Is Cybersecurity the key to customer loyalty for banks?

By Dr Jason Nurse, Director of Science and Research at CybSafe

The rise of challenger banks and FinTech startups, coupled with the advancement of digital threats, has created a perfect storm of competition and risk. As traditional banks face increasing pressure, a differentiator emerges: proactive cybersecurity.

A CybSafe study found nearly a quarter of consumers consider a bank’s cybersecurity posture when opening an account, presenting both a challenge and an opportunity for banks to build customer trust. As banks navigate this change, they face a question: is cybersecurity merely a compliance requirement, or could it be a competitive advantage?

The cost of cybersecurity failures

Data breaches lead to financial losses and reputational damage. In 2023, the global average cost of a data breach reached $4.45 million, a 15% increase over three years. However, the reputational harm caused by such incidents can often exceed the immediate financial impact.

High-profile data breaches not only disrupt operations but also erode customer trust and loyalty, which is particularly damaging in the financial sector, where confidence and loyalty are paramount. As consumers become increasingly aware of the importance of cybersecurity, banks failing to prioritise the protection of their customers’ data risk losing market share to competitors who demonstrate a stronger commitment to security.

Changing consumer expectations

As open banking makes it easier for customers to switch accounts, banks must work harder to retain them. CybSafe’s study found 36% of consumers would be cautious about banking with an institution that experienced a data breach. With only 27% of respondents claiming they have never changed banks, the market is becoming increasingly competitive.

To meet these challenges, banks must foster a positive cybersecurity culture among employees and customers. This involves providing resources on best practices for staying safe online, such as creating strong passwords and identifying phishing scams. By educating customers, banks can help them become more cybersecurity-savvy and reduce the risk of attacks by up to 50%, according to Gartner.

The right cybersecurity tools

To meet expectations, banks are beginning to look beyond their internal resources and collaborate with experienced cybersecurity providers. This allows banks to gain access to a wealth of knowledge, tools, and resources that can be leveraged to create targeted, adaptive training programs and access advanced data analytics and machine learning techniques.

Once financial institutions have a deeper understanding of individual risk profiles, they can tailor training content to the specific needs of each employee/customer. This personalised approach to cybersecurity education ensures that customers receive the most relevant and effective training possible. Ultimately, your bank can empower you to become an active participant in your own security, fostering a sense of shared responsibility and trust.

Banking on trust

Cybersecurity is no longer just a compliance obligation for banks; it is an opportunity to build trust and give customers peace of mind. By making proactive cybersecurity a core part of their brand identity, banks can protect their customers from harm and position themselves for long-term growth and success. Those who prioritise cybersecurity and invest in continuous learning tools will be best equipped to thrive in a digital and competitive world.