By Nick Weston, Director Product Management
Security concerns are widespread among consumers, with 45% of Americans reporting they have experienced a security or privacy issue with their financial institution, according to research by The Harris Poll and Apiture. Topping the list of issues are identity theft, data breaches, and phishing attempts.
Younger generations are especially security conscious, with 60% of Gen Z and 54% of millennials considering security a top factor when choosing a financial institution. Almost a third of these consumers spread funds across multiple accounts to mitigate risk from fraud, compared to 18% of Gen X and boomers who do so.
Consumers are counting on institutions to invest more in cybersecurity and employ security measures like multi-factor authentication to protect their money and confidential information. Financial institutions must prioritize a strong security strategy to maintain consumer trust, retain existing account holders, and attract younger generations who prioritize fraud prevention.
Security Concerns Impact Churn
Though consumers most often choose a large bank as their primary financial institution, about half would be willing to switch to a community bank (52%) or credit union (47%). Of this group, younger Americans are the least satisfied and the most motivated to switch institutions. Among the reasons they would switch are:
- Not trusting any large national banks: 21%
- Security and/or privacy concerns: 15%
- Concerns about downtime: 6%
Adding to consumers’ fears are highly publicized security breaches at large banks. Two security breaches — Flagstar Bank in 2021, affecting 1.5 million customers, and Capital One in 2019, impacting almost 98 million customers — resulted in account holders’ personal information being exposed.
On top of the bad publicity, both bank brands also suffered financially from these incidents. Flagstar paid $3.5 million to the SEC for misleading statements about the cyberattack, and Capital One settled a $190 million class action lawsuit with affected customers. After the fallout, both institutions had to rebuild trust with existing account holders and the public. Given how important trust is to a financial institution’s success, breaches like these demonstrate how critical it is to employ a robust security strategy in this competitive market.
Strategies to Meet Users’ Security Expectations
How can your financial institution ensure you have the right tools and measures to keep account holders safe? A digital banking provider that adheres to industry standards like SOC 2, FFIEC, and NACHA, and passes regular audits can help. Make sure you partner with a provider that can help you maintain strong security — from the safeguards it builds into your digital banking platform to integrations with innovative tools that provide real-time notifications.
By establishing a strong, secure framework for digital banking, you display a commitment to account holders that you care about their concerns and have taken steps to protect their funds and confidential information. Additional strategies to help you boost security within your digital banking platform include the following:
- Provide security and fraud tools that proactively protect payment processes: Ensure that certain tools— including check and ACH positive pay or fraud prevention within bill pay — are part of your digital banking toolset. These safeguards can help your institution prevent fraud by detecting and responding to suspicious activity before funds ever leave users’ accounts.
- Strengthen identity verification and authentication processes: Incorporating multi-factor authentication within security controls can help your institution protect information systems, accounts, and data. These processes especially appeal to 83% of Gen Z and 86% of millennials, who expect your bank to have two-factor authentication in place.
- Consider a tool that enables continuous monitoring, real-time alerts and strong cybersecurity protocols: A majority of the youngest generations, Gen Z (81%) and millennials (87%), believe their bank or credit union should invest more in cybersecurity. A tool like DefenseStorm, which leverages around-the-clock fraud detection and real-time reporting can help your institution identify high-risk areas and provide immediate notification when certain events occur. And DefenseStorm’s solution can enable your institution to initiate certain actions on a user’s profile — including terminating a session, locking out a user or stopping money movement — when it detects suspicious activity.
- Communicate risk efforts to account holders: Be transparent about your security strategy and fraud policies. Remind account holders frequently about good security habits, share information about ongoing scams, and provide them with tips to stay safe. Also, based on new guidance from the FIDO Alliance, encourage account holders to use passkeys instead of passwords to simplify authentication.
Appeal to Consumers Across Generations With Strong Security
Financial security is important to all account holders, and a strong security policy is essential to keeping them satisfied. Meet their needs by choosing a digital banking partner with appropriate fraud and risk protocols in place as well as integrations with best-of-breed fraud and security partners. Additionally, as security concerns continue to shape consumer preferences, be proactive with fraud prevention measures, implement strong authentication processes, and communicate transparently about your security efforts. Such efforts will cement your commitment to existing account holders, as well as help you attract younger, more security-conscious consumers to your institution.
Learn how to better navigate security concerns by contacting Apiture today.
