Always-on, always prepared: the cyber security questions Financial Services organisations need to ask

Financial institutions continue to grapple with the ever increasing complexities of cyber security. As online services across all channels grow, so does the security risk. The underlying questions are – how do organisations modernise the legacy platforms that were not designed for the open, connected world of today’s demanding consumer base, and provide the services and interfaces in a secure manner?

The continual growth and competitiveness in digital services continues to disrupt the market. Whether they like it or not, financial firms and their customers will always be seen as targets and those that take this lightly, or avoid the gravitational pull of online services due to security concerns, will be left behind.

That being said, many organisations are trying to put the right protection in place. The key responses to any security incident are monitoring, reacting and remediating. We have seen from recent breaches that the way that a financial institution reacts and addresses its customers that have been affected can make all the difference. Admitting that a security breach has happened is never easy but your customers are more likely to stay loyal to your brand if you openly discuss the security breach, what information or even money was taken and the remedial activities that you are promptly taking.

Open Banking is getting closer – are you ready?

This August, the Competition and Markets Authority published the final report on its retail banking market investigation. By requiring banks to implement Open Banking by 2018, it has reinforced the UK’s transition to a transformed banking landscape based upon a foundation of Open Banking. While certainly a positive step, Open Banking raises more questions around security. Financial institutions need to look at the security around their APIs, covering both internal and external protection layers – what data is exposed through the APIs, and who may be calling the API? In moving to this new world, what competencies in the organisation exist to create and test these new services? The IT organisation that was designed around creation of services for a customer must now address service management and governance of an estate that exists in a digital always-on connected ecosystem of consumer and business relationships.

Data and information are new focal points for the industry, and this is being highlighted by the new General Data Protection Regulation (GDPR) which will be introduced in 2018. The days have gone where we have one, two or three front doors. We now have multiple connections in and out of networks with services being hosted in cloud, hybrid and SaaS services.

Do you know where your information assets sit – especially your most critical and vital assets?

General Data Protection Regulation – honesty and openness

Looking to 2017 and 2018, notification of breaches will look quite different for a large number of financial institutions. Unlike the directive in the Data Protection Act which was silent on the issue of data breach, GDPR contains a definition of “personal data breach,” and notification requirements to both the supervisory authority and affected data subjects.

This notification to the authority must “at least”:

  1. Describe the nature of the personal data breach, including the number and categories of data subjects and personal data records affected;
  2. Provide the data protection officer’s contact information
  3. Describe the likely consequences of the personal data breach
  4. Describe how the controller proposes to address the breach, including any mitigation efforts.If not all information is available at once, it may be provided in phases.

The last sentence will undoubtedly give some pause for consideration and needs to be thought through. Whilst being open and honest with customers following a breach is essential, how much information is satisfactory to release, and under what circumstances should some information be held until the precise nature of method and impact is understood?

We find ourselves in an information conundrum. We know that open and honesty following a breach are important, but that full clarity on a situation is not always instantly available. Security breaches can take place and it can take time before a complete story is put together – but the longer it takes, the greater the concerns from customers that a security breach is not being effectively managed. It’s why it is essential to prepare in advance and have processes in place in the event of a breach. Testing of these plans and creating play books of certain scenarios is something a lot of organisations are doing.

Criminals work at Christmas

Financial organisations have had to adjust to the requirements of their customers who want services online 24/7. We have seen high street financial institutions opening at weekends, evenings and even Sundays. The world of internet banking allows customers to access financial systems all day, every day.

On the other side of the coin, cyber criminals don’t mind at working weekends, holidays or Christmas Day. An organisation’s incident plan needs to be able to react to whatever, whenever, and in a way that is adequate to develop one or a number of alternative approaches. The Security Operations Centre (SOC) needs to be sufficiently resourced with access to on-call technical expertise, and they in turn need to be able to have access to evidence and activities.

Most people feel confident that their SOC is 24/7 – but it goes further than this. Imagine that you have had a breach on Christmas Day. Can you pull together a legal representative, someone who can talk to the press, the CEO and other important members of staff within your organisation?

We all have business continuity plans and disaster recovery plans, but it’s time we started thinking about security incident response plans that are truly organisational wide.

If you’re interested in finding out more about our Cyber Security offerings you can visit our website, or email us at info.uk@soprasteria.com.

This blog was first published on Finextra.com, 11 November 2016

Digital at scale: how digital can transform business

If you spend time at pretty much any tech company, from startups to big corporates, you’re likely to hear the word ‘digital’ a bit too much.  Some people are doing it, some are making their journey towards being more digital and others are still struggling to define what exactly it is, and in many ways, it’s that final category that have the most honest answer to the question – What is digital?  And this is what experts from the technology and financial services industry discussed during a recent seminar at London Technology Week.

