For financial institutions and banks, security tools are an essential part of their business, not only in terms of keeping their customers’ accounts safe but also with regards to internal compliance. These organisations have a responsibility to safeguard both their customer’s money and information. Consequently, it’s vital they have the tools and technology in place to protect these critical assets.
Gareth Jones is Chief Information Officer at Fraedom.
As technology continues to develop at pace, in 2020 we will see more banks begin to adopt artificial intelligence (AI) paired with machine learning (ML) to offer their customers enhanced security features. Additionally, as misconceptions and myths about cloud security are dispelled, the adoption of cloud technology will also increase. Now, in 2020, what will the increased uptake of these technologies among financial institutions mean for security in the banking industry in the next year?
AI & ML
Through increased use of AI and ML in 2020, banks will be able to help customers keep their accounts more secure by detecting any anomalies and fraudulent activities much quicker than previously possible. The beauty of using AI and ML in this way lies in their ability to understand what is ‘normal’ for each account or card by recognizing patterns based on past transactions and behaviors.
For example, if 99% of the transactions for one account happen Monday to Friday, a transaction that occurs at the weekend will be seen as abnormal and flagged as such. With AI speeding up the detection of any deviations from normal patterns, banks will be able to respond more rapidly when informing their customers if their accounts appear to have had unusual activity. As businesses currently lose an average of 7% of their annual expenditure to fraud and 2017 seeing a record 16.7 million victims of identity fraud, the use of AI and ML should see this figure reduce.
Of course, anomalous transactions aren’t always fraud. Often, they’re just out of the ordinary, requiring some more investigation and flagging them to the business would allow for this. These new technologies will ensure businesses are able to deal with discrepancies in their accounts immediately, rather than finding out about them months down the line when it’s harder to get a clear picture of events at the time when the transaction took place.
Although it’s unlikely to happen in 2020, in the future, we may get to a point where fraud detection can be done in real-time in order to stop fraudulent transactions in their tracks. In these cases, we could see the account being frozen or the card being blocked in order to prevent the transaction from being completed.
AI and ML will also be pivotal for cybersecurity and maintaining regulatory compliance, both of which are hot topics for the financial services sector and will continue to be moving into 2020 and beyond. We will see more banks use ML to code platforms to identify user patterns and detect anomalous network behavior, which is becoming increasingly essential as cyber-attacks are often disguised with inconspicuous data or code.
Cloud adoption has historically been slow among financial institutions, in part due to misconceptions about security. However, banks are beginning to realize that cloud computing services present no more of a security risk than current technology, as public cloud providers have invested time, money and effort into meeting security standards.
Ultimately, cloud providers have commoditized security services so instead of banks needing to build their own encryption capabilities, for example, industry experts such as AWS have made it possible for them to implement security services at the click of a button straight out of the box. This provides banks with a far quicker and easier way to be secure than deploying or retrofitting security features into their own environments. This will help banks to ensure they are storing customer information in a secure and compliant manner, adhering to banking regulations more widely.
Making physical payments more secure
Biometrics have been used to make accessing accounts and making payments more secure for a number of years now, but only for those with certain devices and with certain banks. However, it is predicted that by 2020, nearly all smart devices, including mobile phones, tablets and wearables, will have some form of biometric security enablement, and so this functionality will soon become more widely available. Consequently, more people will be able to make payments through fingerprints and facial recognition and by 2023 it is estimated there will be over 2.6 billion biometric payment users.
Although biometric authentication currently tends to only be available to consumers, 2020 could be the year that corporate clients gain access to the same functionality. As biometric functionality extends into the corporate card arena, the commercial payments process will not only become more secure but also more seamless. We could also see mobile wallets that defer to the individual’s personal attributes to make secure payments on these cards, whether authenticated through fingerprint or facial recognition.
While cybersecurity threats such as malware and the risk of fraud is never going to go away, in 2020, we will see banks adopt new and more sophisticated measures to prevent these instances and improve security within the financial sector. Key to this will be the increased adoption of AI and ML technologies which will help banks detect anomalies faster and perhaps one day stop them from occurring altogether. The efficiency of these technologies is already being realized by corporate banks, with Visa’s use of AI having reduced global fraud rates to less than 0.1%.
As more banks recognize the significant impact AI and ML can have not only on security but their organisations in 2020 and beyond, it is likely we will see more companies turning to fintechs for support. In such a competitive market, this will be a vital step to learn how to best leverage these technologies to improve security and maintain compliance in order to retain customers and attract new ones. These technologies will also offer banks the benefit of becoming more agile and innovative, therefore helping them to retain their existing customers and attract new ones.
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