IT Issues in Financial Services
The financial services industry is changing rapidly. While every industry experiences disruption in the face of new technology, financial technology has dramatically changed the entire financial services industry from top to bottom. While there will always be the same operational issues of keeping customers and remaining competitive, IT issues are of increasing concern in the financial world. From cybersecurity threats to regulatory overhauls, the financial industry must keep IT in mind to operate in the new tech-focused world.
How Has Financial Technology Changed?
It’s incredible to think about how technology has changed finance and the financial industry over the past few decades. The first automated teller machine came out in 1967 and online banking became available in 1983, with internet banking taking off on a broad scale in 1998. In 2015, however, the scales tipped. As of 2015, more people use mobile banking than bank at a physical branch.
While this steady march toward more advanced technology used in finance has had incredible benefits for banks and consumers alike, it has introduced similarly remarkable challenges for the financial industry. While the impact of technology on financial services has been overwhelmingly positive, improving everything from consumer engagement and marketing to transactional speed and accuracy, IT issues can cost organizations millions of dollars in lost revenue and fines.
What Are the Issues Facing Financial IT?
Today’s data-driven, hacker-filled digital world presents unique opportunities for growth in the financial industry. However, the challenges to financial IT are persistent and constantly evolving. On top of ensuring an organization’s systems are operating smoothly, technical officers in financial institutions must also keep the following IT issues in mind.
1. Cybersecurity Threats
Any well-rounded list of financial IT issues must include a mention of cybersecurity. Security and risk management are probably the most significant issues facing the financial technology world today. Much of this significance is attributable to the security landscape at large — hackers are constantly developing new ways of getting into systems, and new security technologies are always under development. Even without these threats, regulatory agencies still push for security management. Failure to adequately assess and respond to potential risks can cause regulatory entities to downgrade company ratings and potentially take costly punitive action.
Maintaining data security isn’t easy, however. Data security requires a great deal of investment of time and money. Technology officers must maintain constant awareness of the latest threats and regularly assess their security measures. Even with this effort, many technology executives still feel vulnerable. According to one threat report, 90% of financial services IT executives said they felt vulnerable to data breaches, and 44 had already experienced a breach.
Some of the most significant sources of cybersecurity threats include the following.
- Internal threats: The majority of information loss comes from insider threats. Poor security awareness, irresponsible browsing and other issues can leave the doorway open for hackers, and that only covers unintentional internal threats. Disgruntled employees may even contribute to breaches. To combat this, financial institutions need to create security-pragmatic cultures that allow employees to operate efficiently and intelligently. On top of preventing employees from creating threats, technology officers can leverage bank employees as a pivotal tool in the fight against cyberattacks. Teaching bank employees to detect phishing scams and fundamental cybersecurity issues and alert IT staff of them improves financial technology defense efforts significantly.
- Ransomware: Cyber-ransom is one of the fastest-growing security concerns across every industry, affecting corporations, government agencies and private entities alike. The potential harm of these attacks can be devastating, putting essential operational data behind a paywall until the hacker gets their ransom. One CNN report stated that ransomware events collected $209 million in the first three months of 2016 alone. For many technology officers, the worry is not whether their company will get hacked for ransom, but when.
- Antiquated systems: Outdated systems are as much a cybersecurity danger as a hacker. Even a few months of not updating your cybersecurity system can leave you vulnerable to the newest hacking methods. Old hardware is dangerous too, as old computers may not be optimized to work with the latest technology, leaving it vulnerable.
If any lapses occur, not only is the company’s data at risk, but so is the data of their customers. Any breaches could mean millions of dollars in lost revenue, lost business and regulatory fines. In an industry that tends to be less willing to invest money in IT issues, this can pose a significant problem.
2. IT Infrastructure and Expertise
Many older executives still have a technology-vs.-finance mindset. Unfortunately, this misconception has yet to leave the industry, despite the reality that the two rely on each other.
For an industry that depends so heavily on security, the financial services world lacks when it comes to understanding the impact of technology on financial services. One report stated that of the largest 109 banks in the world, only 57% had board members with professional technology backgrounds, and a scant 3% had CEOs with technology backgrounds. This lack of understanding has caused many problems within the financial IT industry, including the following.
- Poor IT infrastructure: Many financial organizations rely on outdated IT infrastructures with legacy components and hardware often carried over from mergers and acquisitions and bargain bins. It’s much more difficult to run effective programs with these resources, let alone maintain security, and such outdated infrastructures often have significant vulnerabilities. Unfortunately, many financial organizations are unwilling to pay money to undergo the necessary hardware and software upgrades needed to bring their organization’s infrastructure into the modern age.
- Limited IT budgets: When the board of directors is looking for ways to make cuts, IT is usually the first on the chopping block. As a result, technology officers must either fight for their piece of the pie or figure out how to work within their limitations. In the former case, the officers often have to explain the importance of computers in finance to technologically illiterate board members. In the latter case, technology officers must figure out how to maintain IT staff, manage their infrastructure and keep pace with modern security efforts, all within the same limited budget.
