Technology is changing all industries, and the financial sector is no different. McKinsey recently collaborated with the Institute of International Finance (IIF) and surveyed a number of financial institutions globally. The report revealed how these businesses are currently using, or plan to use, emerging tech to mitigate cyber risks.
So what does this mean for banks today, and how are they future-proofing?
Here are some highlights from the report:
Cloud and edge computing a top-considered technology for financial institutions
There isn’t much data on customer numbers for every bank. We could look at this Statista roundup of customer numbers for European banks in 2018, showing Estonia’s highest with about 14,000 customers per branch on average. On the lower end, Greece had about 3,000. Still, even on the lower end, processing data and personalizing services for thousands of customers can get tedious.
That’s why financial institutions favour cloud computing as a decentralizing form of tech to make customer recommendations and service more personalized and efficient.
Here is a list of the top technologies financial institutions considered in the report (and the percentage of companies that considered them):
- Cloud and edge computing: 84%
- Applied AI: 78%
- Next-generation software development: 73%
- Trust architectures and digital identity: 70%
- Industrialized machine learning: 49%
- Web3: 46%
- Advanced connectivity: 38%
- Quantum technologies: 32%
- Future of mobility: 22%
- Immersive-reality technologies: 14%
Cyberattacks a top risk for emerging tech in financial institutions
The cloud has benefits to customer service and operations, including remote access, cost savings, and greater reliability — but its third-party exposure presents risks of data loss and cyberattacks, too.
Here are the top predicted risks respondents named as they adopt new tech:
- Cyberattacks (ransomware, fraud, social engineering, phishing: 84%
- Tech misuse (cloud, digital trust, AI risk): 59%
- Cyber talent management (upskilling, retention, churn rate hiring): 18%
Compliance with regulations a top driver to address cybersecurity
As new tech emerges, government bodies introduce more regulations for financial institutions — especially in the context of new fintech and open banking. This is a top motivator behind cybersecurity efforts from banks, as there’s enhanced pressure to protect consumers.
The McKinsey study found the two main drivers pushing financial institutions to beef up their cybersecurity game: stricter regulations and the need to fend off external threats.
Here’s a full list of percentages of what financial institutions listed for reasons to invest in cybersecurity:
- Increased compliance with regulations: 70%
- Increased protection from outside threats: 70%
- Consumer-driven: 49%
- Competitive edge: 32%
- Audit response: 32%
- Response to past security issues: 29%
The right metrics and talent are key to successful cybersecurity for financial institutions
Here are some things financial institutions are moving toward (along with McKinsey’s recommendations) to maintain cybersecurity:
- Special initiatives: 40% of respondents launched dedicated programs within their operational workflow to address cybersecurity
- Aligned tech priorities with security: Third-party tech should only be introduced if a company has enough security bandwidth to manage the risks
- Metrics and reporting: Transparent metrics can identify cybersecurity issues quickly and boost internal accountability
- Talent and tech: Effective recruitment, upskilling, and leveraging AI and tech to fill talent gaps in some cases
Read the full report from McKinsey here.
