As Mobile Banking Raises Expectations, Cybersecurity Is More Than An IT Issue

EY’s GCC Digital Banking Report last year revealed that although mobile banking usage in the GCC was still lagging a bit behind the rest of the world, consumers here would be keen to use it if it was simply better, quicker and easier. In September 2016, research from Collinson Group found that 83% of affluent middle-class people in the U.A.E. now use banking and finance apps—more than double the 36% in 2014—and in EY’s study three out of four people surveyed said they would be willing to switch banks for a better digital experience. This represents a huge opportunity for Middle Eastern retail banks. Improving your technology could have a direct impact on your competitiveness in the market and your ability to attract a young and financially savvy crowd—but don’t expect them to be loyal unless you make it worth their while.

Dominique Corradi, Director, MENA Digital Financial Services Advisory Leader at EY, says that the GCC is lagging behind the rest of the world. “According to our Global Customer Banking Survey 2016, GCC banks are not adapting fast enough to new digital needs and are therefore losing their relevance,” he explains. “As a result, an increasing number of customers are now considering alternative solutions to fulfil their financial needs in areas where they were exclusively using banks before. Credit cards and mobile payments are good examples; digital has initially enabled these new solutions and is now accelerating the transition.”

It’s not surprising that banking apps are on the rise, with most of us now using smartphones daily for everything from news to navigation, although the Middle East is still catching up to Western markets. In the U.S., according to comScore, the number of people accessing the media via smartphone apps overtook the number browsing the internet using desktops back in 2014. Germany-headquartered online statistics portal Statista estimates that the U.S. will have 219.8 million smartphone users by 2017, compared to 140.9 million in the Middle East and Africa. Today, 98% of banking customers in the GCC have their own smartphone, but although they use them to manage their diaries, social lives and even fitness regimes, they’re not rushing to use them to manage their finances.

Even among the younger crowd most banking transactions in the region are still carried out in branch or through ATMs says EY, with only 22% of under-35s checking their balance on their phones and only 15% conducting transfers or payments. Looking across customers of all ages and lifestyles, in the U.A.E. 34% use mobile banking, in Kuwait 27%, in Qatar 19% and in Saudi Arabia just 15%. There are many reasons for the low numbers, such as poor user experience or a slow transaction speed, with difficulty in obtaining access scoring high in each country. However, just because expectations are not currently being met, this does not indicate a lack of demand for a decent digital service—and the banks to get there first could find themselves sweeping up eager consumers.

“A few leading banks in the region are transforming themselves to become digital-first, relying less on having a branch network. These banks understand that digital is not only a channel issue, but it affects the complete operating model of the bank,” says Corradi. “This involves a complete digital transformation, which goes beyond the traditional distribution channels, and will often include upgrading the banking infrastructure, reengineering the bank’s operations, developing specific digital assets and re-designing the governance model to foster innovation. This is a complex and disruptive journey; it requires operational agility to succeed, and there are a few success stories in the region.”

As GCC banks recognize the importance of enhancing their digital and mobile services, nearly half are planning on spending between $5 million and $20 million on improving their capabilities over the next five years. However, despite the positive impact this is likely to have on customer satisfaction and therefore profits, there are risks to be faced and overcome, with cybersecurity at the top of mind for both financial institutes and their customers. And they are right to be concerned.

PwC’s 2016 report: A False Sense of Security? Cybersecurity in the Middle East, found that Middle East companies, despite investing in the technology and insurance required to protect against threats, are often let down by a lack of support in processes and governance, with the threat of cyber-attack still seen as a largely IT-based problem as opposed to an issue that affects the whole business and requires an embedded approach.

“Trust is central to any successful business strategy for a digital world and particularly in financial services,” says Mike Maddison, PwC Middle East Partner, Cyber Services Leader and Head of Risk Assurance Services in the Middle East. “Consumers have an increasing expectation that their bank will have appropriate measures in place to protect their information. Trust and reputation that has been built over decades can be destroyed overnight, yet our economic crime survey for the Middle East found that 21% of our company respondents didn’t know if they had been a victim of cybercrime.” Corradi agrees that customers are more complacent, with EY analysis showing that banks are more concerned about protecting customers than customers are about protecting themselves, sometimes even putting themselves at risk for the sake of digital convenience.

In 2015, 18% of the 300 Middle East businesses surveyed were subject to more than 5,000 cyber-attacks compared to 9% globally, and over half (56%) lost more than $500,000 as a result compared to 33% globally. PwC found that these companies were on par with international counterparts when it came to establishing a security framework and having an information security strategy, and yet they are clearly still more vulnerable to cyber criminals. Why is this? The study unveiled three potential answers: Middle East companies rely too much on technology alone being the solution, when in fact technology needs to be supported by employee awareness; the message needs to come from the top, with the board getting involved as much as possible; and cybersecurity is not just an IT issue, it requires an end-to-end approach that includes HR and training.

“Out of 300 Middle East companies, only 37% have a comprehensive security and training awareness program,” Maddison explains. “Financial institutions and consumers can both benefit from mobile banking services, but without establishing a cybersecurity strategy to address the challenges that come with it, financial institutions are at risk of not only losing subscriptions to mobile banking services, but losing customers as a result of reputational damage.

“Cybersecurity threats are not solely an IT issue, it’s a business issue,” he continues. “The Middle East in particular faces an alarming increase in the number of reported cyber incidents, along with a growing number of online users, more assertive regulatory and legislative agendas and high speed adoption of new technologies, businesses in the region are facing new and greater risks than ever before.”

As the speed of innovation gathers pace with no signs of slowing, and as customers become more digitally-minded and expect their services to do the same, Middle East banks need to question whether they have an appropriate and effective approach to security, from the Board all the way through to the branches—even if in the wake of technological advancement, traditional branches may soon find themselves a thing of the past.

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As Mobile Banking Raises Expectations, Cybersecurity Is More Than An IT Issue

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