One cost-effective way to improve cybersecurity and compliance without stretching the budget too severely is by investing in data management tools. Many companies prune their data to keep costs low, but this reduces their ability to identify and solve security problems after they’ve occurred. By investing in a data collection and organization solution that pulls data from all sources and makes it accessible, technology officers can improve their ability to identify and solve technology security issues effectively.
3. Regulatory Compliance
IT challenges encompass more than security and infrastructure. Regulatory agencies also pose a significant challenge. Regulatory agencies exist to protect consumers, but can be difficult to work with in the financial world. Financial companies must comply with a wide range of government and industry regulations to operate, and adhering to regulations can be intense.
The purpose of many regulations is to keep consumers safe through the maintenance of ethical business operations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. Rep. Barney Frank and Sen. Chris Dodd created this legislation to improve transparency and stability in global banking. Technology can help financial institutions maintain compliance with these regulatory entities. For example, the Bank Secrecy Act and anti-money laundering compliance regulations have required banks to comb through their transactions for potential fraud and report any instances to the federal government. While reviewing this data manually would require intensive employee labor to handle the task, automatic data collection and analytics make this process significantly easier.
However, legislation is constantly changing, and regulatory agencies are increasingly focusing on mandating cybersecurity standards in the financial industry to protect consumers. Some legislation would require the establishment of a straightforward cybersecurity plan, while others may be more specific as to the type of cybersecurity plan used. This increasing legislation, while written with excellent intentions, poses problems for technology officers who have to comb through the legislation and determine how to maintain compliance.
4. Big Data
Big data in financial services is both a remarkable opportunity and a significant risk.
The most significant benefit of big data for financial services providers is that it allows them to tap into social media, consumer databases and news feeds, collecting consumer data. Financial institutions can then use data to help target their customers and provide more personalized services.
On the other hand, big data comes with unique risks. Many consumers are critical of the use of big data and are wary of companies that use it. Additionally, it can be difficult for companies to use big data, as it is a great deal of information to sort and use. Appropriately using big data requires powerful analytical technology and a dedicated specialist or team.
5. Transitioning to Digital
On top of everything else at play, banks have to stay competitive in the marketplace. In today’s world, that means having a mobile app and a digital brand.
With the majority of the population completing their banking online, having a mobile platform is the new standard. However, many banks are taking it one step further, shifting their advertising campaigns to focus on digital channels and target digital consumers. That means advertising on social media, using big data, purchasing targeted campaigns and artificial intelligence solutions.
While this trend is decreasing the need for expensive brick-and-mortar branches, it is simultaneously increasing the number of potential customers for any given financial services business. However, maintaining this technology is a challenge in itself. Some of the technological challenges presented by transitioning to a digital brand include the following.
- Maintaining uptime: Technology officers need to stay on top of the network, ensuring the customer experience is smooth throughout and that systems are available on demand at all times. Downtime in the digital era is more costly than ever, so ensuring maximum uptime is a necessity.
- Managing remote workers: With the decrease in brick-and-mortar locations comes an increase in remote workers, each requiring secure connections and hardware. Maintaining the security of each worker and educating each employee on proper maintenance is key.
- Creating secure connections: With mobile banking, consumers need to be able to access their information safely and securely. Part of this involves creating secure connections and implementing thorough security and authentication protocols.
Undoubtedly, we will continue to see more of these issues appear as the brick-and-mortar banks go to the wayside and more digital financial brands join the fray.
Why Choose Consolidated Technologies, Inc.?
The impact of information technology on financial services is undeniable, and the importance of technology in the banking industry is only increasing. If you want your financial services business to stay on top of the technological trends in the finance industry, it’s essential to find a trustworthy technology solution partner. For that, you can trust Consolidated Technologies, Inc.
Consolidated Technologies, Inc., or CTI, has the innovative experience you need to achieve quality results in your financial technology design and implementation. We create communication solutions for a variety of industries, including the financial services and banking industry, bringing together world-class experts and products to deliver beautifully designed results.
With Consolidated Technologies, Inc., you can expect the following.
- Innovative experience: We know technology changes rapidly. To stay on top of it, you need to partner with a company who can keep up with change. CTI knows when and how to adopt innovative technology to make the most of it. We have a proven track record of selecting the right solution for our clients, and we can do the same for you.
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- Industry knowledge: Need a knowledgeable partner? You’ll find no better than CTI. We are always studying the industry to find new solutions that our clients can use, and we think ahead, trying to work in solutions that are scalable and applicable for the next generation of solutions. At CTI, we feel the next best thing is always on the horizon.
CTI’s experts can deliver all these benefits and more. Our highly trained, knowledgeable staff will use their proactive approach and predictive systems to help you achieve the best solutions possible. So what are you waiting for?
Contact CTI Today
Consolidated Technologies, Inc. is the company you can trust to deliver all your communication and technology needs, bringing together experts and products to create unified communications solutions. To learn more about our capabilities and how we can help you discover solutions for your financial services organization, contact us today.