Top Priorities for Financial Services Firms in 2023
Constant disruption is nothing new to the financial services industry. From developments in payments and regulations to combatting new kinds of fraud, it’s safe to say there are a few key areas that need to be addressed in 2023 in order for financial institutions to continue evolving and adapting.
Continued threat of evolving fraud types
According to a recent report by Cifas, the UK could be heading into 2023 with unprecedented levels of fraud spurred on by the cost of living crisis. The figures reveal that more people have reported being a victim of identity fraud, which has increased by nearly a quarter (23%) compared to pre-pandemic levels.
With no sign of abating, solutions that provide robust identity verification measures must be implemented to combat this type of fraud. By utilising technologies such as biometrics and artificial intelligence (AI), organisations can enhance the security of their systems, all the while improving the customer experience. Biometrics, such as facial recognition and fingerprint scanning, can quickly and accurately verify a customer's identity, reducing the risk of fraud. AI-powered fraud detection systems can in turn analyse large amounts of data and identify unusual patterns, helping to prevent fraud before it occurs.
Our research shows that over half of UK consumers (57%) are more likely to engage with an online financial services provider that has robust identity verification measures in place, so by embracing these solutions, financial services organisations can better combat fraud in a way customers are open to.
Digital identity payments
The shift toward a cashless society has spurred on the adoption of digital payment methods. Debit and credit cards are declining in popularity as consumers opt for the convenience and security offered by mobile wallets and payment apps such as Apple Pay. Biometric authentication of digital identities is a driving force behind this trend; e-wallets and digital banking apps tend to provide a more secure and convenient way to store and authenticate financial information and complete transactions without the need for physical cards or cash. In fact, in 2023, it is expected that the number of transactions made through digital identities will surpass those made through traditional credit and debit cards.
As consumers grow more comfortable with the use of digital identities, financial services organisations should leverage this level of acceptance – and even preference – by looking at ways to implement this technology. We know that the use of digital identities already provides a higher level of fraud prevention, but it could also improve customer acquisition and drive business growth.
Impact of EU AI Act on financial sector firms
The European Union AI Act is a proposed legislation aimed at regulating the use of artificial intelligence in the EU. The draft legislation outlines a risk-based classification of AI systems and provides a certification framework. The Act has been agreed upon by the European Council and is set to be voted on by the European Parliament in April 2023. If passed, financial services firms will likely have to ensure their AI systems meet the necessary standards of safety, transparency and ethical considerations outlined.
It may impact areas in which financial organisations employ the use of AI, such as credit scoring, insurance underwriting and fraud detection, meaning they will potentially have to conduct safety assessments and implement transparent decision-making processes for the AI systems being used. Considering the ethical implications, such as the potential for perpetuating biases or discrimination, would become a requirement.
Firms should take a proactive approach to ensure compliance with the proposed EU AI Act as it represents a significant development in AI regulation that could have far-reaching implications for many industries, financial services no exception. By taking steps to understand the requirements of the EU AI Act now and planning how to address them, organisations can set themselves up for success in an increasingly regulated landscape.
As new challenges present themselves, so too do new solutions. Technology is at the core of this and it’s important for financial services firms to stay ahead of the curve and embrace new solutions to meet the changing landscape. The future is full of possibility, and we can expect to see continued growth and innovation in 2023 to realise the potential that lies ahead.
Robert Prigge is responsible for all aspects of Jumio’s business and strategy. Specializing in security and enterprise business, he held C-level or senior management positions at Infrascale, Secure Computing, McAfee, Quest Software, Sterling Commerce, and IBM.