It is becoming increasingly clear that the role of risk management and security must be elevated throughout the financial services and banking markets. More and more financial institutions are focusing their efforts on both physical and cyber security. Modern technology has resulted in a society that is always connected, but this might be a problem for the banking industry. Modern technology has resulted in a society that is always connected. However, the weight of a humongous number of users can be overwhelming and extremely burdensome for many banks and cause a serious crisis."
Tech’s raid on the banks
May 2.– Over the past two decades people across the world have seen digital services transform the economy and their lives. Taxis, films, novels, noodles, doctors and dog-walkers can all be summoned with a tap of a screen. Giant firms in retailing, carmaking and the media have been humbled by new competitors. Yet one industry has withstood the tumult: banking. In rich countries it is perfectly normal to queue in branches, correspond with your bank by post and deposit cheques stamped with the logo of firms founded in the 19th century.
Yet, as our special report this week explains, technology is at last shaking up banking. In Asia payment apps are a way of life for over 1bn users. In the West mobile banking is reaching critical mass—49% of Americans bank on their phones—and tech giants are muscling in. Apple unveiled a credit card with Goldman Sachs on March 25th. Facebook is proposing a payments service to let users buy tickets and settle bills (see article).
The implications are profound because banks are not ordinary firms. It is one thing for Blockbuster Video to be wiped out by a technological shift, but quite another if the victim is Bank of America. It is not just that banks have over $100trn of assets globally. Using the difficult trick of “maturity transformation” (turning deposits that you can demand back at any time into long-term loans) they enable savers to defer consumption and investment and borrowers to bring them forward. Banks are so vital that the economy reels when they stumble, as the crisis of 2008-09 showed.
Bankers and politicians may thus be tempted to resist technological change. But that would be wrong because its benefits—a leaner, more user-friendly and more open financial system—easily outweigh the risks.