Member Article

Banks Face Security Challenges in Delivering Mobile Strategies

(Download the Global Mobile Payments European Report at Omlis.com)

A recent study on the impact of mobile payment security on financial institutions across Europe has highlighted security, infrastructure, cost and technology as the four major challenges facing most European banks as they battle to maximize profits from the mobile channel. The 2015 study by mobile security technology providers Omlis, draws insight from sixteen of Europe’s leading mobile payment markets and is the third instalment of their global mobile payments series.

South and Western Europe

The study highlights the fact that many Western Europeans are increasingly dependent on mobile centric solutions to execute daily tasks. An increase in consumer spend through the mobile channel and high bank account penetration across the region provides digital revenue opportunities that established banks cannot ignore. Successful mobile focused schemes such as iDeal in the Netherlands that processed over 140m transactions in 2014 and Spain’s hugely successful BBVA wallet that has over 250,000 subscribers and is predicted to reach 500,000 by the end of 2015; go a long way in supporting the growing trend in mobile banking and wallet usage in Western Europe.

UK consumer adoption of the mobile channel has seen it rapidly become the most mature m-commerce market in Europe with projected consumer spend of £14.95bn in 2015. The meteoric rise in consumer digital spend has also seen the UK rank second for banking Trojan attacks globally with 117 recorded data breaches in 2014. As digital only banks execute strategies to increase market share and traditional banks under increasing pressure to further embrace the digital age, the Omlis study indicates that subpar security still remains a key issue as a result of aging banking technology systems and alternative technologies that have been shoehorned to fit the mobile channel rather than specifically built for this space.

Central and Eastern Europe

Central and Eastern Europe (CEE) was identified as “a popular region for mobile payments innovation”. The rapid evolution of mobile driven financial products and services supports this position. Poland was positioned as a clear forerunner in the region, with nine Polish banks commercially operating cloud-based mobile payment services including ING Bank, Raiffeisen Polbank and Bank Millennium. The Czech Republic was identified as a leader in NFC adoption across Europe and VISA Europe’s recognition of Slovakia’s leading role in increasing user adoption of contactless payments further enhances their reputation as contactless payment leaders in the CEE region.

Conversely, the study highlighted Romania as having one of the lowest smartphone and bank account penetration in the region. This has provided “potentially lucrative opportunities” for new entrants such as M-Pesa, who transformed payments in East Africa with their successful mobile wallet solutions, to replicate the same model, providing financial services to 7m Romanians who remain unbanked. Unlike Western Europe, the financial sector in the CEE region is free from aging banking infrastructures, allowing for a more agile approach to exploiting opportunities presented via the mobile channel, which will continue to support the growth of mobile payments in the region.

Northern Europe

According to the study released by Omlis, Northern Europe currently enjoys the highest smartphone, bank account and online banking penetration across Europe. The rapid adoption of mobile driven products come as no surprise as consumers in this region strive for more convenient and immediate ways to access banking activities. Norwegian-based SpareBank 1 found that 60% of their traffic came from mobile and tablet devices while experts from the Bank of Finland have suggested that cash could be phased out by 2030. The sale of Danish m-payment service Paii to Swipp in quarter four of 2014 is seen by analysts at Omlis as “a strong indicator of areas for business growth and competitive advantage”.

The Challenges

According to the study, financial institutions in Europe face four main challenges as they strive to take advantage of opportunities through the mobile channel.

Security and Technology:

“Mobile payment security technologies should be built specifically for the mobile channel rather than shoehorning existing technologies into the mobile space,” said Markus Milsted CEO at Omlis.

“As mobile driven revenues continue to increase, cybercrime will turn its full attention to this channel and subpar security measures could be vulnerable, exposing consumers to the potential risk of real fraud.”

Mr. Milsted added, “Financial institutions are now challenged to adopt a high integrity approach to mobile security as commitment to ensuring maximum security for their customers.”

Infrastructure and Cost:

Ageing and underdeveloped banking infrastructures are seen as unfit to secure the complexities of new and constantly evolving mobile specific technologies. Financial institutions across Europe are challenged with streamlining existing banking infrastructures especially in Western Europe where “many years of system add-ons and patches could have a negative impact on the performance and security of such banking systems.” The potentially costly challenge is to identify technologies that are interoperable with current infrastructures but scalable to support growth as more consumers engage with their banks via the mobile channel.

(Download the Global Mobile Payments European Report at Omlis.com)

This was posted in Bdaily's Members' News section by Helmut Okike .