All it takes is one old server sitting anywhere in the world or an outsourced supplier with a weak firewall... the fact is that banks are only as strong as their weakest link.
Unfortunately, when it comes to banking, cyber criminality, and criminality in general, is on the rise. It is a concern that banks are paying a lot of attention to, so much so that it has moved from number nine out of 10 in 2014 to number 2 out of 10 on this year's Banking Banana Skins Survey.
The Survey was presented on Tuesday in Johannesburg by Johannes Grosskopf, partner, PwC Assurance - Banking & Capital Markets Industry Leader Africa and Costa Natsas, partner, PwC Assurance - Banking & Capital Markets.
Produced every two years by the Centre for the Study of Financial Innovation, a non-profit think tank, in association with PwC, the Survey was conducted in September and October last year, and so does not account for any events occurring after that time, both local and international, such as President Zuma's firing of the finance minister and the China's economy slowdown respectively.
The Survey is global and banks respond on a voluntary basis. This year's Survey saw 672 global responses from 52 countries. This included 14 responses from South Africa. The Survey asks respondents to describe their concerns, score a list of potential risks and rate the preparedness of financial institutions to handle risks they identified.
The move of criminality up the ranks is fueled by the fact that cybercrime comes in so many different guises. Therefore, many respondents expressed the worry that banks have little power to prevent these attacks.
Apart from criminality, the other risk factors making up the top five included macro-economic environment, regulation, technology risk and political interference.
Taking up the number one spot is the macro-economic environment. Its move to the top of the Survey reflect the growing concerns about the weakening of the economic recovery and the risk that economic conditions could damage banks. The high levels of debt worldwide, quantitative easing and its effect on interest rates, the weakness of China and other emerging markets and softening commodity prices are all reasons for this sentiment.
Regulation has moved from the number one spot in 2014 down to third place this year. Grosskopf says the reason for this is that banks have moved towards a more nuanced view that accepts the need for tougher controls.
Regulation, criminality and technology are all interlinked says Natsas. "Regulation around cybercrime will happen. It is a question of protecting the customer, not so much the institution. The customer's details must be protected. This has a cost implication for banks, many of whom sit with legacy issues and older systems."
Technology risk remained stable in the number four spot and is also about the threat of innovators who could steal market share as they disrupt current banking business models. "Much of this disruption is due to how consumers want to bank using various devices and the payment solutions options fintech companies are offering," says Grosskopf.
Political interference moved down from number two spot in 2014 to number five as concern about this risk eases. Whether this risk is truly abating or not, however remains to be seen.
