The Green Sheet Online Edition
January 11, 2021 • Issue 21:01:01
Six predictions for financial services in 2021
By Michael Magrath
COVID-19 has created a sea change across enterprises with respect to remote work and a push for digitization. Financial services, and specifically banking, experienced the most disruption, with an accelerated innovation road map that digitized once manual processes including account opening, lending applications, mortgage closures and more.
However, with the rush to digitize, security was often an afterthought. Bad actors took advantage of the new breach opportunities found within increased digital banking platforms and, as a result, we saw a surge in systemic fraud over the course of the year. This was a key learning in 2020, and many financial institutions implemented new digital technologies like facial recognition and biometrics to better identify and stop fraud
With a brighter future ahead, here are my top six predictions for the financial services sector in 2021:
- Remote account openings will gain traction worldwide: Regulators in Hong Kong, Pakistan, Greece, Macedonia, Mexico and Turkey approved remote bank account openings in 2020—a clear indicator that even processes rooted in traditional face-to-face meetings in the branch are now going digital and touchless around the globe.
- Regulation is on the way for cryptocurrencies: As digital banking platforms have experienced massive growth, many governments and industry bodies worldwide have begun to look to Central Bank Digital Currencies (CBDCs) and cryptocurrencies in terms of what they might add to the financial sector. This has resulted in new and refreshed conversations around the possible uses of CBDCs and cryptocurrencies.
- Open banking will grow rapidly throughout the world: As third-party providers (TPPs) are allowed to use banking information to help consumers save money, borrow more easily and pay efficiently, banks will increasingly work with TPPs. In the United States, the Consumer Financial Protection Board issued an Advanced Notice of Proposed Rulemaking on consumer authorized access to financial data, which could be the catalyst for open banking in America. Canada recently announced plans to develop a framework for open banking referred to as consumer-directed finance. In Latin America, Mexico, Brazil, Colombia, Uruguay and Chile are all at various stages.
- Facial recognition will drive the greatest changes to banking regulations: As banks increasingly use facial recognition technology for identity verification requirements, they are housing large amounts of consumer biometric data.
- Many COVID-19 driven actions implemented to sustain commerce will become permanent: In the United States, several governors, including the governor of New York, permitted the use of remote online notarization in 2020 via executive order. We predict this secure and convenient technology will be permanently permissible, post-pandemic through legislation.
- Government agencies will continue to expand data access for private sector organizations to verify the identity of prospective customers: The U.S. Social Security Administration's electronic Consent Based Social Security Number Verification (eCBSV) service is just the beginning. Other agencies at the federal and state level, which historically have been the authoritative source to establish identities, will begin to offer similar services using passport data, current mailing address, driver's license data etc., thereby strengthening the identity verification process and reducing fraud in industries such as banking, brokerage, insurance, healthcare and online gambling.
As technology continues to advance in the financial services industry, banks, credit unions and other financial organizations must find the right balance between adopting innovative technology while keeping security a priority for their customers. Understanding and following current regulations and security best practices are good places to start to ensure that these institutions are held accountable.
However, I believe that we're already seeing a positive shift in how financial organizations are treating and following current security measures. I also think this trend will carry on into 2021, as financial organizations begin to adopt innovative technologies such as facial recognition, digital identities and cryptocurrency to enhance the customer experience.
Michael Magrath, director, global standards & regulations at OneSpan, is responsible for aligning OneSpan's solution roadmap with standards and regulatory requirements globally. He is co-chair of the FIDO Alliance's Government Deployment Working Group and is on the Board of Directors of the Electronic Signature and Records Association. For more information, please visit www.onespan.com.
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