details, by using Data Loss Prevention (DLP) solutions. These solutions can also assist in meeting the bank's security meets agreed standards and protecting its customers' information.

In addition to the monthly account statements that are prepared and distributed to clients, banks need to interact with customers on a frequent basis about system changes, the implementation of new authentication methods, and so on. Customers may also establish limitations and alerts based on various parameters to guarantee that they are notified if any unusual behavior occurs with their accounts. While various lines of contact are accessible, the setup is customizable to accommodate clients' needs.

Filip Cotfas

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Filip Cotfas is Channel Manager at CoSoSys.