Keeping up with technological advances is only going to get harder in 2017, but to try to cut that challenge down to size, experts suggest focusing on three primary areas: cybersecurity, data and business intelligence and digital-first strategies.
NCUA Chairman Rick Metsger warned that cyber-criminals and cyber terrorists are “increasingly using innovative online services, new ways to transmit financial information and off-the-shelf tool-kits to invade computer networks, snatch personal information and steal money.”
Indeed, with regulators’ eyes peeled for credit unions that aren’t doing enough, credit union IT executives are working overtime on these issues.
“As the safety and security of our member’s funds and the credit union’s assets are our No. 1 priority, we’ll be making additional investments in the maturity of our cyber-security policies, programs, and procedures,” said George Rudolph, senior vice president of operations & technology at Alliant Credit Union, a $9.4-billion institution based in Chicago.
Rick Cranston, vice president of innovation & product development at Mountain West Credit Union Association, agreed.
“Growing areas of risk include security patches, mobile malware, ransomware, and ID theft and fraud, especially involving new payment methods,” he elaborated.
Hackers, Cranston warned, have an ever-increasing level of technology and skill at their fingertips. “Intrusions are inevitable and are happening more and more at credit unions,” he stated. “It’s almost impossible to stop them all at the firewall front-door.”
To battle this growing menace, Cranston said credit unions are all “pushing for increased awareness of the risks that drive companies to invest heavily in both prevention and countermeasures—however, much of that investment goes to waste.”
In general terms, cybersecurity, data breaches, malware and hacking present monumental challenges for all organizations – but financial institutions are particularly targeted by criminals.
According to Gartner Inc., worldwide spending on information security products and services reached $81.6 billion in 2016, up 7.9% from 2015. Until the end of 2020, the highest growth is expected to come from security testing, IT outsourcing and data loss prevention.
Credit unions will surely be joining this fight – given the devastating data breaches that have hit the industry in recent years.
David Townsend, security risk manager at Affinity Plus, a $1.9-billion institution at St. Paul, Minn., said his credit union will maintain a sharp focus on hacking and security risks.
“Our priority is to strengthen our security awareness program,” he said. “Security initiatives frequently focus on a fortress mentality, strengthening the perimeter defenses. That is important, but sometimes insufficient as most modern data breaches begin with the introduction of malware into the environment, generally via phishing.”
While credit unions are working individually to shore up lines of defense, there are also some cooperative efforts to this end, as well. The National Credit Union Information Sharing and Analysis Organization (www.ncuisao.org) has been created to aid in this effort.
“The goal of this national organization is to get pro-active help to credit unions regarding intelligence, operational guidance and information sharing,” Cranston explained. “The intent of the [NCU-ISAO] is to create real cyber-resistance for credit unions across the country.
Collaborative efforts are also underway to find new technologies to reduce fraud, such as CULedger, a credit union-backed team that is working to use distributed ledger technologies, to “proactively prevent fraud instead of just reacting to it after a cybersecurity challenge occurs at a credit union,” Cranston added.
Digital First Strategies
The digital first philosophy is about transferring as much activity as possible to online and mobile platforms in order to increase efficiency and ease-of-use and to cut costs.
“In 2017, we’ll continue to make significant investments in our digital platforms,” Rudolph said. “With the successful launch of our new proprietary mobile banking application in 2016, we’ll be looking to further this investment with additional enhancements, features, and functionality. Other 2017 digital priorities include a full a re-vamp of our existing new member application, lending, and online banking platforms, with a particular focus on streamlining the member experience.”
Data and Business Intelligence
The key to leveraging technology is being able to parse and analyze the data and turn it into actionable business intelligence, Rudolph noted.
To that end, Alliant CU is continuing with its multi-year investment in restructuring its existing data warehouse and “adding the tools and structures necessary to leverage business insights enabling more fact-based decisioning, increases in productivity, and a more customized member experience,” Rudolph explained.
The bad news: technology infrastructure costs will likely increase as credit unions make these types of upgrades. The mission, he said, is to “look for ways to leverage that infrastructure for improvements in efficiency and revenue generating capacity.”
Alliant, he added, like other financial institutions will also “continue to standardize technology practices and platforms, move services to the cloud where it makes sense, and negotiate with our partners to optimize technology operating costs.”