Link Search Menu Expand Document
Cybersecurity Research
  1. VI. RECOMMENDATIONS FOR NAVIGATING BANKING POST COVID-19

VI. RECOMMENDATIONS FOR NAVIGATING BANKING POST COVID-19

COVID-19 has accelerated technology usage and increased the popularity of contactless payments.240 The CEO of Israel’s oldest bank, Bank Leumi, has stated that the days of consumers visiting bank branches and consulting bankers in-person is “passé.”241 Therefore, financial institutions will need to be digital-ready.242 Banks need to make large investments in digital technology to improve their cyber-resiliency as the industry shifts away from a physical banking structure.243

Digital transformation is an ongoing process whereby businesses adapt to changes in customers and markets by leveraging digital competencies.244 Being “digital-ready” could include: (1) banks integrating technologies like artificial intelligence or robotics into daily operations;245 (2) banks promoting and improving use of banking functions (e.g. withdrawing money or applying for loans) through online

240. See Jan Bellens, Four Ways COVID-19 is Reshaping Consumer Banking Behavior, EY (Aug. 31, 2020), https://www.ey.com/en_us/banking-capital-markets/four-ways-covid19-is-reshaping-consumer-banking-behavior [https://perma.cc/28NH-Q2XD] “With many companies closing their brick and mortar channels, consumers are going online to buy essentials. At the same time, concerns have been raised about whether physical cash could spread the coronavirus. This has contributed to a 57% fall in cash usage among respondents, alongside a rise in payments using credit cards (7% net), debit cards (10% net) and online payment tools (14% net).”).

241. Francesca Cassidy, What is the Future of Banking? RACONTEUR (May 1, 2019), https://www.raconteur.net/finance/future-banking [https://perma.cc/C8PX-JC8G].

242. See id. (discussing how digitalization is essential for a bank’s survival).

243. See Oliwia Berdak, Predictions 2021: Banks Will Need To Get To Know Their Customers (Again), FORRESTER (Oct. 21, 2020), https://go.forrester.com/blogs/bankingpredictions-2021/ [https://perma.cc/7EU5-YKQH] (predicting that the digital banking behaviors of consumers will persist post-pandemic, and that bank executives will face pressure to pivot towards digital banking).

244. ANDREW BUSS ET AL., THE DIGITAL READY BANK: HOW READY ARE EUROPEAN BANKS FOR A DIGITAL WORLD 6 (Int’l Data Corp., ed., 2016), https://st.ilsole24ore.com/pdf2010/Editrice/ILSOLE24ORE/ILSOLE24ORE/Online/Oggett_Embedded/Documenti/2016/07/22/IDC-WP.pdf [https://perma.cc/HXT7-WWKV].

245. See Chris Skinner, Survey: Banks Just Aren’t Ready for Digital, FINANSER (Jan. 23, 2020), https://thefinanser.com/2020/01/survey-banks-just-arent-ready-for-digital.html/ [https://perma.cc/4PF7-9FKR] (stating most banks have not yet incorporate robotics into their operations); see also Penny Crossman et al., 10 Ways Technology Will Change Banking in 2019, AM.BANKER (Jan. 6, 2019, 10:00 PM), https://www.americanbanker.com/list/10-waystechnology-will-change-banking-in-2019 [https://perma.cc/QFM4-HYR7] (reporting that U.S. Bank and Wells Fargo are already incorporating automations into their operations).

platforms like smartphones;246 (3) banks opting to go paperless;247 and finally (4) banks recognizing a minimal need for direct interaction with clients given the array of digital platforms for communication.248 Now more than ever, it is important to have financial service organizations invest in the best technology available especially for remote-work capabilities such as 5G networks, VPNs, document capture, digital signatures, and mobile channels for banking.249 Implementing and continually improving banking technologies will cater to the growing number of “digital-first, branch-second approach” consumers.250

First, banks need to perfect their mobile banking. Indeed, the pandemic is hastening the pace at which banks are converting to online platforms.251 For example, Bank Leumi expanded to create Pepper, Israel’s first mobile-only bank.252 Built off of the customer base of Bank Leumi, Pepper has been able to circumvent consumer trust issues by building its reputation off the success of its parent company.253 Pepper might actually be more popular than its parent company254 because it has opened more accounts per day than Bank Leumi.255 Moreover, Barclays launched a fully online bank in the United States, and regional banks like

246. See Cassidy, supra note 241 (“Digital tools have become people’s first choice [for banking].”).

247. See Going Digital: The Banking Transformation Roadmap, KEARNEY, https://www.es.kearney.com/financial-services/article?/a/going-digital-the-bankingtransformation-roadmap [https://perma.cc/YUJ5-CLLC] [hereinafter Going Digital] (last visited Sept. 13, 2020) (discussing recommendations for a bank’s digital vision, which includes going fully paperless).