It’s easy to define digital as being about technologies – that digital is at its core the binary ‘0’s and ‘1’s, on and off and all the brilliant devices and interfaces that have spawned out of it.  While that’s not entirely wrong, it paints a picture that everything digital is very clean cut, with a definite right and wrong answer that follows any question – but the truth is very different.  The technologies are far from a constant, and everything from the technology chosen to the implementation will change not only for different demographics but from person to person, and will adapt to their current situation, desires, needs and moods.  Technology then, is transient, and to be truly digital you must be open to constant and relentless change, throwing away technology, processes and ways of working constantly, and ensuring that the new tool adopted is chosen intelligently, to be the best tool for the job, and the most commercially viable solution.

This however all sounds like the territory of startup businesses.  Businesses that are new to the scene, or with very flexible business models are often far more adept to change as they do not have the long-standing commitments to clients, legacy platforms and some of the regulatory requirements of their big corporate counterparts.  Some may suggest that these big corporates should simply throw away the legacy platforms, circumvent the regulation and transform their clients, and noble though that may be, it’s a fool’s errand.  For these businesses, what they really need is to find a way to take advantage of new technology, whatever that may be, and develop systems that allow them to adapt to change which work alongside and complement their legacy ‘technological debt’ and support their regulatory requirements rather than dispose of them. This is digital at scale.

Put simply, digital at scale explores how businesses can leverage digital, be it technology, ways of working or any other idea that comes under the umbrella of digital to transform their business, supporting existing technologies, commitments and regulation where appropriate, and disposing of them where necessary.

Sopra Steria’s MiFID 2 project with the FCA is an example of where digital at scale has been implemented. For all the businesses that are wary of how technologies like cloud and open source could work in a highly regulated environment, there’s no better example than that of the regulator itself adopting these technologies.  The MiFID 2 regulatory support service is built for the cloud, ingesting, processing and persisting files on AWS, with innovative open source platforms like Cassandra and Spark ensuring that all submissions are processed quickly and with an extremely high degree of accuracy, with an architecture that supports changes should a specific client or geography require, like private vs public cloud or separate technology components.  What is particularly profound about this solution though is how it backs into and supports the legacy environment, through a simple FTP gateway, ensuring that the wealth of historical data is utilized and, as is so important in an environment like this, remembered with a system that can speak both the languages of the old and the new into the future, maintaining a stream of communication regardless of changes made on either end.

The MiFID 2 platform is only one example of these principles put to work, and though the distant future might see us living in a fully digital world we must be conscious today that whether we transition fast or slowly, we must do so safely too, and with a strong commercial focus to build not simply small digital players, but truly successful enterprises with digital at scale.

Find out more about our FCA Market Data Processing project and Sopra Steria’s #intelligentdigital campaign.

Challenger banks have challenges of their own

If you think that the UK’s High Street banks have had it tough over the last few years, spare a thought for the new kids on the block…

Sure, the big 4 have had to deal not only with the credit crunch, product mis-selling, systems failures and outages, increased regulation, the CMA, the FCA and new regulations such as MiFid II and soon – very soon – PSD2, where all banks will have to allow access to their customer account information to third parties via open APIs. But they now also have to deal with nimble start-ups with appealing propositions who can cherry pick the most attractive and most profitable customers and offer them a well thought-out product set with excellent – and targeted – customer service. Or even just a single product, one that has been honed and finely tuned to satisfy a specific market demand, be it the highest-paying savings account or a transactional account with all the bells and whistles but without the so last century chequebook. And what’s even worse for the High Street banks is that they have to try and compete with these start-ups – or upstarts – using a creaking legacy infrastructure which isn’t fit for purpose in the digital age.

So it’s really an unfair fight, isn’t it? It’s as if the High Street banks are playing with a marked deck, or with one arm tied behind their back, while the Challengers hold all the high cards and can pick off the incumbents at will, much like Monty Python’s King Arthur fighting the Black Knight. Or is it….?

While the incumbents have had to contend with IT systems which were developed in the 1970s, around the time of the widespread deployment of ATMs and when internet banking wasn’t even a twinkle in the eye of Tim Berners-Lee, the Challengers DREAM of having an IT infrastructure to fall back on, or a data centre, or even a Call Centre. Mostly, they have an idea and a target market to go after but they lack the systems and services wherewithal to realise their ambitions. They often have to rely on a systems provider who gets them part of the way to their goal, but who lacks the Business Intelligence and Analytics component or the Business Processes support capability needed to create a comprehensive systems solution.

