Cyber security: the biggest barrier to financial innovation

According to a study conducted by international law firm Simmons & Simmons, 71% of the world’s largest banks and asset management firms have said cyber security is the biggest risk associated with working with FinTech firms.

Breaking this down, in Germany 64% felt this way, while 70% did in Hong Kong + Singapore 70% and an overwhelming 78% in New York.

The study has shown how many large financial institutions are struggling to innovate fast enough, and the figures prove that data security is a hurdle that needs to be overcome in order for banks to feel confident about partnering with FinTech firms.

>See also: Open banking: a financial revolution?

The desire to work with FinTech partners is there, but 71% said greater visibility of  these FinTech firms’ cyber security controls would help improve partnering capability.

Some realise, however, they might not have a choice, with 75% acknowledging the need to improve partnering capabilities to stand any chance of accelerating their digital innovation.

A further 60% also believed that the security of the environment in which new digital solutions are being tested is another area of concern.

Alex Brown, head of TMT at Simmons & Simmons said: “There is no doubt that established financial institutions need to look at new forms of technology and partnering solutions if they are to escape from the chains of their legacy IT systems and adopt innovative technology solutions.”

“At the same time, though, not only are they encumbered by their legacy systems, the increasing weight of data protection and financial regulation make data sharing with third parties or adopting innovative technology solutions steadily more difficult. However, there is a real economic imperative to share data with partners to help provide better services to customers. Those that don’t find ways to innovate will be left behind.”

>See also: Back to the future: what will financial services look like in 2017?

While it is agreed that successful collaboration with FinTech firms is essential for innovation, most large institutions (75%) admit they are poorly equipped to address the factors prohibiting progress.

Hyperfinance, the firm’s flagship research programme, investigates what large banks and asset managers need to do to succeed in accelerating their digital innovation and overcome the challenges they face. The firm surveyed 200 senior level respondents (30% at c-suite level) across five financial centres.

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...

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