The Biggest Threats to Banks

The Biggest Threats to Banks

Today’s financial landscape is very different to that of yesteryear. Countless new business practices, regulations and compliance procedures have emerged, while technological innovation has rapidly changed business models and operational processes.

Those who wish to access financial services are no longer limited to the banks on their local high-street; technological advancement and an influx of funding has provided options while opening doors to a previously unbanked population. This, along with increased regulations and cyber-security risks are just some of the modern-day threats to banks.


Technology-based financial services have been leading the charge to ‘bank the unbanked’, making daily financial operations accessible and user-friendly for almost everyone – especially people who had no access to banks before. By banking the unbanked, FinTech is likely to prompt traditional players in the sector to innovate, in turn, accelerating a regime change. Implementing a robust digital identity verification process can positively impact the economic opportunities and welfare of those excluded from gaining financial services.

Removing the hurdles created by traditional banking and traditional methods of onboarding can help open doors to financial inclusion for these ‘thin-filed’ customers. Where these customers usually have some form of identification, they often lack the documentation and credit records required by traditional financial institutions to assess creditworthiness and perform consumer due diligence.

We recently explored how FinTechs are engaging millennials and Generation Z; 1 in 3 adults under the age of 37 in the UK, say their primary banking relationship is with one of the host of challenger banks now available. But, according to finder, almost a quarter (23%) of all British adults have opened an account with a digital-only bank and two-thirds of banking customers say they plan to convert fully to a digital bank in the future.

FinTech companies are capitalising on a willingness to incorporate technology into their banking by creating convenient, intuitive and personalised mobile apps. In our recent podcast episode with Dimitris Litsikakis, Global Head of FinTech at deVere Group, we discussed the wider implementation of ‘super-app’ wallets, which will house customers’ entire financial footprint.

Finder also found that customer sentiment towards 10 of the UK’s biggest banks fell by 7% during lockdown. This leaves overall consumer sentiment for the banking industry at -24% (on a possible scale of +100% to -100% for the period between 1 March and 31 July).

High-street banks had, and continue to have, a much lower overall sentiment than digital-only banks (-35% vs -13% currently). But, in the UK the ‘big five’ banks – Barclays, HSBC, Lloyds, Royal Bank of Scotland & Santander – still account for 80% of the overall UK retail banking market.

Increased regulations

The increased regulation of the banking industry since 2008 brought the risk of misinterpretation of new regulations as well as risks arising from failure to implement the necessary changes to keep up with regulatory expectations.

Neglecting regulatory compliance can come at a considerable consequence; some institutions have been put out of business by enormous non-compliance fines and some big brands have suffered huge reputational damage. But, completing manual identity proofing measures in order to remain compliant can lead to long and cumbersome account opening processes that drive away new users. 

Traditionally, when performing some form of identity verification or onboarding, businesses would require a person to carry out manual reviews of identification documents. These outdated processes can be time-consuming, frustrating and create a poor user experience for customers who may be likely to move to a competitor. 

One of the main reasons for customer abandonment is the speed of the onboarding process. If your process takes days or even weeks to arrive at a decision as to whether a customer is being approved or disapproved, they’re very likely to go to a competitor where they can be up and running in minutes.

Manual reviews by humans are also more prone to errors; too many false negatives mean that fraudsters are slipping through the cracks, too many false positives mean legitimate users and transactions are being flagged incorrectly, leading to undue friction and lost business. Fraud prevention solutions aren’t effective unless they can tell good users from bad and implement different processes for each.

The challenge going forward is to meet regulatory requirements without adding friction and delays, which lead to customer frustration and drop-offs.

Cyber-security risks

Bank executives and banking experts list cybercrime as the leading risk for banks. It is estimated that in 2019, criminals made $4.2 trillion from fraudulent activity worldwide and around half (54%) of fraudulent incidents in the UK were cyber-related.

An accelerated adoption and use of digital technology has had a massive impact on the way we live our daily lives, but it’s also had an impact on how exposed our identities can be to fraudsters.

According to Barclays Bank, there was a 66% increase in reported scams in the first six months of 2020 compared with the last six months of 2019. Fraud volumes also rose 61% between May and July this year.

There are a number of reasons fraud has risen, the global pandemic for one but mainly:

  • A greater number of mobile transactions.
  • More sophisticated synthetic IDs.
  • More goods and services are sold online.
  • More cross-border transactions.
  • More automated botnets.

These scenarios are more susceptible to online fraud and in the current economic climate, it’s never been more important to ensure anti-fraud measures are up to scratch. More than 2 in 5 consumers worldwide have experienced a fraudulent event online, and according to PwC’s bi-annual Global Economic Crime and Fraud Survey, 47% of companies have experienced fraud in the last two years.

How we can help

Occupational fraud is on the rise and fraudsters are getting smarter, but with the right partner and tools, you can minimise the risk of fraud to your business and customers.

Here at Acuant, we utilise digital data gathered from a range of sources such as digital footprint verification, document authentication, facial recognition matching, liveness verification, live utility data address verification and CRA identity checks. Working together, these sources can act as a catalyst for creating digital identities and improving financial inclusion. The added benefits for an organisation when using these data sources is that they provide additional insights into a consumer behaviour, likes, dislikes and background.

Traditional checks, such as using credit history mean that many good customers are turned away. A vast number of younger people do not have CRA data so if this source is used, they are rejected. Equally in countries with thin files, where traditional data does not exist or is scarce, our product offering can be used to qualify and verify new customers.

We’ve a comprehensive family of KYC and AML solutions all working together and delivered via a single API integration. Using this wide range of data, we provide a unique, real-time ID scoring system which intelligently verifies identity and can be sure your customers are who they say they are. Our global ID, KYC & AML platform, Sodium, is designed to help save you time and money, streamline your customer journey, automate your onboarding process, reduce fraud and achieve regulatory compliance. One simple integration; a flexible 360° solution which is scalable and secure.

Utilise a single element or multiple processes – it’s entirely up to you. Learn more about how we can help to automate and simplify your verification processes to help you to learn more about your customers. 

Book a demo today and see for yourself how powerful our suite of solutions are.


Let's Talk Support