As 2019 starts to wind down, we start to look ahead to potential problems that the financial services sector may expect in the coming year.
Understanding the impact of these issues will help larger and smaller banks take appropriate measures to enhance both operations and public confidence in the sector.
Government Issues, Regulatory Worries, and Compliance
This area is a perennial cause for concern in the industry, and 2020 looks to be no exception. Here’s what we can expect.
Regulatory changes
For the global financial services community, worries about regulations and compliance provide a constant source of concern. The General Data Protection Regulation (GDPR) passed last year, for example, from the European Union put the onus of protection on companies located anywhere in the world dealing with EU entities.
The EU also listed the protection of personal data as a fundamental human right.
Fines for violations can reach up to 20 million euros or four per cent of the previous year’s revenues, whichever amount is higher.
Regulatory changes in many countries will heighten scrutiny over the creation and delivery of financial products and services.
The United States, and North America in general, serve as an exception to those concerns, at least for now. The US government, for instance, has pulled back on several constricting regulations that had previously stifled the financial industry, as has Mexico.
Brexit Fears
Even with time counting down, the details of Britain’s impending exit from the European Union have yet to emerge.
Although predictions of peril have waned somewhat, the lack of certainty prevents financial services and other companies from being able to prepare for the dissolving of direct ties between the two governments.
Since the vote to leave, many financial services businesses have transferred assets from London to European hubs, anticipating the partial or entire loss of access once Britain formally leaves.
Moreover, the impact of Britain leaving the EU will not be fully understood for some time regardless of the terms of exit, if any. This situation has added to the sense of both urgency and uncertainty.
Cybersecurity
With increasing accountability for data protection strongly suggested in the United States and enforced by the European Union, financial services companies must remain vigilant.
In Britain alone, ransomware attacks increased by 200 per cent over 2018, rising from 2.2 million incidents to over 6.4 million.
Cybercriminals, terror groups, and national intelligence services all have the will and the ability to strike anywhere. And while finding a reliable financial software developer is not an easy challenge, banks and other financial service companies must continue to work with private sector and government groups to promote and enhance operational security.
Ransomware has grown more sophisticated. Attackers now use ‘ransomware cocktails’ to fool defensive systems. Criminal entrepreneurs have also started selling ransom and other malware as a service.
Ransomware continues to score victories. In the past year, notable attacks crippled the city of Atlanta in the United States and a heart hospital in Melbourne.
The financial services community should adopt a unified strategy regarding ransomware, especially concerning whether or not to pay.
Experts also advise taking a multilayered approach to protect vital data and operations.
They must also continue to train staff about IT discipline since most breaches come through an unwitting employee’s email.
Cybercrime and other attacks will continue to create significant concerns far into the future.
Global Financial Services Infrastructure
An important issue that may emerge in 2020 or shortly thereafter lies in the sector overall falling behind public expectations in the use of product and service delivery technology.
Many consumers rate banks poorly on the use of interactive technology, for instance. Improving digital infrastructure requires a significant investment, which may delay implementation. As concepts such as artificial intelligence and machine learning emerge in every sector, banking and finance in many vital areas have started to fall behind the curve.
While this will likely not lead to major breakdowns, it can affect public perception. Customers and clients expect that their financial services will move at the same speed as other businesses.