This means that Challengers have to partner with a number of other providers to realise their goal of an integrated, seamless IT and services offering to support their customer and product ambitions, mostly with a set of components which are not quite as integrated as they would like and where information exchange and a single customer view is far from seamless. In short, they tend to end up with a “legacy infrastructure of the future”, instead of a flexible, upgradeable solution that moves with the times and has built-in future-proofing – which is really how all such systems should be designed and implemented today.

So, the Challenger Banks might be nimble in terms of product development and responsive in terms of customer service but, in reality, their supporting IT solutions can sometimes be as much of a patchwork as an incumbent’s legacy infrastructure, although carefully concealed behind the veneer of a digital front end and a slick mobile app. Not so much a state-of-the-art solution, more of a dead parrot. That’s quite a challenge…

What are your views? Do you think the Challengers have it easy? Are they about to eat the incumbents’ lunch? Or are they faced with exactly the same infrastructure problems and integration issues as their bigger and older competitors? Please leave your comments below or contact me by email.

My blog was originally posted in Finextra on Wednesday 29 June to coincide with the press announcement of Sopra Steria as digital partner of choice for the new UK challenger bank “The Services Family”.

There’s no time like the present: how the FS industry can prepare for MiFID II

I faced a difficult decision last Bank Holiday Monday: file away a pile of personal documents I had been ignoring for many months, or spend the day out with friends. The filing looked like it would take a long time, and be complicated to untangle – but it would benefit me in the long-run. On the other hand, the opportunity to wind down and see old friends is precious. I’m sure many people faced similar decisions that weekend – the choice between doing the things they wanted to do, and the things they had to do.

MiFID II delay

How is this relevant to the Markets in Financial Instruments Directive, known as MiFID II? Many financial firms will be breathing a sigh of relief. On 28 April, European Union countries collectively supported a proposal for a one-year delay to the legislation. Whilst a delay has been on the cards for a while now, this is one step closer to formally delaying the legislation to 3 January 2018, rather than 2017, giving firms another year to postpone – or start making arrangements.

Under MiFID II, trading venues and investment firms operating in the EU will be required to submit a wide range of reference and transactional data on an even greater range of financial instruments to their regulatory bodies. All current and some new regulated firms and venues will need to forward information on trading that takes place within their company – equities, bonds and derivatives – and send transaction reports, commodity position reports, transparency reports, double volume cap reports and reference data, to their country’s regulator.

The full conditions that firms will have to comply with are yet to be finalised by ESMA. Many organisations may be tempted to wait until they have 100 per cent clarity on the requirements given the complexity of the Directive – and to leave that pile of filing to another day. The issue, however, is that there is still significant risk. If you are not compliant by the due date, you run the risk of fines, the inability to trade, and severe reputational damage. Given the delay to the implementation date, the Regulator is likely to be less tolerant of any non-compliance. There is a natural business tension between what you want to do, and what you have to do due to regulation.

Fail to plan, plan to fail

The answer is simple: fail to plan, plan to fail. My company, Sopra Steria, has provided solutions for financial services regulation for over 10 years – we’ve been involved with solutions for a wide range of regulatory compliance programmes (including IFRS9, BCBS239, Basel II and AIFMD), for both the UK regulator, the Financial Conduct Authority (FCA), and for regulated firms.

Our experience shows that preparation and partnering with the experts are essential. Both options are available right now, which is why the FCA has chosen us to deliver a new solution that will support them with MiFID II, and therefore ensure investment firms’ trading reporting activity remains compliant. The FCA will be receiving millions of transaction reports a day from January 2018. Our solution, the Regulatory Support Service (RSS), is capable of receiving and storing billions of transaction reports.  Its reporting warehouse facility will interrogate large amounts of data with the purpose of giving the FCA greater transparency, and therefore a larger breadth and scope of information on reported transactions, helping to ensure markets operate smoothly and reduce the risk of abuse.

Technology has come a long way over the past decade. The RSS platform has scalability and the ability to operate completely independently from existing architectures, hosted on Amazon Web Services Cloud.  From the outset we designed a shared platform model that will enable other organisations to be part of a system that sits right at the heart of MiFID II developments, as we continue to work closely with the FCA. The opportunities for reducing the cost of regulation are substantial: the high-speed data ingestion and processing capability can be adapted and scaled for other European regulators, and for regulated firms.

We see MiFID II as an opportunity for the FS industry – it is a catalyst for modernisation, rather than simply creating the next generation of legacy technology.

Time to take action

January 2018 may seem a while away, but in reality firms need to be compliant and ready by this date, leaving little time to prepare – and there is no time like the present when it comes to planning. It doesn’t need to be difficult, or put in the corner and ignored for months to come. The technology and services to help you prepare are available now, so it’s time to make a start to becoming compliant.

What are your views on this? Leave a reply below, or contact me by email.