The banking industry of the 21st century has become technologically advanced. Let’s take a look at how the specific IT and technology needs of a bank/financial institution can be supplemented by partnering up with an IT company that specializes in financial services, and how they can leverage that technology to meet a customer’s needs, improve employee productivity, and achieve regulatory compliance.
In so doing, we will be able to demonstrate why it’s important for a financial institution/bank to partner with an appropriate IT company.
Technology and the 21st Century Banking Experience
According to Forbes Magazine, there’s a reason why the banking industry, as a whole, has changed in the digital age: there are fewer “physical” banks (40% of the people the outlet polled hadn’t set foot in a physical bank in more than 6 months) because so many people are banking online. Additionally, “big banks” are no longer the only option for the average consumer — thanks to the rise of various digital technologies, consumers can crowdfund, get financial advice, and even lend and borrow money without having to set foot inside of a bank. Thus, the competition for the average consumer’s business is much greater than it was even 20 years ago.
As a result, blockchain technology is on the rise. While the average financial services professional has no idea what blockchain technology provides — mostly because there are so many misconceptions about the technology in the first place — the IT professional that works within the banking industry knows that blockchain technology covers everything from digital currencies (i.e., Bitcoin) to trading technology. What’s more, blockchain technology does all this while exposing the user to little, if any, risk.
But there’s another, perhaps unintended side effect to this new financial technology: it’s changing the way customers are thinking about their financial health. It bears noting, however, that while the online big banks are subjected to the same compliance regulations that brick-and-mortar online big banks are subjected to, “alternative” forms of banking (i.e., Venmo, PayPal, GoFundMe, CashApp) are not as bound by these regulations.
One thing that this all means for the average user, though, is that the need for actual cash will, eventually, be eliminated.
Enhanced Cyber-Risk Management Standards for Financial Institutions
In 2017, the Federal Reserve partnered with the Board of Governors of the Federal Reserve System (Federal Reserve), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) to create enhanced cyber-risk management standards for financial institutions. This was done to make online banks be compliant with various regulations set forth by such organizations as FINRA (Financial Industry Regulatory Authority), the SEC (Securities and Exchange Commission), and the NIST (National Institute of Standards and Technology).
“Financial institutions and financial services companies comply with a broad array of cyber obligations, including the Gramm-Leach-Bliley Act (GLBA) and the subsequent Interagency Guidelines Establishing Information Security Standards; Federal Financial Institutions Examination Council (FFIEC) Information Technology (IT) Examination Handbook, and Cybersecurity Assessment Tool (CAT), and the Federal Reserve, OCC, and the Securities and Exchange Commission (SEC) Interagency Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System,” says the report.
Additionally, in 2013, President Obama signed an executive order that instructed the Department of Homeland Security to join forces with the Department of the Treasury and identify financial institutions whose cybersecurity breach would lead to “a far-reaching impact on regional or national economic security.” In 2016, America’s financial institutions took it a step further and created the Financial Systemic Analysis & Resilience Center (FSARC). According to their official release, the FSARC concentrated their efforts on “the systemic risk to the U.S. financial system from current and emerging cybersecurity threats.”
Financial Institutions Need IT Companies
With all of these complex, and ever-evolving, rules and regulations — and even improving standards in the online banking industry — it’s no wonder that financial institutions need IT companies to handle, and grow with, their needs.
First, and foremost, the relationship between the financial institution and the IT company will mean that the financial institution will have a partner to rely on in times when the technology fails. Unlike your average online e-commerce site, a financial institution’s site cannot afford to “go down.” Without an IT partner to stay abreast of the potential breaches and failings of the technology, the financial institution will not only “go down,” it will fail to be in compliance with the various regulations. This will be very costly for the financial institution in more ways than one.
Second, and no less importantly, the relationship between the financial institution and the IT company will mean that the financial institution will have a partner who can offer a proactive and scalable solution to keep problems from happening in the first place while also leveraging the latest technology for client success.
In short, a financial institution needs to partner with an IT company that will not only look out for its interests and keep it compliant with various rules and regulations, but provide it with the ability to improve employee productivity and to meet their customers’ changing needs.