4 Ways Financial Institutions Protect Their Customers

Published On February 25, 2019 | By Clare Louise | Security

All companies, no matter the industry they belong to, need to invest in some measure of protection for their customers, especially in this day and age when crime of all sorts are rampant. Neglecting to do so not only risks their reputation among their customers, it also puts their own business-critical data and finances at risk. This can be very disadvantageous and may drastically affect their revenue-earning capacity in the long term.

Nowhere does this apply more strongly or heavily than in the financial sector, where banks and other financial institutions have to constantly ensure that their customers feel safe in entrusting them with their hard-earned money.By ensuring that they are doing all they can to protect themselves and their customers from threats, they are investing in their long-term profitability while at the same time making themselves a more attractive choice for potential customers.  Doing otherwise jeopardizes their businessbecause this dissuades their existing customer base from keeping a relationship with them due to their apparent lack of security consciousness.

That said, here are some of the ways that players in the financial sector protect their customers.

Financial crime detection and prevention through data analytics solutions

Among the biggest threats to the financial sector are criminal activities like fraud, money laundering, and other similar financial crimes, wherein deception is used by offending individualsto commit acts like stealing money from the financial institution itself, or funneling resources to criminal or terrorist organizations.

To be implicated in such crimes or even just being associated with them can be very bad news to a bank or financial institution, as it ultimately paints them as being very negligent when it comes to security matters at best, and party to criminal behavior at the worst. Whichever the case, it negatively impacts their image among their customers and the public in general.

As such, financial institutions employ software solutions that can help detect fraud and other financial crimes before they happen. By using AI and machine learning solutions coupled with real-time data analysis tools, financial institutions can observe and comb throughvoluminous incomingand outgoing data streams in search for clues that could lead to the discovery of financial fraud, money laundering, and other money-based crimes. From there, the institution can enlist the aid of law enforcement agencies to intercept these activities and bring the culprits to justice.

Data protection through security solutions

Another threat that financial institutions protect their customers from is the threat of cyberattacks. Cyberattacks are electronic hacking attacks perpetrated by cybercriminals in an attempt to infiltrate the network and databases of businesses, usually with the aim of stealing their confidential data. This data would then be monetized illegally, either through selling them in the digital black market or simply holding them at ransom, forcing the victimized organization to pay for their return.

In the financial sector, such attacks could result in the personal and financial information of customers being stolen, which could then lead to further crimes that involve identity theft or identity fraud. An example would be when criminal elements use stolen details to pretend to be someone else beforecommitting more crimes using those stolen identities. The culprits may also use the stolen information to access people’s financial accounts, draining them and using the money for their own purposes. Looking at it in this manner, we can say that when a bank or financial institution is hit by a cyberattack, it’s the customerswho feel the brunt of the damage rather than the bank itself.

Seeing as how serious cyberattacks can be, financial institutions usually invest in the best cybersecurity solutions money can buy in order to prevent them from occurring. These solutions harden computer networks against intrusion attempts and protect them further when an actual intrusion does occur. Such solutions are also proactive in detecting and deleting malicious software that cybercriminals typically use to try and penetrate network defenses.

By integrating such protective solutions into their digital infrastructure, financial institutions can protect itself and its customers from the consequences of cyberattacks.

Financial protection through the adoption of secure banking technology

Financial institutions have also made strides in protecting their customers against card fraud and other petty crimes by adopting more secure versions of their current banking tools. One particular example of this is the slow but steady transition of banks and credit unions from magnetic stripe cards to EMV chip and PIN cards.

How are EMV chip and PIN cards more secure? Simply by providing another layer of security to the information stored in the card. The reason that magnetic stripe cards have always been vulnerable to card fraud is that the stripe itself supplies a piece of unique data that doesn’t change from transaction to transaction. Once a fraudster manages to copy that data, they can then reuse it over and over without consequence, allowing them unauthorized use of the card account.

The EMV chip and PIN card, on the other hand, creates a different kind of information, one that’s unique to every transaction it makes. This information can only be used once, and will instantly be rejected once it’s detected to be reused in another transaction. So, even if the fraudster manages to steal the information during a single transaction, it is made impossible for them to abuse it.

Banks can intensify this security measure further by adding PIN verification to every transaction made by the EMV chip and PIN cards. This requires the card owner to verify their transaction with a 4- or 5-digit PIN code, where usually only a signature would be needed. While certainly inconvenient, it does add another layer of security, as this means that even if the card itself were stolen, it is protected from abuse as the thief would not be able to supply the required PIN.

Other examples of secure banking technology being adopted for the benefit of customers include the construction of more tamper-resistant automated teller machines, more secure banking networks, and so on.

Customer protection through physical security measures

Finally, the financial sector protects its customers by investing in physical assets that secure their facilities and locations against crime. This usually involve certain security measures such as employing armed security staff, constructing indestructible security safes, installing CCTV surveillance systems, and so on. Armored cars and trucks are also used to transport hard cash to and from banking locations. All these measures are geared towards making the financial institution’s physical locations safer for their staff and the money stored within them—and by extension, the customers that do business in these establishments.

Besides protecting facilities from the dangers posed by criminal activities, these measures also have the added effect of making customers feel more at ease in trusting the financial institution with their money. It gives them the assurance that the bank or credit union is taking the threat of crime so seriously that it is willing to invest considerable resources into securing their locations. True enough, the very sight of armed security personnel acts as both a calming sight for customers as well as a deterrent for potential criminals looking to carry out some illegal money-making mischief.

The financial sector: where customer protection is paramount

The security measures listed above may seem excessive, both in scope and in expense. However, since the profitability of financial institutions often rely heavily on customers being able to trust them with their hard-earned money, investing insuch measures is certainly more than worth it. Otherwise, they’llrun the risk of their customers taking their money and investments somewhere else.

Moreover, the unfortunate reality is that the grave threats that such measures protect against are very real and find victims nearly every day, making them all the more important and even mandatory for any financial institution. Anyone looking to make an account or to invest in any bank, credit union, or investment company are therefore advised to check whether the institution they are planning to go with have implemented these measures as a bare minimum.

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