Cybersecurity will become more of an issue to financial services institutions thanks to the increased usage of digital channels, as COVID-19 necessitates continued lockdowns and social distancing mandates. Implementing additional measures to ensure extra protection is paramount, not only to maintain service continuity, but to protect against monetary and reputational damage.
As providers across the globe are reducing opening hours or temporarily closing branches, customers are being encouraged to use digital channels whenever possible. This will leave banks and their customers more exposed to the many online fraud schemes.
Data from our Global Wealth Managers Survey shows that 73% of high-net-worth investors are concerned about cybercrime, but only 34% of providers in the wealth space regard the impact of data breaches on their company’s brand as a threat, suggesting a blind spot in executive thinking. Wealth managers already experience higher customer churn rates during times of increased market volatility, so any reputational damage caused as a result of cybersecurity breaches would have a significant effect on customer attrition.
Of the consumers who were subject to fraud, 9% closed their account and switched to another provider, according to our Payment Fraud Customer Analytics. Given the costs involved in acquiring and retaining customers, this is a significant proportion. This is particularly true in the wealth management and private banking space, where we see the highest-value transactions, older clients, and hence the highest risk of fraud and reputational damage.
This means financial services institutions have to allocate additional resources to increase the speed and efficiency of anti-fraud processes. However, any measures have to be two-fold. Externally, customer education will be key. Data from our Investor Insights: Channel Selection Analytics shows that digital channel uptake significantly drops with age. For example, only 35% of millennials prefer face-to-face contact when arranging their investments, compared to 51% among baby boomers. As can be expected, those new to digital channels present a notable security risk, so it is critical that these demographics are educated on basic security procedures and the means to detect and deter fraud.
On the flipside, providers have to review and assess the adequacy of their fraud detection and prevention processes. Acknowledging the additional risk posed as a result of COVID-19, the European Central Bank recommends that financial services institutions collaborate with third-party security providers for the duration of the pandemic. Fintechs – such as Tandem, a cybersecurity and compliance software tool designed to help maintain information security; or CoNetrix Security, which helps financial institutions verify and secure their Internet perimeters during these times of rapid change – present excellent examples in this context.
As COVID-19 wreaks havoc across the world, providers should assure their customers that digital channels are safe and that their bank is doing its best to combat fraud. Global anxiety is on the rise, but cybersecurity should be an issue that only providers worry about, so that their consumers don’t have to.