Five ways to maximize opportunity in the digital banking era

We hear a lot today about digital transformation in financial services, but what does it really mean in terms of opportunities to win and keep customers? Where will financial institutions (FIs) find the most promising digital channels? How will they manage digital risk? And what role will technology play in securing digital transformation? Here are five key areas where opportunity abounds and risk can be managed, as long as you have the right tools.

1. Fintech: beating the startups (and upstarts) at their own game

Fintech is offering many innovative digital alternatives to traditional financial services offerings in banking, payments, insurance and other areas—and traditional banks and insurers are feeling the pressure. Therefore, to compete or not to compete: that is the question for FIs that want to stay relevant for their customers. When the alternative is to risk losing business to the new kids on the block, the answer just may be to provide more of the kinds of digital services fintech companies offer (How? Read on!).

What’s the downside? A higher risk of fraud resulting from creating more channels for doing financial business. To manage fraud risk on a far bigger scale, financial services providers will require next-generation authentication that challenges transactions based on the degree of risk they present, so as to be less intrusive to customers conducting legitimate transactions.

2. API economy: on the other hand—if you can’t beat ‘em, join ‘em

What if, instead of developing technology to compete with fintechs, FIs partnered with them on new services? Fintech companies can bring the latest technology, financial institutions can bring the customer base—and open APIs can join them together. The growing API economy gives these institutions a way to offer digital capabilities such as linking customer accounts to payments for everyday services (for example, utilities).

The worry is that open APIs could create a new attack vector. To address this requires a combination of financial technology innovations such as next-generation authentication (described in #1, above) and a secure omnichannel architecture in which assets are centralized, shared and managed as a whole rather than as individual resources.

3. 3D Secure 2.0: finally, more frictionless credit card payments!

Hold on to your hats: the latest version of the 3D Secure (3DS) security protocol for online card-based transactions is expected to bring dramatic growth in transaction volume, thanks to its robust support for a more consumer-friendly, frictionless shopping experience.

The risk is not unlike what’s expected if more FIs adopt fintech: a higher number of transactions translating into a higher risk of fraud. And once again, it’s technology to the rescue: next-generation authentication will be instrumental in helping prevent fraud, and automated fraud case management will help the analysts who review potential fraud cases keep up with the growing volume.

4. Mobile banking: where banking is headed (don’t get left behind)

Mobile banking has been steadily growing in popularity since its introduction nearly two decades ago; just about every FI out there expects to offer mobile banking by the end of 2018, if they don’t already. Mobile banking gives FIs another channel to provide services to customers and grow their business, but it also creates risk—a lot of risk, when you consider that RSA’s recent fraud report shows fraud transactions from mobile apps increased by more than 600 percent from 2015 to 2018. This is partly attributable to more digital banking services being introduced, but RSA data also suggests mobile is simply a preferable method for fraudsters to cash out. FIs need to adopt new and better ways to protect the mobile channel, monitor social media for fraud threats (or contract with a vendor who can do it), and adopt policies and tools that minimize false positives.

5. IoT: it turns out wearables are a very good look for payments

Wearables and smart-home devices are increasingly becoming a payment mechanism for consumers, and as this trend toward human-not-present payments continues, it creates both opportunity and risk. The risk is that when a human is not present for the payment, there’s no way to positively confirm the person’s identity. This creates the need for new ways for FIs to establish—with confidence—that transactions are indeed authorized and detect fraud when humans are not involved.

FIs that have the technology in place to not only deliver digital experiences but also to secure them effectively will have the advantage over their less technologically equipped competitors in the digital economy. Adopting next-generation authentication, building secure omnichannel architectures and using automated tools to detect and stop fraud will position them well to manage digital risk in the future.

Want to learn more about the opportunity and risk that digital transformation creates for banking? Read RSA’s latest report, Banking’s Digital Transformation: The Confident Pursuit of Opportunity in the Face of Rising Risk for more information.

About Daniel Cohen

Daniel Cohen is Director and Head of Products and Fraud Strategy at RSA. In his role, Daniel leads product development for RSA’s risk-based authentication solutions for online, mobile and e-commerce (3D Secure) as well as global fraud intelligence services. Daniel is a sought after speaker in the cybersecurity and fraud industry and a frequent contributor to media articles on a range of topics.

About RSA

RSA, a Dell Technologies business, offers business-driven security solutions that uniquely link business context with security incidents to help organizations manage digital risk and protect what matters most. RSAs award winning cybersecurity solutions are designed to effectively detect and respond to advanced attacks; manage user identities and access; and, reduce business risk, fraud, and cybercrime. RSA protects millions of users around the world and helps more than 90% of the Fortune 500 companies thrive in an uncertain, high-risk world. For more information, go to rsa.com.