Ensuring Mobile Banking Security: Challenges and Solutions

In 2023, 48% of consumers said their primary method of accessing their bank account was through their mobile phone and online platforms. The preference for digital banking channels is especially strong among younger generations, with 74% of millennials reporting that they choose to bank digitally.

The growing popularity of digital banking platforms provides fraudsters and hackers new opportunities to create false accounts or take control of existing accounts. Financial institutions must implement new security measures to keep criminals out while providing a positive experience for legitimate users.

The Growing Need for Robust Authentication in Mobile Banking Security

Mobile and online banking has made it easier than ever for users to manage their money. They can open new accounts, make money transfers and pay off credit cards right from their mobile banking apps or websites.

But the lack of face-to-face interaction means digital authentication methods need to ensure users are who they say they are during account onboarding, and again when they access their various accounts. When it comes to mobile banking security, authentication methods need to be robust, reliable and accurate.

The Rise of Mobile Banking Apps and the Need for App Security

While the rate of mobile banking users is increasing each year, so is the amount of fraud and scams. The amount of financial fraud executed from a mobile device was 61% in 2023, up from 47% in 2022.

Cybercriminals are creative in the way they attack digital banks and accounts, meaning security needs to be strong from the moment a new account is opened. Financial institutions also need to implement security to ensure their protection and Know Your Customer (KYC) compliance.

Security Challenges and Risks of Mobile Banking

Mobile banking has a unique set of challenges and risks. Properly protecting against them requires a full understanding of what they are, how they’re used and how they can be stopped.

Top security challenges and risks of mobile banking include:

  • Phishing attacks
  • Vulnerabilities in conventional authentication methods and systems
  • Device theft and unauthorized access
  • Man-in-the-middle attacks

Phishing Attacks

Phishing attacks are some of the most common types of fraud attacks. They involve tricking legitimate users into providing sensitive information related to their accounts, such as their usernames and passwords or two-factor authentication codes. Phishing attacks typically happen via email, SMS text messages or fake notifications and websites. Some more sophisticated attackers may even create fake banking apps to gather login credentials.

Fraudsters use information collected from phishing attacks to gain access to a user’s account, or they may take stolen information to commit synthetic identity fraud, where they open new accounts using fake and stolen credentials.

Vulnerabilities in Conventional Authentication Methods and Systems

Cybercriminals take advantage of weak points in the conventional authentication methods mobile apps typically depend on. Lack of multifactor authentication (MFA), low-quality passwords and reuse of credentials across multiple platforms all allow fraudsters to break in to users’ mobile bank accounts.

Fraudsters have even gotten better at finding weak points in high-tech authentication methods, such as biometric security. Thanks to spoofing advancements, cybercriminals can more easily impersonate account owners, tricking banks into providing access to unauthorized accounts.

Device Theft and Unauthorized Access

Mobile devices like cell phones are easily lost or stolen. And if they fall into the wrong hands, thieves can access bank accounts and sensitive information. Even when banks require a passcode, PIN and biometric authentication measures, hackers can find a way to bypass most of these security measures.

While users should take the appropriate measures to protect their devices against security threats, banks should implement another layer of protection to prevent identity theft. Leveraging functionality such as biometric authentication from an identity verification provider can stop hackers from accessing accounts even if they’re able to bypass the device’s security features.

Man-in-the-Middle Attacks

A man-in-the-middle (MitM) attack intercepts communication between a user and the banking server. For example, a MitM attacker might collect a username and password while the user is on an unsecured network or public Wi-Fi, or intercept a one-time password shared over an unsecured channel. Man-in-the-middle attacks happen without the user’s knowledge.

Financial institutions need to implement the appropriate security measures to detect suspicious or fraudulent activities on a user’s account. It’s also important to provide educational materials on how to prevent MitM attacks from happening, such as suggesting account owners use VPNs or avoid logging into their accounts on public Wi-Fi networks and hotspots.