248. See id. (stating that there is a “minimal need for call centers and direct interaction with clients” when mobile banking).

249. See Bellens, supra note 240 (reporting that 43% of surveyed consumers say the way they bank has changed due to the pandemic, leading to an increase in digital banking).

250. See Acton, supra note 82 (discussing how millennials are more likely to consider digital forms of banking, especially in light of their distrust of financial institutions); see also Going Digital, supra note 247 (“to keep up in this fast-changing market, traditional banks will have to adapt their operating models. In particular, changes in IT, new products and services development, and changing expectations for time-to-market will be key factors going forward.”).

251. See Cassidy, supra note 241 (stating that digitalization is necessary for banks to survive in the modern age).

252. *Id. *

253 *Id. *

254. See Laura Noonan, Bank Leumi to Launch Online Bank Pepper in US, FIN. TIMES (Nov. 19, 2018), https://www.ft.com/content/810368b2-e98c-11e8-885c-e64da4c0f981 [https://perma.cc/AMW9-VV42] (discussing the Israeli-listed Bank Leumi’s launch of its online-only bank Pepper).

255. Id.

Capital One anticipate launching online spin-off institutions.256 Given the majority of consumers that prefer a digital relationship with their bank, 257 there is an advantage for banks in deferring to online banking platforms.258 With less overhead needed for operating a digital platform, banks could entice new customers by offering lower fees and higher interest rates on checking accounts.259

Second, banks need to develop a work-from-home operating model. Some companies are already ahead of the game.260 For instance, JPMorgan Chase has developed a pilot program dubbed “Project Kennedy,” which calls for 10% of its 127,135 employees to work from home.261 Project Kennedy is meant to serve as a contingency plan in the event that COVID-19 leads to more disruptions to in-person banking.262 The plan will be in effect for an indeterminate period of time.263 Pilot work-from-home programs like Project Kennedy can provide banks with the confidence and experience when dealing with a remote workforce.264 JPMorgan Chase has already seen a significant increase in revenue and net income since implementing its work-from-model.265 Their success can provide an incentive for other banks to work towards the same.

256. Id.

257. Yu & Hughes, supra note 83.

258. See id. (“[T]o meet customers’ digital wants and needs – and to save money – many banks are aggressively expanding digital channels.”).

259. See Knueven, supra note 84 (“There are a few reasons why online-only banks like Betterment, Wealthfront and Ally have captured tech-savvy consumers: lower fees, higher interest rates, and perhaps most importantly, convenience.”).

260. See Michelle F. Davis, JPMorgan Tests U.S. Virus Plan with Thousands Working From Home, BLOOMBERG (Mar. 3, 2020, 2:41 PM), https://www.bloomberg.com/news/articles/2020-03-03/jpmorgan-tests-u-s-virus-plan-withthousands-working-from-home [https://perma.cc/4S49-N6DF] (discussing JP Morgan Chase’s pilot remote work project).

261. Jack Kelly, JPMorgan Asked Thousands of Employees To Work From Home: This May Start a New Trend, FORBES (Mar. 4, 2020, 2:18 PM), https://www.forbes.com/sites/jackkelly/2020/03/04/jpmorgan-asked-thousands-ofemployees-to-work-from-home-this-may-start-a-new-trend/#46dfd64d48ae [https://perma.cc/8A4L-CPU7]; Davis, supra note 260.

262. Davis, supra note 260.

263. See id. (reporting no definite end date for Project Kennedy).

264. See id. (“For the consumer bank, testing the telecommuting policy on a sampling of employees across businesses can ensure kinks are worked out before the plan needs to be rolled out more broadly in the event of a pandemic…”).

265. See Ennis, supra note 47 (reporting that JP Morgan Chase posted a 32% increase in revenue and 86% increase in net income).

A potential operating model could incorporate a hybrid of remote and in-person work.266 Specifically, banks could alternate portions of its employees between at-home and in-person roles, while also offering a permanent work-from-home option for certain employees.267 This hybrid model would reduce the need for a large office space since a smaller portion of the bank’s workforce would be on-site at any given time.268 The need for designated workstations for employees would also decrease.269 It would be more practical to provide employees with temporary workstations as opposed to designated permanent spaces.270 Maintaining a hybrid telework model would guarantee that banks are upto-date with the newest technologies and have well equipped information technology departments.271 Given that increased digitalization also increases the risk of cyberattacks, telework incentivizes banks to maintain up-to-date systems and remain vigilant against cyber-risks.272 The key elements in implementing this hybrid model could include: ensuring employees have the requisite technologies, securing connections, implementing team communication platforms, and setting clear

266. See Kelly, supra note 261 (discussing how JPMorgan has a work-from-home plan, but also send traders to from their New York City locations to offices in surrounding areas to conduct business); see also Davis, supra note 260 (discussing how JPMorgan Chase will toggle between remote and in-person work during the pandemic).

