FCA warns of IT risks as mobile banking review begins

The Financial Conduct Authority (FCA) has warned of potential IT problems as the market for mobile banking services continues to grow.

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The Financial Conduct Authority (FCA) has launched a review of mobile banking, warning that banks need to ensure they have adequate IT systems in place to prevent customers being affected by service outages.

As part of the FCA’s review, which will report again in the first half of 2014, the watchdog aims to gain a better understanding of the measures currently in place as banks develop new products aimed at mobile devices.

Smartphones and tablets are viewed as increasingly important platforms for the delivery of banking services, with many banks having already developed mobile banking apps. Interest has also increased around mobile payments, such as Barclays’ Ping-it app. Recent research from the UK Payments Council forecast that the number of mobile transactions made in the UK will grow from 356 million in 2012 to around 1.5 billion in 2022.

However, as mobile payments and banking continue to gain popularity, the FCA has warned that the firms delivering mobile services need to ensure they have “robust” systems and technology in place to ensure customers are protected. 

For example, the report mentions that with firms under commercial pressure to launch products quickly, products and services could be released without sufficient testing. This could impact on the public's willingness to use mobile services, if not addressed.

"There is a risk that an IT failure could interrupt services, preventing access to mobile banking, limiting customers’ access to their money and undermining consumer confidence in these services," the report stated.

In addition the report highlighted that some banks are looking to third-party suppliers to provide outsourced IT for their mobile services, warning that this complexity could increase the likelihood of outages.

“Many of the firms entering this market are using the specialised services of outsourcing partners. This leads to the risk that there may be a chain of companies involved in a customer’s transaction, resulting in a greater likelihood of a problem occurring,” the report read. 

The FCA also said that malware being delivered through mobile apps is an "important risk" for firms to consider, highlighting problems around financial loss as well as the potential to undermine consumer confidence in mobile banking.

Clive Adamson, director of supervision at the FCA, commented: "Mobile banking is an exciting development in financial services, with increasing numbers of consumers attracted to the convenience of banking on the move.

“With the market growing, now is the right time for us to take stock and, as part of the FCA's forward-looking approach, to ensure that consumers are appropriately protected."

He added: "By publishing these initial thoughts we want to make sure that the industry knows exactly what we’re looking into, and consumers have a clearer idea of some of the potential risks."

Dorian Wiskow, Client Managing Director, Financial Services, Fujitsu UK & Ireland, commented that banks need to have the right infrastucture in place to ensure that they are able to deliver services to meet demand for mobile banking.

“The FCA’s decision to review the banking sector’s ability to protect against the vulnerabilities that mobile banking brings, is a positive move. Banks carry the weight of responsibility handling and processing such huge volumes of customer and process data and insight. Not having the correct infrastructure in place to protect this puts customer data – and ultimately their own reputations – at significant risk," Wiskow said.

“Financial services institutions need to strike a balance between providing innovative services while maintaining a high level of security, ensuring trust with their customers. Moving forward with innovative technology and trusted partnerships will enable them to do exactly this.”