A recent YouGov and IBM survey indicates that 82% of UK citizens prioritize data security and privacy in digital banking due to the Covid-19 pandemic. Additionally, 43% of respondents expressed a desire for banks to introduce more cybersecurity and privacy features.
In an interview with Finextra, Bharat Bhushan, CTO for banking and financial markets at IBM, highlighted that the rise in scams during the pandemic has fueled these concerns. He stated, “The scammers and fraudsters potentially have access to some of the data that has been lost over the last few years, combining it with social engineering skills to exploit our human vulnerabilities.” Bhushan emphasized that banks are also under attack, making it increasingly challenging for financial institutions to distinguish between legitimate customers and malicious actors.
When discussing how banks can address these issues and build trust, Bhushan pointed to ongoing consumer education initiatives. He stressed the importance of accelerating digital transformation, noting that financial institutions are transitioning to cloud technologies and adopting emerging solutions like artificial intelligence (AI) and data analytics to enhance security. He advised that banks should utilize trusted third-party solutions quickly to avoid lengthy validation processes.
The pandemic has prompted more customers to shift toward digital banking, with a 15% decline in visits to physical branches following the end of the first lockdown. However, YouGov found that only 15% of respondents held digital-only bank accounts. Bhushan remarked, “The pandemic acted as a catalyst for digital service adoption among consumers and compelled banks to innovate self-service channels due to branch closures.”
Although digital service adoption spanned all age groups, certain trends became evident. Younger individuals expressed greater concern over their finances, with only 22% of 18-24-year-olds and 26% of 25-34-year-olds feeling unconcerned, compared to 55% of those over 55. Notably, 62% of 18-24-year-olds expressed a desire for assistance from their banks in managing their finances and planning for the future, while other age groups averaged 34%.
Younger demographics also showed a keen interest in AI integration within banking. Bhushan noted, “Historically, AI has been misunderstood. Over half of those under 34 want their banks to use AI, indicating a rise in digital literacy as more people become accustomed to mobile apps and digital services.” This contrasts sharply with the 52% of those over 45 who opposed increased AI services.
One aspect of AI that appeals to younger consumers is chatbots and text-based messaging services. Approximately 48% of 18-24-year-olds and 49% of 25-34-year-olds stated they were comfortable conducting banking transactions through text-based messaging, either with a bank employee or an AI-powered assistant.
In response to these findings, IBM made three recommendations: First, “adopting security frameworks suitable for the cloud era,” advocating for their ‘confidential computing’ solution to protect data in the cloud. Second, they emphasized the need to “deliver innovation that matters, faster,” noting that many banks can take up to two years to implement new technology solutions due to regulatory hurdles. Lastly, they advised banks to “enhance digital customer experience with AI,” underscoring the importance of meeting customer needs effectively.