Many forces are disrupting how financial institutions operate. Fintech startups, for example, are changing how users lend and borrow money. Instead of centralized banking, O2O makes for new ways to distribute resources.
Central to that notion is technology. Technology is one of the inevitable forces that have disrupted the financial sector. We are living in an era of the internet of things where every other thing relies on internet use. The internet is a technological innovation that has changed the way we work, live, and associate with other people.
With the world adopting trends in the IoT, the financial industry has had no option other than adjusting their way of doing business. Finance businesses have embraced the technological force whose advance has seen the development of innovations that are specially designed for the sector.
Ways in which technology is disrupting the financial service industry
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New finance businesses are maximizing on fintech
Thanks to innovations in technology, start-ups are now able to make an entry into the previously giant dominated industry. Finance technological (fintech) innovations are enabling small companies and start-ups to market their customized products to prospective clients fast and easy.
These small and medium financial service providers are offering money based services such as payments, lending services, and selling of insurance products. Previously, offering these services was a preserve of huge financial institutions like banks and insurance companies.
More Banks and other financial institutions move to fintech service offerings
Fintech services are not only cost-cutting but also convenient. It’s great when you can carry out transactions or process a payment that is due from the comfort of your home; on the gadget at the palm of your hand.
The evolution in fintech has forced finance industry players to wake up and smell the coffee. That products and business models cannot continue operating as usual. The traditional institutions have started re-inventing what they do, and their way of doing it.
These institutions have realized that shaping up is the only way to remaining relevant in a market that has both FinTechs and other companies willing and ready to provide financial services and products to willing customers.
Digitalization is becoming mainstream
With the continued developments in the internet and technology, financial service providers are keen on establishing an online presence that helps to meet the customer’s needs. This is an approach that has been taken by many financial service providers. They are using it to process payments, asset management, and running of other investments like securities exchange.
The cloud is becoming one of the major infrastructures
Many sectors have taken a shift towards cloud computing with a majority using software-as-a-service (Saas) to process major business activities. The financial services industry is also getting started on the same. SaaS is now being used as a platform for offering point solutions like accounting services.
We can expect a broader diversification in the near future as more financial products and services placed on SaaS.
Setting up of security systems
Most of the technological developments in the financial industries involve data storage and exchange over the internet. This data is more or less like a product and is invaluable to these institutions. To keep this product safe and secure, there has been a need to enhance security by developing proper security systems.
Downloading a VPN helps achieve the required security. There are efforts to come up with security compliance systems that will be acceptable to consumers. If these businesses will be able to build on consumer trust and confidence, then they have a potential for growth.
Blockchain technology is another force that is disrupting the way things are done in the financial industry. It is a technology that has seen investors focusing on new products in open trading such as cryptocurrencies and bitcoin.
As it is, some institutions like banks are already exploring some of the safest ways of storing this form of digital wealth. They are putting in place models that will help them make informed decisions concerning protecting their consumers from fraud and other cyber-crimes.
Safety measures to consider while banking on the web
The above disruptions are here to stay. That they all rely on the internet calls for enhanced cybersecurity measures. With proper security, consumers of financial services will rest easy knowing that their assets are safe.
To understand the kind of protection that is required, you need to understand the kind of risks that you are exposed to whenever you are banking or conducting any transaction over the internet.
Weaknesses in the financial sector that pose risks to consumers of tech-based products and services
Breaches in technology
Consumer data stands a risk of being accessed by third parties. If this information falls in the hands of hackers, then it can be used to gain unauthorized access which can compromise the existing accounts. Users may then become victims of the data breach.
Many financial institutions run websites and applications that have many gaps making them very vulnerable to attacks. A research report by Positive Technology indicated that over 80% of the tested banking systems were vulnerable to attacks by malicious cybercriminals. According to the report, these websites were susceptible to malicious codes or applications putting users’ data at high risk.
The staff of a financial institution can willingly or unwillingly make the company vulnerable to attacks. Hackers are often scouring for the personal details of the staff; they then launch whaling attacks by sending numerous phishing emails.
Unsuspecting employees may fail to recognize the trap and their actions may give the hackers some crucial information that may be used in defrauding the institution. In some cases, employees may be on an inside mission to defraud the company.
Vulnerabilities in supply chain
Many financial institutions operate on systems whose installation and maintenance is placed on a third party.
Because lots of data on the financial institution is at stake, companies should only work with companies that have strong defense systems in place.
How to bridge the cybersecurity gaps while banking through the web
Introduce a security training culture
Cyber-attacks are as dynamic as the technology itself. To prevent unintentional risks from your staff, you should put a security training culture in place. The training should cut across the staff from all departments. Everyone should be made to understand that they have a personal responsibility to keep the company’s data safe and secure.
During the training, the staff should be brought to speed with the emerging trends in cybersecurity. They should also be sensitized on how to identify and respond to security threats such as phishing emails.
Using VPNs (Virtual Private Network)
Banks and other financial institutions can subscribe to VPNs as part of the security measures. Paid VPNs are a reliable security measure for protecting confidential data. They are widely used by individuals and businesses.
VPNs encrypt data as it moves from the sender to the desired destination. Any other person that may gain access to this traffic as it moves on the net cannot be able to make much of it. It’s even harder to intercept data sent through a VPN connection because these connections mask the real locations and identities of the sender.
VPNs are available in renewable monthly or annual subscriptions.
Conducting proper checks before procuring the services of a third party
Before hiring the services of third party banks and other financial institutions should consider all the cybersecurity implications at play. Clear details should be sought on all the details that will be shared with the vendor, how and where it will be stored.
As a financial company, you should also come into an agreement with the vendor. Mention details such as the responsibility of your company towards ensuring data security and who will take responsibility in the event of a breach.
Financial institutions have a host of untapped opportunities in their product and service delivery. With the right technology and security measures in place, businesses in this sector can gain the trust of their consumers.
This trust will help propel their businesses to the next level.
Featured image source: Freepik