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With consumers’ trust comes great responsibility: Approaching data security in a fintech-friendly world

by: Kylee Wooten

Highly publicized events in recent months, like the Facebook-Cambridge Analytica scandal, have heightened what is already an increasing concern of consumers – the collection and use of their data and personal information. Fintech apps have taken the world of financial information by storm in recent years. Between personal financial, budgeting/saving and investment apps, one-third of today’s U.S. banking consumers use at least one financial app, according to a survey by The Clearing House.

Financial technology and banking were once held to be separate, competing entities in the financial space, but recently, the two have begun finding more ways to partner together and provide better offerings for their customers. While both banks and fintech providers, along with their consumers, may benefit from expanded product offerings, all parties will increasingly have to consider the implications of data and information security. Research shows that two-thirds of consumers who use apps indicated that they are “very” or “extremely” concerned about data privacy and data sharing. Banks, on the other hand, are viewed as the most trusted provider of data security. In a survey by A.T. Kearney, 62 percent of customers reported banks as the most trusted firm to ensure the security of customers’ personal information, in comparison to other firms, such as Amazon, PayPal and Apple.

When it comes to accountability, banks also bear the largest obligation. In the same TCH study, 56 percent of those who reported using fintech apps, as well as 59 percent of those who did not use apps, said that they hold the customers’ bank(s) accountable for the security of their data – the most frequent response among those surveyed. These stats, in particular, highlight how critical it is for collaboration between fintech and banking to safeguard personal and financial information accessed by third parties and ensure consumers’ expectations for data security are being met. The foundation of the financial services industry is trust; failure to take sufficient measures to keep customers’ information safe puts that trust at risk.

How to protect your customers’ data

This information may make your bank want to run from the prospect of ever partnering with a fintech, but don’t turn away yet! Innovative technology doesn’t automatically equate to risk, it merely means putting equally as innovative new measures in place to protect your customers. There are many approaches to data protection, but two key options banks should explore include communication aimed at customers’ security awareness, and the utilization of application program interfaces (APIs).

Increasing customer awareness

One of the simplest steps to protecting your customers and their data is to keep them informed. When asked which entity should provide education and promote awareness on how fintech apps collect and use customer data, most respondents answered banks (59 percent). There is a significant deficit in customers’ understanding of how their fintech app will access, collect, store, use and share their data. Have you ever clicked the terms of agreement checkbox without actually reading them? Probably so. Chances are, your customers have too. Many times, customers don’t realize the freedom third parties have with their data simply because they haven’t taken the time to learn.

Educate your customers on the “whys” and “whats.” Why should they keep their bank account details secret? Why is their data at risk to start with? What should they look out for in terms of suspicious data sharing? What is okay to share and not okay to share? Creating a document that customers can easily access via the bank’s website offering insights, advice and best practices in data security can help mitigate future risk. Security features like two-step logins can seem like a hassle to customers, but educating customers on why it is necessary and how it helps mitigate risks will not only help protect your customers, but it will strengthen their trust in your brand and your ability to protect their information.

Utilizing APIs

One of the most effective and secure ways for today’s banks to incorporate fintech is through the use of application programming interfaces, or APIs. Utilizing APIs is advantageous for both the financial institution (which you can read about here), as well as the customer. APIs allow customers to take advantage of fintech apps, while also keeping their information secure.

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There are a number of ways that APIs bolster security, data transparency and control. For one, APIs allow banks to share information with third parties, such as fintech app providers, without depending on customers to share their banks’ log-in credentials. Banks that utilize an API can also limit the amount of data shared with third parties so that only necessary information is shared. While most people are relatively comfortable sharing an email or their date of birth, customers are significantly more apprehensive to share their bank account information, credit card number or social security number. Luckily, with the use of an API, banks can offer features like the ability for a customer to access their credit score in real-time through their bank account, without having to give these sensitive details away. APIs give both the financial institution and the customer increased control over data management.

As the realm of fintech continues to grow, it becomes more and more apparent the industry is not going away anytime soon. Banks are seeing the benefits of teaming up with fintech, but also discovering there are new risks involved. As the most trusted institution for ensuring customers’ data is safe and secure, banks have a responsibility to uphold and maintain their customers’ trust, even as their technological capabilities expand. Banks that provide transparency into the benefits and risks of using fintech and utilize APIs to ensure greater control over the information shared with third parties will build customers’ trust and will be able to provide an even greater repertoire of offerings for those customers.

Additional Resources

Whitepaper: Generating Efficiencies in SMB Lending Through Technology

On-demand Webinar: Reclaiming Your SMB Lending Market

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About the Author

Kylee Wooten

Kylee Wooten is a content marketing manager at Abrigo.

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About Abrigo

Abrigo is a leading technology provider of compliance, credit risk, and lending solutions that community financial institutions use to manage risk and drive growth. Our software automates key processes — from anti-money laundering to fraud detection to lending solutions — empowering our customers by addressing their Enterprise Risk Management needs.

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