24 October 2016
Banks should adopt a digital transformation strategy to serve their customers better. Photo: HKEJ
Banks should adopt a digital transformation strategy to serve their customers better. Photo: HKEJ

Why financial institutions need a digital transformation

Earlier this year, cybercriminals threatened to launch cyberattacks against the websites of two financial institutions in Hong Kong unless they paid the hackers ransom in bitcoin.

Eventually, one of the institutions confirmed its website was affected by a distributed denial-of-service (DDoS) attack — in which multiple systems flood the resources of a targeted system – though customer service was not affected.

Akamai Technologies Inc.’s latest State of the Internet report showed financial services was the industry fifth-most frequently targeted by DDoS attacks in the second quarter of this year, accounting for 8 percent of all attacks.

Retail and financial services were subjected to the greatest number of web application attacks, and about 95 percent of the attacks using the Shellshock software bug were related to a single worldwide campaign against large customers of financial services.

Consumers today are tech-savvy and want to control all aspects of their lives through the convenience of a smart device and mobile applications.

In light of the ever-increasing incidents of cyberattacks, financial institutions must not only embrace digital offerings but must do so with a focus on simplification and service excellence that ensures security is the priority.

Transformation offers financial institutions the potential to reinvent themselves and meet heightened customer expectations.

Here are five innovative approaches for financial institutions to drive, embrace and secure change while unleashing the business benefits of transformation.

(1) Gamification
The use of game-design thinking to make non-game applications fun and engaging can be a benefit to customers of financial institutions.

In theory, gamification can increase new account openings and collected balances, help children understand basic banking principles, and assist customers in establishing and reaching savings goals, such as the purchase of their first home, by visually explaining spending habits and budget allocations.

Financial institutions in Hong Kong are deploying games in their digital channels to increase loyalty, educate consumers and extend the scope of online transactions.

Their counterparts in other regions are slower to embrace this strategy. The recent EFMA-Infosys Innovation Survey shows only 9 percent of banks worldwide have introduced some kind of gamification into their business.

(2) Social media strategy
In Hong Kong, 64 percent of the population have active social media accounts.

However, given the extent of regulation over the banking sector, many financial institutions continue to struggle to implement a meaningful social media strategy.

According to a report by The Financial Brand, one in every 25 financial institutions doesn’t include links to its active social channels on its website, and one in every 50 institutions includes links to dormant social media accounts.

(3) Virtual currencies
The adoption of virtual currencies such as bitcoin may result in significant disruption to the banking sector.

While regulators around the globe continue to monitor developments closely, with most bodies opting not to implement extensive regulations until they understand the inherent risks each form of currency presents, regulation is definitely on the horizon, especially now that more than 100,000 merchants worldwide accept bitcoins.

Customers may soon see banks, or even countries, creating their own digital currencies.

Financial institutions must continue to monitor developments in this realm.

(4) Mobile
The number of mobile service subscribers in Hong Kong reached 16.7 million in April, representing one of the highest penetration rates in the world, at about 232 percent.

In addition, 96 percent of Hong Kong’s smartphone users access the internet on a daily basis.

Customers demand a seamless experience across all form factors, particularly mobile devices such as smartphones and tablets.

With this explosive growth, financial institutions will need to ensure they are measuring and analyzing revenue by channel, product, service, customer type and so on, so that they evolve the online experience in a manner consistent with the customer’s demands and expectations and ultimately drive profitability.

(5) Security
The ability to protect data and applications from attacks and security breaches while delivering a great online experience is non-negotiable.

The financial sector is no stranger to cyberattacks, and the frequency of mega attacks has increased significantly.

Akamai’s State of the Internet report shows that in the second quarter there were 12 attacks peaking at more than 100 gigabits per second and five attacks peaking at more than 50 million packets per second.

Financial institutions have a huge responsibility to earn and keep the trust of their customers by protecting their digital properties from cyberattacks while maintaining availability of their sites at all times.

There is a positive aspect for financial institutions that deploy a solution that delivers strong security.

In addition to mounting an effective defense, advanced technology solutions offer operational efficiencies as well as deliver the functionality and transparency needed to ensure compliance, satisfy internal audit expectations and withstand regulatory scrutiny.

Digital transformation must become part of the financial institution’s DNA, and consequently, the duty of everyone in the organization – from the C-suite to the front line – to identify how to use technology to serve customers more effectively and at higher rates of retention and satisfaction while protecting them from security threats.

– Contact us at [email protected]


Industry Marketing Manager, Financial Services, Akamai Technologies

EJI Weekly Newsletter