Virtual Banking and Security in the Post-Cash Age

Virtual banking is one of the fastest-growing financial innovations, with a quarter of adults in some countries now having a digital-only bank account.

The global total of virtual banking customers will pass 2.5 billion by 2024, with the number of accounts expected to almost quadruple for the period 2020-2026.

With so many opportunities that virtual banking brings, it also raises some serious security questions.

What cybersecurity challenges do modern virtual banks face? How are they dealing with them?

Lets find out.

Virtual banking around the world

The time, when nobody will leave their house to use a bank, is just around the corner.

The world leader in virtual banking is Brazil, where 32 percent of adults have a digital-only bank account. Southeast Asian countries are close behind with some of them having almost a quarter of their population using virtual banks:

Ongoing concerns for virtual banks

While most digital banks have implemented the latest technology and adapted it to the market, the virtual banking scene is still challenging.

Adapting to regulations more suited to traditional banking

Virtual banks are exposed to cybersecurity problems on a new level of complexity. They have the problem of complying with laws that have not kept up with advances in online banking. Some regulations consist of principles rather than clearly defined rules, and it’s sometimes difficult to reconcile new technology with laws that never anticipated it.

Keeping technology up to date and legally compliant

On the other hand, virtual banks must ensure their technology is adequate from a legal and operational point of view. Banks usually use recently developed software from many third-party vendors, and it’s vital to ensure that all of it complies with the standards imposed on financial institutions. Although technology is outsourced, accountability is not. Any technical fault is the bank’s responsibility.

Facing the growing number of cyber threats

There is no industry where cybersecurity is more vital than banking. Not alone does the system need to be secure; it needs to be seen as secure. Even a cyberattack that doesn’t result in any theft will seriously compromise the reputation of any financial institution.

Ways virtual banks protect your money

Even though online bank fraud has been increasing in both volume and sophistication in recent years, virtual banks have greatly succeeded in protecting customers’ assets.

Much of this progress consists of secure customer identification techniques and data protection.

Encrypting your data

One of the fundamental, indispensable security measures is data encryption through a virtual private network. For virtual banks, a VPN allows their staff to safely connect to the office servers if needed. On the other hand, when a client uses a VPN, it scrambles communication to make it unreadable by anyone except the client and the bank. If you want to get some extra knowledge, you can learn more about VPNs here.

Providing customer authentication

Blocking unauthorized access is paramount to internet banking security. Customers get a one-time security code to log in after they type in the preliminary password and PIN. Normally, the customer only keys in part of a password and PIN by clicking on boxes on the screen rather than using the keyboard. This method makes it harder for cybercriminals to steal customers’ login details.

Using biometric identification

Some virtual banks are now using biometric identification to ensure secure logins without the risk of impersonation. Such identification can include fingerprint or iris recognition. In addition, there is the science behind behavioral biometrics. The program tracks unique activity patterns such as tapping a screen or moving a mouse to determine whether they’re a trusted customer or a fraudster.

Spotting scammers’ tools

Virtual banks also use methods that help them to detect technology used by online fraudsters, such as proxy servers and the TOR browser. These methods alert banks when someone wants to conceal their IP address to misrepresent their location and steal funds.

Adding customer alerts

Virtual banks also apply security measures for their customers, such as text or email alerts that inform clients of any potentially fraudulent or suspicious activity. This way, customers can immediately block any transactions once a fraud attempt is detected. At the same time, it helps to monitor all account activity in real-time.

Fighting against phishing and identity theft

Some of the most common types of fraud in virtual banking are phishing attacks and identity theft. While the first one involves fake emails, the second one is about stealing money using a genuine customer’s login details. Fraudsters open virtual accounts using another person’s identity and conduct financial operations on their behalf. To prevent these threats, some virtual banks use a secure email system. It cuts off one of the primary sources of how thieves get sensitive information.

Despite the growing number of challenges that virtual banks face, they can keep their customers’ money safe by implementing the latest cybersecurity measures.

Featured image credit: Photo by Franck via Unsplash