Pub. 2 2014 Issue 4

www.uba.org 12 you offer right now compared to what’s out there. You’re not going to go from A to Z in six months,” he said. “Set the groundwork first.” After unviable vendor relationships and launching an outdated product, the third biggest risk for banks launching new technology products and services is reputational risk due to security con- cerns. Sometimes security lapses happen because internal controls at the bank fail, but more often they happen due to poor customer practices. “Many of these technologies are computer or mobile device-based,” Vonder Heide said, “and if the customer doesn’t practice proper computer and device hygiene – keeping security software up to date, et cetera – the bank could be at risk.” Customers’ perception of security can present just as many challenges as secu- rity itself, according to Reed. In a recent ath Power Consulting study of mobile banking, nearly 40 percent of consumers said the reason they’re not using mobile banking services is because of security concerns. Of that 40 percent, nearly 4 out of 5 said their biggest security concern is hackers. “Banks really need to com- municate clearly and consistently about security,” Reed said. “Make it easy for customers to ask questions and get an- swers regarding security.” Security concerns are just one hurdle fueling another risk to emerging tech- nology in banking: customer adoption rates. A bank could potentially invest large amounts of capital into launching a product or service that very few custom- ers actually utilize, which results in both reputational and financial risk for the bank. “Customer adoption boils down to how effectively a bank’s marketing strat- egy sells the value of mobile technology regarding ease, availability, and security,” said Reed. Finally, one of the biggest risks banks must take into account when consider- ing new technologies is the risk of losing customers (both current and potential) due to not offering them the products and services they want. “Don’t keep up with technology and you could lose business,” said Nelson. “If your bank chooses not to offer [technology] services because of security considerations, you will begin to lose customers,” Vonder Heide agreed. “As the percentage of your Gen Y cus- tomer base grows, your bank will shrink.” It’s a Mobile World Gen Y consumers are now in their 20s and 30s. In 10 to 15 years, many will be growing into decision-making roles in their corporate careers. That means attracting and retaining Gen Y customers through technology products and services is becoming a critical strategy for many banks. Mobile technology products may be the key to this tactic. “Gen Y relies on their mobile devices to a great extent, and they demand financial services that are based on mobile technology,” said Vonder Heide, going so far as to suggest that banks that do not offer customers the ability to make person-to-person (P2P) transactions via a mobile device will begin losing customers before the end of 2014. The capability to conduct P2P transac- tions on a mobile device is one of the reasons for the current boom in mobile banking. “It’s a way of life for Gen Y customers,” said Vonder Heide. When P2P first became available to consumers, the individual receiving the funds didn’t have access to them for 2-3 days while the transaction processes. Banks don’t have the luxury of that window anymore. “Today, the expectation is that the funds are available instantly,” Vonder Heide explained. “That’s the new bar that banks need to reach. It’s such a critical area that I advise banks to make that their top technology priority for 2014-2015.” However, the success of mobile P2P will rely heavily on whether banks and their customers can depend on their funds and data being protected throughout the transaction. Reed pointed out that in response to recent breaches of custom- er data, many consumers will seek out different, more secure options for P2P payments. “Banks have an opportunity to gain transaction volume through mobile wallets or other associated applications,” Reed said. Mobile security will be vital for banks to profit by gaining customers and reduce fraud losses, according to Nelson. “The security right now for the phones and applications are only in their first or second phase of development,” he said. “As the security in mobile devices matures and is re-architected, usually phases 3 and 4, there will be much more security built in.” He predicts that as the industry matures devices will become just as secure, if not more, than the current security on PC systems.  Technology — continued from page 11 “As the security in mobile devices matures and is re-architected, usually phases 3 and 4, there will be much more security built in.” He predicts that as the industry matures devices will become just as secure, if not more, than the current security on PC systems.