PSD2 creates a cyber risk headache for banks
Temenos report reveals that banks are concerned that European legislation on payments will increase their vulnerability to cyber threat vulnerabilities.
A report created by banking software specialist Temenos in cooperation with The Economist Intelligence Unit shows that banks are wary of the cyber risks associated with European Union’s Payments and Services Directive (PSD2). The directive, which will come into force in 2018, forces banks to open up their APIs to third parties so that information on payments customers is shared with potential competitors.
Two hundred banking executives we surveyed for the report, and they were asked to name the major challenges they faced to 2020. When asked about the open API framework mandated by PSD2, 73% of respondents cited the ‘increased threat of cybercriminals exploiting weakness in online payment and banking systems’ as their number one challenge. The cyber threat ranks above increased operational costs associated with overhauling platforms and processes to deal with cyber-threats, and also the competitive issues associated with PSD2.
According to Renée Friedman, managing editor, EMEA, of the Economist Intelligence Unit, the results are surprising because most conversations about the challenges around PSD2 have focused on the competition that banks face when they open up their customer data to third parties.
“What this shows is that banks are not particularly worried about the risk posed by challenger firms; they believe that the main challenge will consist in assuring that their data is secure throughout the entire value chain, even once it has left their hands,” she said.
The fear of cyber attacks is driving spending. Thirty-four per cent of survey respondents cited cyber security as their digital investment focus, above delivery capabilities (24%), and multi-channel capabilities (17%).
Banks are also facing challenges around skill acquisition. In a question that asked respondents what their biggest talent challenge was, 54% of those surveyed said it was finding candidates with appropriate data skills. Friedman attributes this to banks having to compete with large technology companies when recruiting candidates: “Working for a bank is not as glamorous as it was – they now have to compete with the Google, Amazon, and other technology giants.”