Online banking is central to how Americans approach money management today, and as an offshoot of traditional banking, almost everyone has a stake in it. Despite its importance, though, many people feel anxious about digital banking security; people use it, but not without worries. Many of the innovations devised and implemented by new fintech groups, however, could help banks catch up with modern technology and security demands.
The Blockchain Revolution
Among the many changes we’ve seen recently in online finance is the advent of cryptocurrency, such as Bitcoin and Ethereum, and its underlying technology, blockchain. But although it’s closely associated with cryptocurrency, blockchain is actually an encryption technology, not a financial one, and blockchain could revolutionize traditional banking by making its online version elements more secure. Indeed, major banks are looking into how they can implement this technology to thwart cybersecurity risks.
Online Banking Today
Though there are certainly many risks associated with any online activity today, the majority of major banking issues are actually related to phishing schemes and other outside influences, rather than the banks themselves. That being said, the FDIC – the group that insures banks – has identified three major concerns for banks, specifically adapting to technological innovation, strengthening their own security management, and developing a stronger oversight system for banking cybersecurity.
While the FDIC works with banks to decrease any security risks that might negatively affect clients, it’s important to remember that they do still protect those banks. Unlike new Fintech, online banking is FDIC insured in the event of failure. Though there are other risks, such as hacking, that are separate from flat-out failure, online banking remains safer than most people worry it might be.
A Changing Landscape
Some isolated groups are working to enhance banking security using new technologies, and they are taking legal steps to solidify the changes. This includes a complex move on the part of the Wyoming state government that would allow stocks to be transferred and represented through blockchain databases, with the goal of securing such transfers despite the lack of FDIC insurance. In a broader setting, several major credit card companies are also trying to move into the blockchain space as a means of enhanced security.
Clients Take Control
According to research, 48% of people think online banking presents more opportunities for banks to mishandle their data, but there’s no reason to think this is true. Even if it were, however, that all would be coming to an end soon. Influenced in part by Europe’s GDPR system, banks have made it so that customers have more control over their data, even as digital banking continues to grow. This, combined with increased interest by FDIC regarding banking security, should be enough to boost user confidence, and with tech-savvy Gen Z users taking control of their own finances, these new practices will be put to the test.
Digital banking operations don’t have the same freedoms as Fintech companies, but they do have the support of the FDIC behind them. As the FDIC moves to adopt Fintech’s innovation, clients beyond the Bitcoin economy are positioned to benefit. Hopefully it will provide a measure of confidence to worried users.
