In a world where cyberattacks seem to lurk around every corner, putting individual’s private data and even the security of nations at risk, it is no surprise that 70% of banking CEOs identify cybersecurity as a threat to their growth prospects or that expenditures on security are expected to continue. But in an industry that recognizes itself as under assault by Silicon Valley, building security infrastructure that defends against hacks will not be enough – financial institutions must also deliver services that delight customers.

If financial institutions take the same approach to delighting customers as they do to ratcheting up security – by waiting for a serious event to change how they operate – they risk losing the fight for customer devotion against the hundreds of financial technology (fintech) start-ups that are putting customer needs first. To stay competitive, financial institutions need to deliver better, faster and more effective service. And they have a competitive advantage: more customer data than fintechs will likely ever dream of.

Financial institutions are a continuous catch basin for client attributes – they collect customer information over time, starting with account opening information (e.g. name, date of birth) and through to transaction data. However, due to security concerns, financial institutions are turning their attention to authentication – the process of using a username and password, and maybe even biometric factors such as facial recognition, to verify someone is who they say they are.

While there is no question that authenticating customers is core to the legitimate operations of financial institutions, by better understanding client attributes, financial institutions can ask an interesting question: whether the products and services they are delivering are the right ones for the clients they serve. But by and large, this opportunity is not maximized. While 80% of consumers describe themselves as comfortable with banks using their data to provide tailored offers and advice, 79% of customers describe their relationship with their bank as purely transactional, and absent of financial advice. Clearly, offering the right services to the right customers is something that financial institutions can do but they are struggling to leverage data to better understand customer needs.

Customer views of banking relationships

Replacement figure

Source: Accenture

Over in the fintech space, new technologies are very customer centric. Technologies that enable peer-to-peer money transfers are addressing the consumer need for convenience, allowing customers to transact easily from any device, anywhere. For example, Venmo is a financial platform that allows users to instantly send and receive money from their mobile device. This instant, fee-free technology is meeting a need that is unmet by financial institutions. Case in point – Venmo facilitated the transfer of $1.3 billion in Q1 2015, beating even the most optimistic forecasts.

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Source: Business Insider

If financial institutions are consistently gathering customer attributes and enhancing authentication by investing in sophisticated security protocols, they should be well positioned to win against fintech start-ups, right? The difference between financial incumbents and fintech start-ups is where they choose to focus. Fintechs tend to focus on winning with customers, and simultaneously address data security and authentication. In contrast, financial institutions trend towards incrementally improving their strengths – such as authentication – leaving room for fintechs to happily facilitate critical day-to-day customer interactions and transactions.

Unlocking the value of customer data is challenging for incumbents – they are up against poor data quality, legacy systems that silo data across businesses, and tightening regulation related to consumer privacy. But the rewards could be enormous, including the ability to deliver the advantages of the unified financial ecosystem that consumers want.

Have you read?
What the human body teaches us about cyber security
How quantum physics is improving data security 

Author: Sabrina Sdao is manager at Monitor Deloitte and a lead consultant on the World Economic Forum’s FSI projects. Research efforts in this blog were supported by Max Seltzer, Consultant at Monitor Deloitte

Image: Vishant Patel, senior manager of investigations at the Microsoft Digital Crimes Unit, shows a heat map and talks about how malicious computer networks known as the Citadel Botnets attack computers in Western Europe at the Microsoft Cybercrime Center in Redmond, Washington November 11, 2013. REUTERS/Jason Redmond