Fintech is increasing operational risk to banks
More than half of banks in Europe count on a rise in an operational threat to their organization over the subsequent year, based on the main report from the European Banking Association (EBA).
The EBA mentioned perceived operational dangers have escalated over the previous three years, with banks’ fast transfer to fintech fuelling the most recent surge.
According to an EBA survey of banks, 55% of respondents anticipated operational dangers to extend over the subsequent 12 months. This is soar from the 43% that mentioned so in an analogous examine year in the past, and 35% that mentioned so the 12 months earlier than.
A current concern is pushed by the rising reliance on digital platforms to supply buyer companies which have elevated the chance of cyber assaults and IT failures. “[Digital] opportunities are accompanied by a number of new pockets of risk,” mentioned the EBA report. “In this regard, cyber and information safety are key threat drivers.
“An excessive and rising reliance of banking operations on IT platforms, digitalized product channels for banking companies, outsourcing to third-party suppliers of IT-related duties and features and communication networks renders banks weak to operational dangers.”
The survey additionally discovered that 42% of respondents determine cyber threat and information safety as the principal drivers for growing operational threat and 16% cited IT failures as an element.
The EBA mentioned outsourcing, which banks are utilizing more and more to entry new expertise, can also be a significant threat. Although it’s not the one operational perform outsourced by banks, IT outsourcing is turning into extra vital.
“While banking operations have become increasingly dependent on IT platforms, cost pressures and operational challenges have contributed to an increasing reliance on third-party service providers, to which a range of IT services and data are outsourced,” mentioned the EBA. “Notwithstanding its benefits, the outsourcing of IT services and data poses security issues and challenges to governance and controls, as well as to data management.”
The organization mentioned it’ll replace the Committee of European Banking Supervisors’ tips on outsourcing on account of the elevated significance of IT to banks and the rising use of cloud companies.
Fintech is growing operational threat to banks.
Publish Date: 2017-11-28 08:52:28