Banking

One of the largest financial cybercrime events in history happened in early 2016. Hackers successfully breached Bangladesh Bank’s systems and attempted to steal nearly $1 billion from its account at the Federal Reserve Bank of New York. By the time it was uncovered, the heist had netted hackers more than $80 million.

In 1965, Gordon E. Moore, co-founder of Intel and Fairchild Semiconductor, predicted the amount of transistors in a dense integrated circuit would double every two years. He theorized that processing technology power, bandwidth and storage capacity would progress at the same rate. By 2015, that pace of advancement had slowed only slightly to closer about two and a half years, but his predictions largely have held true.  We are in an age where technology is increasing so rapidly, it is no longer just changing. It is transforming.

As we are all aware by now, data breaches are a fact of life for most businesses – and in particular for businesses that collect or engage private customer data within an internal electronic network. The annual Ponemon Cost of Data Breach Study: Global Analysis report provides indisputable evidence that cybercrime is a permanent risk organizations need to be prepared to manage.[1] In particular, highly regulated industries (i.e., financial services and healthcare) have the most costly data breaches because of fines and the higher-than-average rate of lost business and customers.

Verizon’s Data Breach Investigations Report (DBIR) is the most comprehensive and cited source of statistical data and trends related to cyber security incidents. Data breaches are traced, categorized, and analyzed to provide intelligence used by security organizations and businesses of many types and categories.

We recently shared some statistics that demonstrate the cost of cybercrime by industry. Particularly, that the annual combined loss from cybercrime in the US exceeded $525 million (USD) in 2015. While financial institutions have the highest risk of threat and the highest average annual costs caused by cybercrime, virtually every industry is at risk. 

From May 11-15, 2016, more than 600 bank industry professionals participated in the 128^th annual Mississippi Bankers Association Convention. Held in beautiful Sandestin Florida, this conference offered participants time for professional, social, family, and leisure.

Since 2015, an estimated 4,000 fintech (“finance” + “technology”) firms have come into the marketplace, garnering more than $25 billion in capital. While that number is only a fraction of the value of the traditional banking industry, these companies are disrupting traditional financial businesses as they gained their share of customers. The influence of this market disruptor is undisputed. App based financial providers like Square, PayPal, Apple Pay, and Venmo came on the scene and quickly revolutionized how consumers exchange money.

As of 2015, companies in the United States reported annual combined losses exceeding $525 million (USD) due to cyber crime. The majority of these losses stem from malicious code and denial of service attacks. [1]

"The biggest difficulty in Fintech is predicting when the banking defenses begin to come down, as they realize they have to react to the fact that banking services are going to be delivered digitally. Those bricks are coming down one brick at a time, unfortunately, as opposed to the wall coming down. But they are coming down, and my advice is don’t burn all your money thinking you can knock the wall down. But if you’re sharp and pay attention, and you can tailor your product and spend to the right trajectory, you can pace it so as the bricks come down, you’re able to go over the top." - Pete Kight, VC, Founder of CheckFree

A few months ago, the HORNE Banking team put together one of our most widely read and shared posts of all time, entitled Hey, Community Banks. This is What Really Matters to Your Millennial Customers. In it, we cited research from the Pew Institute highlighting that the value and power of this group come somewhat from its size: “By 2020, it is estimated that one in three Americans will be labeled a Millennial – and by 2025, 75% of our workforce will be composed of Millennials.” We noted the importance of technology, social media and personalization for banks trying to engage a generation that has more members in the U.S. Labor Force and that is the most diverse, well educated and well informed in our history.

The HORNE Banking team has been active lately, going to select conferences around the Southeast to gather insights about the current and future state of the banking industry. Most recently, I attended the Mississippi Young Bankers (MYB) Study Conference and Convention. In its 66^th year, this event is a chance to learn and network with the future banking industry leaders.

My HORNE Cyber Solutions colleagues and I just spent two wonderful days at the annual Alabama Banker’s Association (ABA) Bank Operations and Management Summit. Talks and discussions during the event centered on three overlying themes. We have discussed some of them previously in this blog, and all are pertinent to your banking organization.  

Over the course of working with a variety of banks, I have seen numerous approaches to the audit committee role. In the best cases, the audit committee works in collaboration with the internal audit (IA) group, the external auditor and management toward a set of common goals. In others, work groups are compartmentalized and focused on their own work, not sharing information or goals.