The Risk of Jaded Consumer Attitudes Toward Cybersecurity

The financial industry has increasingly been a target for cyberattacks as banks accelerated their digital transformation initiatives to maintain operations during the pandemic. While protecting against cybercrime has always been a top priority, the complexity and volume of attacks indicate that cybersecurity will remain one of the most important tasks banks face.

Consumers are feeling the impact, too. A recent CSI survey found that 85% of Americans reported cybersecurity concerns when it came to their personal confidential data. But that figure is down from 92% of Americans expressing cybersecurity concerns in a 2019 survey from CSI. The number of respondents not concerned about cybersecurity increased 7 percentage points compared to 2019, which could indicate that many consumers are becoming desensitized to cybersecurity risks.

It’s possible the size, scope and frequency of cybersecurity attacks makes these breaches appear abstract and distant to the average American. The constant media coverage could also contribute to a broader jaded attitude toward the seriousness of cybercrime risk that some consumers now hold.

When taking these factors into consideration, it is likely that a growing percentage of bank customers have fatalistic acceptance of cybersecurity breaches. As evidenced in CSI’s survey, this acceptance has resulted in lower security standards and more lenient practices in customers’ personal lives, which could ultimately increase the likelihood of their becoming victims of cyberattacks. And broader adoption of this mindset among consumers could have further adverse effects for financial institutions, making cybersecurity education a top priority for banks.

While cyberattacks may seem inevitable, there are consequences for financial institutions and consumers alike. There’s no doubt cyberattacks can cost banks money to resolve, but there are also reputational implications that can be harder to overcome. Banks that experience a cyberattack may face lower customer retention and adoption rates due to their tarnished reputation post-breach. According to CSI’s survey, nearly half of respondents (48%) strongly or somewhat agree they would leave their institution if it suffered a breach.

Additionally, consumers who are lax with cybersecurity awareness increase the risk they’ll fall victim to cyberattacks, including, but not limited to, identity theft and stolen card information. Due to the vast amount of time and resources often needed to resolve these threats, banking customers should take precautions to protect themselves. And to mitigate this risk and prevent attacks, institutions should, in turn, provide education and promote good cyber hygiene to their customers.

According to CSI’s survey, 69% of respondents claim they know what to do if their personal information is compromised. However, additional research suggests that consumers may be overconfident in this assessment. The Norton Cyber Safety Insights Report revealed that 46% of Americans don’t know what to do if their identity gets stolen, and 40% admit they don’t know how to protect themselves from cybercrime.

This data suggests an opportunity for banks to educate their customers about how to react when they notice suspicious activity and ensure that customers can easily obtain assistance if they suspect a breach. Banks that prioritize customer education have the potential to become experts in cybersecurity advice and resolution, which could expand their market reach.

As the frequency of cyberattacks continues to increase, it is vital that bank customers recognize the signs of cyber threats and react appropriately to suspicious activity. Their awareness is an important first step in the fight against cybercrime; as evidenced in the survey, awareness among consumers on the importance of cybersecurity needs to be higher than its current level. Banks should create tailored campaigns to educate their customers and provide actionable tips and insight on how to best protect themselves from attacks.

Looking ahead, banks should also embrace a layered approach to cybersecurity to strengthen their defenses, including continued customer education that reinforces the importance of cybersecurity awareness and best practices for staying secure. Banks that provide valuable education and promote cybersecurity awareness have the opportunity to increase new business through knowledge sharing while retaining current customers by building trust and maintaining strong brand reputation.

Banks Are Missing Out on America’s Most Financially Active Demographic

Despite continuous setbacks, women are more economically powerful in America than ever before. This is a prime opportunity for banks to capitalize on women’s unique banking demands, both as customers and in terms of employment.

Women were disproportionately impacted by the coronavirus pandemic, causing a further growth in gender financial disparities. Unemployment among women increased compared to men, according to a study by the UN Capital Development Fund; additionally, millions of women left the workforce to prioritize caregiving responsibilities.

The pandemic comes in the midst of what is expected to be the greatest wealth transfer in history that is expected to occur in the next decade. More than $30 trillion of wealth could be passed from baby boomers to their children and heirs. Women’s share of private wealth is expected to grow dramatically.

Additionally, women own and operate two-fifths of small to mid-sized businesses — yet 70% of them still have unserved or underserved credit needs, according to a recent IDB Group study. And more than two-thirds of female entrepreneurs are opening businesses because they see clear business opportunities, not just out of necessity.

The economic tables are turning. Women are now the primary breadwinners in the United States and now earn the lion’s share of household income overall compared to any other banking demographic. Nearly two-thirds of mothers last year were either breadwinners or for their families. More that 40% of women are working mothers whose income makes up at least half of their family’s total income.

For women in America, one size does not fit all. Financial inclusion — which extends far beyond a bank account — leads to economic empowerment. But “bank accounts can be powerful tools in the hands of women who are determined to take more control over their lives,” says Greta Bull, former CEO of the Consultative Group to Assist the Poor. So, let’s start there.

How Banks Can Capitalize
How well do the current banking conditions look, given that women control of more dollars than ever before? As the new default users of financial products and services, women are making spending decisions — lots of them.

It’s not enough for banks to use targeted marketing that features bright-colored content and fancy font types. Those and other stereotypically feminine marketing strategies are never going to work, especially when it comes to banking.

