FSIs—especially recent entries into the field—are shifting to cloud-based architectures, which means the “vault” protecting assets requires rigorous software security and secure cloud configurations.
Frank Morris, managing director with the Synopsys Software Integrity Group, notes that most younger people “don’t even know what a checkbook is. They don’t have phone communications because everything is done through digital chat.”
All of which brings both benefits and liabilities. The opportunities for growth and profit are huge, as a consumer’s or corporation’s entire financial life can be connected to one organization. But, especially for so-called “legacy” banks that have been around for generations, the digital transformation is a heavy lift because their decades-old infrastructure was made for a model that is increasingly obsolete, yet a portion of their (older) customer base still wants that model.
That makes the playing field a bit uneven. The newer, or “challenger” banks, which are tech companies that typically use mobile distribution channels to offer competitive retail banking services, “can move at a very fast pace because they have no legacy infrastructure like mainframes sitting around disparately across 20 different regions of the country,” Morris said, adding that generally they also have a younger and more agile workforce.
On the other side, he said, legacy banks do have the advantage of size, which includes lots of money, but they are trying to run “a massive legacy estate of infrastructure while trying to accelerate their processes, practices, and procedures to keep up with the challenger banks.”
Ian Ashworth, security consultant at Synopsys, said some challenger banks “aren’t even true banks,” and don’t have to reimagine anything because “they’re starting from what amounts to a clean sheet of paper,” while legacy banks must overhaul their infrastructure to stay in the game.
One illustration of the generation gap is credit cards. Ashworth noted that in the legacy bank world, a customer who misplaces a credit card would have to cancel it and then wait several days to get a new one. “But in the new challenger-bank world, you’re on your mobile app and can say ‘I’ve misplaced my card, lock it from all types of transactions.’ So then when you locate it, you just reenable it.”
As Morris noted, there are now virtual cards—no plastic at all. “So each time you use a card on a digital transaction you get a new card number. It can’t be cloned or reused,” he said.