Why This Should Be Banks’ Summer of Sleepless Paranoia

The pace of the pandemic has slowed, at least temporarily. Activism in the streets may be leading to sustained change? The stock market is climbing, though possibly irrationally. The approach of summer feels promising, but maybe we don't get our hopes up too much.

This is the moment to dust off the warning of Intel’s former boss, that the job of a CEO or investor is not to provide calm. It’s to introduce fear that things have changed. That mindset doesn’t make you popular anywhere. As Eric Barker pointed out, in the political sphere, Winston Churchill was considered a paranoid loose cannon.

The key to good paranoid leadership, at least in technology, is to ask what you’re missing before straying off into conspiracy, and to do the very hard work of bringing your customers along with you.

What are you missing?

Entrepreneurs, investors and others need to take a breath in this pause in what might be the eye of the storm. Then ask, what have we ignored in the economy, culture and technology, perhaps consciously, because addressing developments would be difficult or uncomfortable? Are the currents pulling us towards dangerous rocks as we look the other way?

The Great Recession reminded us that assets that go up can go down. The coronavirus taught us that we shouldn’t have buried our heads in the sand as experts warned us about pandemics. Civil unrest has shown us that we can’t sweep injustice – or even perceptions of injustice – under the rug.

In the financial system, too many people have dismissed the very real possibility of a massive hack or proliferation of fraud that could trigger yet another national crisis, perhaps when we’re preoccupied with other troubles. Think this issue is not important or can wait given other pressures? Think again. Hackers infiltrated an estimated 8.5 billion bank, corporate and other online accounts last year. Half a million Zoom accounts were compromised in April. We have reports of organized crime taking over distressed businesses to commit stimulus fraud. And I bet you every reader of this muse has had at least 50% of their identify stolen.

If fraud and cybersecurity were analogous to an earthquake, the global financial community is sitting on a fault line. The Big One could hit at any time.

I might sound like a doomsayer, but I’m not. We have the tools to forestall cyberthreats and fraud. How we use those tools is the challenge we face today. In protecting customers, for instance, we can’t ruin their experience. On the contrary, fraud detection and cybersecurity must be customer-centric, including transparency so customers know how and why their money is shielded from cybertheft and how fraud detection works. Protection measures must be scalable, too. Otherwise there’s no point in implementing them.

That said, throwing more people and automation at anti-fraud and cybersecurity won’t work. The U.S. government injected $6 trillion into the economy to counterbalance losses related to the coronavirus. More might be on the way. Fraudsters are working overtime to abscond some of those funds. They will make off with hundreds of billions of dollars. New platforms are necessary to handle the firehose of data that institutions must collect to catch them. The way stimulus was rushed and ill-conceived, with admittedly the absolutely right and best intentions, we have set up problems that will last a decade or more change the very structure of many bank operations, particularly the smaller, middle market and regional banks.

Prophets that people listen to

Transparency is important. Banks understandably are disinclined to discuss cybercrime or fraud with their customers. They don’t advertise how they’ve installed video cameras, security guards and unbreakable safes in their branches to prevent robberies. Why should they discuss cybersecurity and anti-fraud?

But explaining to customers how and why a bank safeguards their birthdays, Social Security numbers and other private information is arguably the right move at a time when a majority of Americans feel that tech companies could compromise elections, that they’re constantly tracked and a “techlash” threatens to slow the pace of innovation. Reassuring customers is forward thinking, not reactive.

Transparency is good business, too. Large banks today can’t view themselves like utilities, where customers have few or no other options. Digital challengers who place security and convenience at the center of their business model are happy to exploit legacy institutions’ slowness to address customers’ concerns. News of more hacks will only put more pressure on larger institutions to keep up with the times.

New actionable cybersecurity platforms are also how the banking industry will ascend to the next level in revenues and operations, both of which have been plateauing in recent years as the Internet, social media and smart devices transition from being innovative technologies to routine parts of the economy.

These platforms are not only going to protect one’s customers from hackers. They will also impart an enormous amount of information about one’s customers to business owners. Artificial intelligence will get to know people. That will empower institutions to block interlopers. It will also provide banks with deep customer profiles that don’t exist today.

This vision of the future might put some bankers off. Especially the ones that saw FinCrime as a regulatory requirement, pushing it into back office functions instead of seeing it as a key constituent of the DNA of effective brand, customer management and profitability. But he with technologies a difference between protected and unprotected will get much wider, much quicker. The result – a concentration of crime in specific firms, firms unable to discover, react and interdict quickly enough. This polarization of effectiveness will create some significant headlines, and with much more mobile and technology fluent customers these headlines will have a much heavier effect on the bottom line than in the past.

Ignoring these opportunities and the changes around them won’t make them go away and looking at solving new problems in old ways will simply institutionalize the very problems you’re trying to solve.

Drift is our nemesis today. Sleeping through or remaining indifferent to epochal changes that are rocking our world is maybe a part of why Intel’s Andy Groves’ named his book “Only The Paranoid Survive.”

Simon Moss is CEO of Symphony AyasdiAI, an artificial intelligence software company serving financial services and other industries.