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The rise of alternative payment platforms is posing a sizeable risk to traditional financial institutions. But before banks bemoan the fact that they’re losing revenue to new market entrants, they ought to consider why consumers are going elsewhere. While banks haven’t exactly carved a great name for themselves post-crisis, it seems consumers still resolutely trust them to handle their payments.

The latest survey from the American Bankers Association shows three-quarters of US consumers trust banks most to keep their payments safe. On the other hand, just one per cent of consumers trust major retailers or telecom companies to protect their payments.

Given the high profile data breaches at some of the largest US stores in 2014, it’s hardly surprising. But is it any more remarkable that banks are seen as such trusted institutions?

“It’s no surprise that consumers trust banks the most with their payments,” says Doug Johnson, ABA’s senior vice president of payments and cybersecurity policy. “Banks have a long history of protecting their customers’ money whether in the vault or online. Banks are the gold standard in security and customers know their money is safe when it’s with the bank.”

In terms of the payments industry, it’s interesting that the proportion that trusts a non-bank payment provider such as PayPal or Venmo has fallen from eight per cent in 2014 to four per cent this year.

UK data

Figures from the UK indicate that there is big progress being made and banks are rightly trusted. According to Financial Fraud Action (FFA) UK, banks prevented £7 in every £10 of attempted fraud. It said: “Banks’ and card companies’ security systems detected and prevented a total of £910.9 million worth of attempted card, online and telephone banking and cheque fraud.”

It’s a good job they do, too. A study from TSYS found that while consumers are more likely to blame a retailer if their card details are compromised, they expect the bank to fix the problem. With added trust comes added responsibility.

Mixed picture for security

What the survey masks are the occasionally wide differences between the performance of individual banks. While lots are undoubtedly making great strides, others are struggling to improve security. Card fraud management systems are often older than core banking systems. For example, CEB TowerGroup found 40 per cent of the banks it surveyed said solutions were installed prior to 2006.

“Best-in-class players, however, constantly evolve their offerings to adapt to change; some provide comprehensive turnkey solutions, while others might require the purchase of additional modules,” the firm said in its report.

“Although machine learning is certainly a strong aspect, an effective operation will also have trained staff to make command decisions, test parameters, and design expert rules.”

Security and fraud prevention is a battle never won. Consumers may trust banks but it’s a constant fight and banks are on the frontline.

“Banks use sophisticated security systems to protect their customers, stopping over two-thirds of fraud from occurring. However, the industry is never complacent and banks are continuously improving the tools they use to beat the evolving threat of fraud,” commented FFA UK director Katy Worobec.

For now, consumers trust banks the most, but with the rise of new market entrants banks cannot afford to stop investing in fraud prevention systems.


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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Neill Harris

Neill Harris is product marketing director for ATM solutions at NCR. He travels extensively to many of the world's leading banks and financial institutions, articulating how self-service technology and innovation can inform and support strategies and solve challenges.