Published : 5 years ago, on 01/08/2019

By Alison Wilkes, Head of Payments, FIS

Nowadays you can do pretty much anything online.From reading the news, booking your next holiday, to ordering your burger and fries – the modern lifestyle is only a click away. Banking was initially slow to get with the digital program, but what it lacked in speed it is now making up for in spread. FinTech is booming, in the UK especially. Venture Capital and private equity investment in Britain is at an all-time high of £2.6 billion and innovation has only been spurred on by the Open banking standards rolled out across Europe last year.

Alison Wilkes

The banking sector’s technological developments are, in some respects, paying off. According to a report that FIS recently released, Performance Against Customer Expectations (PACE) 2019, consumers are receiving digital banking with welcoming arms. The use of mobile payments in Britain is rising year on year. This is especially true of person to person payments, 11% of which is currently carried out using mobile. Millennials are unsurprising leading the charge, with a 39% adoption, however Baby boomers aren’t close behind.

However, the same study shows that, when it comes down to it, what really matters to consumers is security and peace-of-mind.When asked what the most important attributes were in choosing a bank, the most popular response was safety and security (82%), closely followed by trustworthiness (81%). When asked what trustworthiness meant, consumers mentioned transaction security, fraud prevention and protection of personal data. Technological innovation is still important to consumers – usability and seamless customer experience was the third most popular attribute – however this was somewhat of a lower priority at 64%.

Is the financial sector doing enough to act on consumers’ demand for banking security? At a time when unprecedented sums of money are being pumped into FinTech innovation, financial fraud is only increasing. Last year, the Financial Ombudsman Service received a record high number of fraud complaints, representing a 40% rise on last year. This was largely driven by Authorised Push Payment (APP) schemes, where consumers were duped into transferring funds to fraudsters posing as official entities. Meanwhile across Europe, Card Not Present (CNP) fraud in rising, fueled in no small part by the uptake of one-click-payments.

In many cases, a preoccupation with technological features is actually at odds with security. Digital banking has opened the door for fraudsters to prey on consumers, and for all its benefits in terms of openness and transparency, many would argue that the Open banking initiative has only made it easier for them. One thing’s for sure –a direct link exists between digital activity and fraud. According to the PACE 2019 report, 72% of fraud victims claimed to have recently switched to a mobile banking app. Given the upsurge in online payments that will undoubtedly continue into the future, this statistic is all the more worrisome.

By the same token, increased security is commonly seen to be the enemy of usability. The tighter Strong Customer Authentication (SCA) requirements coming into effect across Europe this September are already prompting concerns amongst merchants that a more complex payment process – albeit a more secure one – will deter customers from making purchases.

However, on the other side of the coin, some financial providers are looking to technology to improve safety and security for their customers. Many are looking to Artificial Intelligence (AI), Machine Learning (ML) and biometric testing to more intelligently detect fraud, tracking pattern that human analysts overlook. Indeed, 47% of respondents to the PACE 2019 report called for technologies like facial recognition to replace passwords as authentication methods.In addition, the imminent roll-out of 5G will likely assist in adopting these technologies quickly and reliably. It will also help providers deploy security enhancements more seamlessly without prompting users to download updates.

Financial providers are clearly intent on using technology to offer greater functionality and usability to consumers, and while this is clearly appreciated, their customers are asking for more. What really matters, it would appear, is the ability to carry out their banking with peace of mind that their financial provider is keeping their money and their data safe.

Technology may have assisted the rise of digital fraud, but it can also help to prevent it. There is no shortage of funding in the banking sector, and fewer barriers to innovation than ever. For too long the financial sector has directed its creativity towards usability, believing the consumer appetite favoured experience over security. But consumers have spoken, and they want both. It’s time for the sector to channel the same energy it has directed towards usability into the problem of digital fraud.