The problem isn’t that women aren’t being exposed to attempts from banks to acquire new customers. From my personal experience navigating the banking industry as a female customer, I can say it’s actually very much the opposite. I am constantly bombarded by the same cookie-cutter attempts to draw my attention to the same untailored banking products or services over and over again.

The problem is that banks aren’t offering anything that meets the needs and preferences of the female demographic. They need to systematically rethink their banking practices and how they address the users of their banking services.

It’s estimated that more than 3 million women are seeking restart opportunities. Several consultancies focused on restarts — such as Après, iRelaunch, and reacHIRE — have launched in the last few years. These companies, and others, help financial institutions and other organizations develop restart channels within their inclusion programs and help identify candidates. Banks are also launching financial products and services tailored to the specific needs of women entrepreneurs, as they increase the quality of their portfolio while having a social impact.

“What [these banks] offer ranges from women-targeted loans for working capital and investments to credit cards, housing loans, programmed savings, checking accounts and insurance products. This offering is further complemented by non-financial services including networking events for women entrepreneurs and training programs,” the IDB Invest wrote in a piece about how banks can attract more female customers. “Given women’s comparatively better savings behavior, demonstrated loyalty to banks and lower credit risk, many banks aspire to be the financial institution of choice for women in the region.”

These banks are on the right track. Women won’t enjoy doing business with any financial institution that considers men their default user. It is time to change the dynamic between women and banks. It is urgent that banks act on this as soon as possible if they desire the greatest return from investing in diversity and inclusion programs. They need to embed actionable plans that create more financial inclusion for women as part of their long-term business strategies.

A ‘Call to Action’ mindset will drive diversity within firms to showcase more tech innovations and increase productivity. The more that women work, the more economies grow. Simply put, women’s economic equality is not only right — it’s good for business.

Four Ways Banks Can Cater to Generational Trends

As earning power among millennials and Generation Z is expected to grow, banks need to develop strategies for drawing customers from these younger cohorts while also continuing to serve their existing customer base.

But serving these younger groups isn’t just about frictionless, technology-enabled offerings. On a deeper level, banks need to understand the shifting perspective these age groups have around money, debt and investing, as well as the importance of institutional transparency and alignment with the customer’s social values. Millennials, for instance, may feel a sense of disillusionment when it comes to traditional financial institutions, given that many members of this generation — born between 1981 and 1996, according to Pew Research Center — entered the workforce during the Great Recession. Banks need to understand how such experiences influence customer expectations.

This will be especially important for banks; Gen Z — members of which were born between 1997 and 2012 — is on track to surpass millennials in spending power by 2031, according to a report from Bank of America Global Research. Here are four ways banks can cater to newer generational trends and maintain a diverse customer base spanning a variety of age groups.

1. Understand the customer base. In order to provide a range of services that effectively target various demographics, financial institutions first need to understand the different segments of their customer base. Banks should use data to map out a complete picture of the demographics they serve, and then think about how to build products that address the varying needs of those groups.

Some millennials, for instance, prioritize spending on experiences over possessions compared to other generations. Another demographic difference is that 42% of millennials own homes at age 30, versus 48% of Generation X and 51% of baby boomers at the same age, according to Bloomberg. Banks need to factor these distinctions into their offerings so they can continue serving customers who want to go into a branch and engage with a teller, while developing tech-driven solutions that make digital interactions seamless and intuitive. But banks can’t determine which solutions to prioritize until they have a firm grasp on how their customer base breaks down.

2. Understand the shifting approach to money. Younger generations are keeping less cash on hand, opting to keep their funds in platforms such as Venmo and PayPal for peer-to-peer transfers, investing in Bitcoin and other cryptocurrencies and other savings and investment apps. All of these digital options are changing the way people think about the concepts of money and investing.

Legacy institutions are paying attention. Bank of New York Mellon Corp. announced in February a new digital assets unit “that will accelerate the development of solutions and capabilities to help clients address growing and evolving needs related to the growth of digital assets, including cryptocurrencies.”

Financial institutions more broadly will need to evaluate what these changing attitudes toward money will mean for their services, offerings and the way they communicate with customers.

3. Be strategic about customer-facing technology. The way many fintech companies use technology to help customers automatically save money, assess whether they are on track to hit their financial goals or know when their balance is lower than usual has underscored the fact that many traditional banks are behind the curve when it comes to using technology to its full potential. Institutions should be particularly aggressive about exploring ways technology can customize offerings for each customer.

Companies should think strategically about which tech functions will be a competitive asset in the marketplace. Many banks have an artificial intelligence-powered chatbot, for instance, to respond to customer questions without involving a live customer service agent. But that doesn’t mean all those chatbots provide a good customer experience; plenty of banks likely implemented them simply because they saw their competitors doing the same. Leadership teams should think holistically about the best ways to engage with customers when rolling out new technologies.

4. Assess when it makes sense to partner. Banks need to determine whether the current state of their financial stack allows them to partner with fintechs, and should assess scenarios where it might make sense — financially and strategically — to enter into such partnerships. The specialization of fintech companies means they can often put greater resources into streamlining and perfecting a specific function, which can greatly enhance the customer experience if a bank can adopt that function.

The relationship between a bank and fintech can also be symbiotic: fintech companies can benefit from having a trusted bank partner use its expertise to navigate a highly regulated environment.

Offering financial products and services that meet the needs of today’s younger generations is an ever-evolving effort, especially as companies in other sectors outside of banking raise the bar for expectations around tailored products and services. A focus on the key areas outlined above can help banks in their efforts to win these customers over.