Banks and financial companies have made it abundantly clear that they don’t care about security.
As much as brick-and-mortar institutions boast of safety, thick walls and vaults simply aren’t enough anymore. The biggest threat to banks is the internet and, more specifically, hackers. But, for all the fear-mongering around internet safety and cyber attacks, these institutions don’t seem to do much in response. They take the hit, and nothing changes.
The consequences for big banks and finance companies is relatively small, whether it be from the hack itself, or from the laws that are supposed to protect their customers.
A recent study by the RAND corporation found that the financial cost of a cyber security breach is around $200,000 for large institutions. Adding in the meager fines levied against banks, this is a drop in the bucket.
But, for customers and small businesses, a cyber-attack is devastating.
Loss of tax information and revenue are one thing, but losing trust in your bank can be even more costly. So, what’s wrong, and what can we do?
We’ve put together a list of the three things bank security is getting wrong. Customer awareness of the issues may prompt financial institutions to improve. Or, maybe it’s time we all moved on to something better.
In an increasingly digital financial ecosystem, it’s unlikely you’ll deal directly with a banker. People just don’t need to go into their bank anymore. In many ways, this makes it easier for financial institutions to close themselves off from clients. A lack of sufficient customer service, unintuitive websites. A recipe for disaster.
But banks making information harder to access is a good thing, right? Isn’t that more secure?
While it might seem like less access to information is better, it actually makes it easier for hackers to invade. Centralized information accessible by only a few people means that hackers know where the good stuff is, and a breach might not be noticed immediately.
The more eyes on your information, the more secure it is.
This isn’t only true of tax and account information though. International and domestic transfers are also notoriously difficult if not impossible to track, especially through banks.
Money in transit is relatively easy to tamper with, and it happens all the time.
If financial institutions make their transfer processes more accessible, the security almost creates itself.
But, these changes can be expensive, and evolving a process that has worked for so long can seem like more work than it’s worth. Especially if you’re a multi-billion-dollar financial institution.
In 2016, Wells Fargo faced a fine for allegedly opening unauthorized credit card accounts for their customers. The bank was fined $185 million for “widespread illegal sales practices.”
Many thought Wells Fargo would see a deficit, or at least change their practices from the news.
They were wrong.
Not only did Wells Fargo see a $20 million revenue increase the following year, the fine barely made a dent.
$185 million was 0.84% of Wells Fargo’s $21.6 billion annual revenue for 2016.
So, how can we expect such a small fine to generate change in one financial institution, let alone an entire infrastructure?
Though internal accountability would be ideal, that’s a bit fantasyland at this stage.
We need legal action taken against institutions that purport to protect our money.
In January, the Data Breach Protection and Compensation Act was introduced to Congress by two Senators. The bill would impose incremental fines depending on the severity of the breach, with some estimating the costs going as high as $1 billion.
If the bill passes, it could be the first step on the way to accountability for financial institutions, and a reworking of our faltering banking system.
In the meantime, customers and small businesses are losing money, time, and patience. It may be time for banks, and their customers, to look elsewhere for financial services.
Amidst all the Bitcoin and crypto chatter of the past year, fintech has gradually entered the financial mainstream.
Startups and established companies offering financial services at cheaper rates, more safely, and faster than the banks are popping up around the world. Many of these companies are operating on the back of blockchain, the decentralized ledger technology behind many cryptocurrencies.
Banks are currently weary to adopt blockchain, but it addresses many of the transparency issues we mentioned earlier. For more information on how it works, check out our guide to blockchain for small businesses.
Banks are falling further behind in the financial arms race as fintech companies become more attractive to individuals and small businesses.
One of the leaders in this space is Veem, a global payments solution for small businesses.
Veem utilizes multi-rail technology to ease the international payments process. Unlike banks, Veem charges no hidden fees, offers favorable exchange rates and the ability to track your payment from sender to receiver.
Veem offers the transparency that banks won’t, so your money is safe and secure.
While banks stumble around innovation, Veem works proactively to find the best way to service small business payments.
What’s not to love?
Try Veem today and get your money moving.