267. See Davis, supra note 260 (stating that banks having been “splitting up teams and traders amid different locations, and quarantining staff” in order to remain functioning during the pandemic).

268. See id. (discussing how banks are trying to have some employees work remotely to maintain safe operations during the pandemic).

269. *See id. *(explaining in further detail how regulatory plans for banking have developed protocols for workspace arrangements, i.e. how far apart employees should sit from each other, or how many can work remotely).

270. See id. (indicating that banks, like JPMorgan Chase, may need to develop resilient telecommuting policies for the future).

271. See Daniel Newman, Distributed Companies, Work From Home, and the Technology Enabling the Change, FORBES (Oct. 22, 2020, 10:14 AM), https://www.forbes.com/sites/danielnewman/2020/10/22/distributed-companies-work-fromhome-and-the-technology-enabling-the-change/?sh=57d48af733bf [https://perma.cc/SGS4- TLYT] (discussing how companies need to invest in the right technologies for their employees working remotely).

272. See Boehm et al., supra note 88 (“[T]he recent COVID-19 pandemic has intensified the danger of cyberattack, across all industries. Changes in working conditions have made it harder for companies to maintain security. Large-scale adoption of work-from-home technologies, heightened activity on customer-facing networks, and greater use of online services all present fresh openings, which cyberattackers have been quick to exploit.”).

expectations on appropriate cyber-practices.273 By investing capital into providing online services, banks can stay connected with consumers while still maintaining the quality of their services.274

The advantages for increased telework are clear.275 While banks can realize a multitude of savings on office rent and supplies,276 employee morale can be boosted as well.277 Telework can even allow banks to dip into a more competitive and inclusive applicant pool since coming into the office is no longer essential.278 The need to regularly come into the office can impose a significant hardship for some groups of people.279 Eliminating the requirement for in-person work can offer more opportunities for people with disabilities and parents who seek employment in the banking industry.280 Additionally, banks could benefit from increased corporate responsibility resulting from the telework model.281 Remote employees will rely less on the need for

273. See COVID-19 Work from Home Policy Best Practices, AMTRUST FIN., https://amtrustfinancial.com/blog/small-busines/coronavirus-best-practices-work-fromhome-policy [https://perma.cc/X6L5-N6RR] (last visited Feb. 6, 2021) (reporting on best practices for employees to follow while working remotely).

274. See Ryan Haar, *How the Pandemic Pushed a Generation of Americans to Discover the Perks (and Risks) of Online Banking, *TIME: NEXT ADVISOR (Sept. 25, 2020), https://time.com/nextadvisor/banking/how-the-pandemic-is-changing-banking/ [https://perma.cc/8LU9-DRGZ] (reporting that consumers will see the most added value in money reinvested in online banking services).

275. See id. (discussing advantages of mobile banking like convenience, easier financial planning, and less fees); see also Donna Fuscaldo, Telecommuting: Should Your Company Make It Permanent? BUS. NEWS DAILY (Sept. 16, 2020), https://www.businessnewsdaily.com/15817-should-telecommuting-be-permanent.html [https://perma.cc/958T-SSE9] (explaining that telework can allow employees to save money and work more productively).

276. See Fuscaldo, supra note 270 (“Telecommuting has proven to save money, boost morale and enhance the quality of life for many workers.”).

277. Id.

278. See id. (discussing how remote employment enables companies to hire from a talented pool from all across the globe).

279. See id. (“[W]hen a physical office is out of the equation . . . it also means your business can hire people with disabilities who can’t get to a physical office, single parents who are juggling families and work, and those who can’t afford a car, train or bus to get to work.”).

280. See id.

281. See Daniel Crow & Ariane Millot, Working From Home Can Save Energy and Reduce Emissions. But How Much? IEA (June 12, 2020), https://www.iea.org/commentaries/working-from-home-can-save-energy-and-reduceemissions-but-how-much [https://perma.cc/QV9V-JRPW] (discussing how working from home could reduce employees’ carbon footprint).

public transportation, thereby promoting environmental sustainability and reducing the bank’s carbon footprint.282

Finally, policymakers need to consider the pragmatic effects of a remote workforce and amend existing privacy legislation in consideration of it.283 The Telework Enhancement Act of 2010 (“Telework Act”) is the most recent federal remote-work legislation,284 which applies solely to executive agencies.285 Under the Telework Act, federal agencies must (1) designate a telework managing officer (who is the primary contact point for telework matters),286 (2) require all remote employees to complete telework training,287 and (3) demand written agreements from all agencies setting forth their telework plan.288 Furthermore, a push for new telework legislation has resurged in the form of the Pandemic Federal Telework Act (“Pandemic Telework Act”),289 which, if passed, would require all federal agencies to maximize telework and expand the number of employees required to telework for the duration of COVID19.290 The expansion of telework would remain in effect until the COVID-19 public health emergency ends.291 While the Telework Act and Pandemic Telework Act are aimed solely at federal employees, telework is more common in the private sector.292 Thus, a comprehensive

282. See id. (“Our analysis shows that for people who commute by car, working from home is likely to reduce their carbon dioxide (CO2) footprint if their journey to work is greater than about 6 kilometers. However, for short car commutes or those done by public transport, working from home could increase CO2 emissions due to extra residential energy consumption.”).

