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Fighting Fraud and Protecting Data: Why do Financial Institutions Continue to Struggle?

bank-sunrise-compGiven the frequency of cyber attacks and data breaches, regulators and customers alike, expect financial institutions to dedicate the appropriate resources to the fight.

While the penalties and fines for non-compliance and the reputational damage that accompanies regulatory action present ever-present threats, how many eye-popping fines does it take for financial institutions to stop providing slickly worded press releases apologizing for their latest failings and get serious about protecting their customers?

Financial institutions continually sing the praises of their efforts to protect their customers, but customers still lose billions to fraud each year, and regulators continue to issue fines. Something has to give.

Compliance and the Impact on the Customer

Throughout the life of their relationship with an institution, customers face a never-ending series of demands for information. While customers today expect their bank to go the extra mile to protect their funds, they do not expect to be overly involved in the process.

In the fight against fraud, banks rarely shy away from overburdening customers with fraud and compliance-related tasks. Empowerment, that’s what they call it. In reality, it really masks the existence of ineffective compliance programs.

Inevitably, financial institutions end up shifting too much of the burden from the institution to the customer, which, in turn, slows the customer onboarding process and the generation of revenue. So while attempting to foster a relationship built on trust and understanding, ensuring compliance creates tension and an environment of distrust.

Remember, despite the fact that many individuals wish to use an institution to facilitate an illegal act, most customers have no criminal or nefarious intent. However, each customer, regardless of their intent, must comply with time-consuming and often confusing requests.

Why punish good customers for the financial institution’s inability to stop cyber criminals? It is easy to see how an institution can lose a legitimate customer while attempting to root out individuals connected to criminal activity.

Throwing More People at the Problem Isn’t the Answer to Fraud

While financial institutions must develop and deploy robust compliance programs, in the face of new or evolving regulations, they too often “throw” people at the problem in the form of larger compliance departments and more responsibilities placed on frontline employees to administer compliance-related processes.

It’s unrealistic, and frankly, indefensible to expect a teller to suddenly become a compliance expert. Notwithstanding, exceptionally high employee turnover throughout the banking sector, low salaries, and a lack of career opportunities do little to attract and retain exceptional employees.

Unfortunately, throwing people at the problem becomes the default action for institutions to achieve compliance. Consequently, financial institutions can easily find themselves facing a number of pervasive operational challenges, including an unwieldy and expensive compliance function and difficulties training and ensuring compliance on the front line.

Implementing a Technology-Driven Approach to Compliance

To ensure compliance and meet customer expectations, institutions must align their people, processes, and technologies to form an integrated, efficient, and cost-effective compliance program.

In an age when the average bank customer’s smartphone delivers astonishing capabilities, the technology exists to help financial institutions dramatically increase all forms of compliance, while simplifying compliance-related tasks for customers.

Implementing a technology-driven approach can help financial institutions comply with a multitude of regulations, meet and exceed customer expectations, and generate a competitive advantage in comparison to institutions that rely on a people or process-driven approach.

It’s hard to please all of the people, all of the time, but with the right technology, financial institutions can come close.

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