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Risk and Compliance in Banking Sector

By Eric Crabtree, VP, Global Head of Financial Services, UNISYS

Eric Crabtree, VP, Global Head of Financial Services, UNISYS

When it comes to risk management, the one certainty is that future regulatory measures will present challenges to banks and financial institutions. We can make assumptions that future compliance requirements will revolve around protecting the customer and ensuring the future viability of institutions in the event of another financial crisis. But this is speculation, not prophecy.

"Overall, technology is just one part of the puzzle. The real challenge comes in ensuring security is built in at each point of the customer journey"

In an uncertain regulatory climate, it can be tricky for financial institutions to future-proof against forthcoming requirements. To ease the strain, there are a number of technology solutions that allow the measurement and management of financial risk and regulations, including cloud. In this case, technology like cloud offers several benefits. Most notably, cloud ensures that organizations can adapt to regulatory changes in a faster, more agile manner – software updates are much easier to implement than infrastructure overhauls. And though it’s long been a concern of banks, steps have been taken to ensure that cloud today is as secure as any on premise system. As an example, our award-winning Unisys Stealth security software is available for both Microsoft Azure and Amazon Web Services cloud platforms, using encryption and identity-driven micro-segmentation techniques that allows enterprises to quickly and easily divide their physical networks into thousands of logical micro segments, delivering unmatched security and helping financial institutions reduce costs.

Big data and analytics is one area where we are already seeing significant potential within the industry. The move towards omni-channel banking gives financial services firms a seemingly infinite quantity of user data, which – if armed with the right analytics and technology to harness it – will bring significant advantages to all areas of their operations.

Many financial organizations are grappling with the deluge of raw data, and analysts estimate that 80 percent of it is unstructured, file-based and cannot be analyzed with traditional relational database tools. This data might seem unwieldy – but with the right analytics, it has the potential to increase productivity, improve decision-making and positively disrupt businesses.

For example, when harnessed properly, data analytics can help drive loyalty programs and allow banks to personalize every transaction to customer preferences. It can also deliver substantial benefits to risk management, as predictive analytics can detect and pre-empt potential fraud, as well as accurately identify credit risk.

Today, customers want the bank to come to them, which means banks need to stay in lock-step with today’s innovative digital tools, leveraging advanced technologies like mobile and cloud, and ensuring that above all else, they are doing so in a way that ensures their critical data is kept secure.

Our goal is to ensure our clients are connected. It starts with engaging them to get their perspectives on the industry and their needs. We take this information and use it to create a truly unique, personalized solution to best fit their needs. It’s important we stay close to our clients.

This approach is illustrated by the award-winning behavioral biometrics mobile app we designed in partnership with BehavioSec and Nationwide, the world’s largest building society. The solution provides an extra layer of behavioral biometrics security by recognizing unique patterns from consumer's natural interactions with their smartphone or tablet, which other solutions do not. These unique customer profiles are based on traits including the force with which users hit a key, the angle they use to swipe a touchscreen, or their typing speed. This type of solution builds a bridge between consumers who expect a frictionless mobile banking experience and an additional layer of security based on their natural interaction with their phone or tablet.

Advice for Fellow CIOs

You don’t need to look any farther to see the impact of mobile and digital on the industry than the explosion in the FinTech world. And customer expectations continue to evolve as rapidly as the technology available to them. It is by joining forces that banks and their tech company partners can create the omni-channel service that today’s customer expects. When positioned the right way, FinTech companies can become good partners to provide solutions and get those solutions to market at a quicker pace than a traditional bank can probably do by itself.

For example, there are a multitude of factors that a good partner can help address, including what a good mobile solution might look like or how it can fit into your environment. You need to define what type of end-user experience you’re trying to achieve and what content you need to build in order to produce that experience.

The bottom line is that the way people want to interact with their banks and the way people want to do their banking is changing dramatically. At the same time, regulations are being adapted for this new banking ecosystem, which leads to a whole new set of challenges – most notably, being able to keep up with tightening regulations and compliance mandates. However, it also presents a whole new set of opportunities for banks, as they revisit how to provide their products, services, and customer experience in the digital world. They key for success will be to always ensure compliance, while minimizing cost and disruption.

In a regulatory climate of such uncertainty, it can be tricky for financial institutions to future-proof against forthcoming requirements. It is generally speaking a good idea to take part in industry forums to share compliance best practice with peers. However, this can often be a double-edged sword. Regulation is rarely black and white, and one institution’s approach to compliance may not necessarily be appropriate for another organization. That said, there are certainly benefits to engaging in these kinds of best practice discussions.

Overall, technology is just one part of the puzzle. The real challenge comes in ensuring security is built in at each point of the customer journey. Often, a tech partner can help in identifying these compliance-ready solutions at each point in the journey, as well as provide the expertise and experience to tailor them to your needs. Ideally, that partner would be able to facilitate debates about upcoming regulatory challenges. They should leverage their consultancy capability to advise institutions on how to approach compliance issues from a technological perspective, and discuss and analyze requirements necessary for success.