283. See Telework Enhancement Act of 2010, Public L. No. 111-292 12 Stat. 3165 (2010) (currently, the most recent legislation relating to telework) (currently, the most recent legislation relating to telework).

284. *Id. *

285. *Id. *

286. *Id. *§ 6505.

287. Id. § 6503.

288. Id. § 6502–03.

289. Pandemic Federal Telework Act of 2020, S. 4518, 116th Cong. (proposed Aug. 10, 2020).

290. *Id. *

291. See Jessie Bur, Maximum Federal Telework Gets a Second Senate Push, FED. TIMES (Aug. 10, 2020), https://www.federaltimes.com/federaloversight/congress/2020/08/10/maximum-federal-telework-gets-a-second-senate-push/ [https://perma.cc/9VF5-MVNF] (reporting that about 7% of the private sector teleworks compared to 4% in the public sector).

292. See Drew Desilver, Before the Coronavirus, Telework Was an Optional Benefit, Mostly for the Affluent Few, PEW RES. CTR. (Mar. 20, 2020), https://www.pewresearch.org/fact-tank/2020/03/20/before-the-coronavirus-telework-wasan-optional-benefit-mostly-for-the-affluent-few/ [https://perma.cc/9A82-B49D] (“Telework

federal telework act—covering both public and private employment sectors—could provide a framework for companies pursuing a permanent remote workforce in the future.293

Ensuring the safety and soundness of consumer financial data necessitates regulatory oversight of remote work.294 Key provisions proposed in the Pandemic Telework Act would benefit from inclusion in a comprehensive federal telework act.295 Such provisions include a determination of precisely which employees are telework-eligible,296 and an implementation of mandatory telework training for supervisors and managers.297 Given that many employees were not prepared to make the remote-work transition at the onset of the pandemic,298 understanding which bank employees will telework is necessary for ensuring that these employees will be well equipped. While some employees were less inclined to follow safe data practices at home,299 a federal telework act could provide guidance on what behaviors are permitted and prohibited. Because the financial services sector faces specific challenges pertaining to the protection of sensitive consumer data, oversight to ensure

is more common in the private sector than in state and local governments: About 7% of private-industry workers have access to it, versus 4% of state and local workers.”).

293. Financial services companies have largely transitioned to a remote workforce since the pandemic began, and many companies have announced permanent work-from-home positions. See, e.g., Bond, supra note 222 (reporting that Facebook “plans to begin ‘aggressively’ hiring remote workers, and it will soon allow some current employees to apply to work remotely on a permanent basis”); Brownlee, supra note 221 (“Recent announcements that virtually all Twitter and Square employees will have the option to work from home forever sent shock waves through business communities. . . . On the heels of surprisingly successful work from home experiences, survey data clearly suggest a momentum towards expanded work from home policies going forward.”).

294. See George Mutune, Work from Home Cyber Risks, CYBER EXPERTS, https://cyberexperts.com/work-from-home-cyber-risks%EF%BB%BF/ [https://perma.cc/QJ2A-TF8Z] (last visited Jan. 5, 2021) (detailing risks of remote work environments).

295. See id. (“It is therefore necessary for every organization to be familiar with the different types of risks associated with remote working.”)

296. Pandemic Federal Telework Act of 2020, § 2(b)(1)(A), S. 4518, 116th Cong. (proposed Aug. 10, 2020).

297. Id. § 4(3).

298. See Westfall, supra note 228 (“[M]ost workers are still unprepared for the challenges of working from home.”).

299. See Half of Employees Abandon Safe Data Practices, supra note 230 (“A new report from email security firm Tessian looks at the state of data loss in organizations and reveals that nearly half of employees (48%) are less likely to follow safe data practices when working from home.”) (emphasis added); see also Going Digital, supra note 247 (“[B]anking in the digital age requires a drastic, profound reset of how banking staff reacts to customer needs.”).

employees are adhering to good cyber-risk management policies is critical.300 Moreover, a federal telework act could provide civil penalties for non-compliance with safe data practices. If widespread telework is to continue then guidelines are necessary.

Table of Contents

Table of contents