Emerging Technologies in Mobile Banking Security

Emerging technologies are helping to improve security in mobile banking. Here are some of the biggest areas of opportunity.

AI and Machine Learning

AI and machine learning are helping to increase mobile banking security through improved threat detection, fraud prevention and user authentication. Here are some examples:

  • Generative AI can be used to fight fraud by creating synthetic datasets that resemble real transactions and user behaviors. This data can be fed to machine learning algorithms to improve training models, improving the outcomes of AI-driven fraud detection measures.
  • Informed AI helps improve authentication processes by using real-world production datasets to deliver better, more informed and bias-free AI verifications. It’s faster, more accurate and keeps fraudsters out while maintaining a streamlined user experience for legitimate account holders.
  • AI-driven predictive analytics help determine fraud red flags whenever a user goes through an onboarding or ID verification process. Sophisticated behavioral analytics makes it easier to spot complex connections that could point to fraud rings or other suspicious activity.
  • Biometric analytics match selfies with photo IDs to determine whether or not the person featured in both images is the same person. This advanced technology helps prevent identity theft and stops fraudsters from attempting to take over legitimate accounts.

Blockchain Technology

Blockchain technology provides a decentralized and immutable ledger for record-keeping and identity verification. Users can create secure digital identities on the blockchain, giving them more control over how their personal information is shared and who has access to it.

Using blockchain technology can also be paired with machine learning algorithms to analyze transaction patterns to look for suspicious activities or anomalies.

New Challenges and Opportunities

As new technology emerges, financial institutions need to remain aware of how those tools impact regulatory and compliance measures they must abide by. Whenever new technology is implemented, banks must ensure sensitive data is protected.

Maintaining customer trust while driving innovation in mobile banking services requires finding just the right balance between the two.

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Best Practices for Keeping Mobile Banking Safe

Keeping mobile banking safe requires a team effort between banks and financial institutions and their customers and app users. Here’s what that looks like.

For Banks and Financial Institutions

Best practices for banks and financial institutions looking to improve mobile banking security include:

  • Implementing multifactor authentication. MFA methods such as biometrics add an extra layer of security to prevent hackers from accessing legitimate users’ accounts. It also stops fraudsters from creating digital banking accounts with stolen identities or credentials gained from a phishing attack or data breach.
  • Regular app and cybersecurity updates. Maintaining the software used to run mobile banking and keeping apps up-to-date helps address app vulnerabilities that might allow cybercriminals and malware to slip through the cracks.
  • Secure communication channels. Use secure communication protocols to encrypt data shared between mobile apps and backend servers. Implementing end-to-end encryption measures to communicate with customers within the app can also help keep sensitive conversations and financial information secure.
  • Smart fraud detection and monitoring. Real-time fraud detection is key for stopping suspicious activity early. Transaction monitoring, behavior analytics and prompt notification systems are all critical for making this possible.
  • User training and education. Banks and financial institutions should provide account holders with accurate and comprehensive information about how to protect themselves against fraud and cybercriminals.

For Customers and App Users

Best practices for banking customers and app users wanting to keep their mobile bank accounts secure include:

  • Using strong passwords and MFA. Users should activate MFA methods for banking applications wherever possible. Additionally, or when MFA isn’t an option, they should use strong passwords that aren’t easy to guess or used on other platforms.
  • Proper phishing attempt education. Knowing what phishing attempts are and what they look like is critical. Users should know what to do if they’re baited with a phishing scheme.
  • Using official communication channels. Users should verify the authenticity of an app, bank’s website or representative before providing their login or other banking information.
  • Monitoring account activity. Users should regularly check their transaction statements to spot suspicious activity. They should also have clear instructions on how to report discrepancies or unauthorized charges.

Working Toward a More Secure Mobile Banking Landscape for Customers & Institutions

Mobile banking is convenient for both customers and institutions — but it also leaves both exposed to new security risks. Both parties have a duty to do what they can to safeguard it against cyberattacks and criminals.

For financial institutions and banks, this means implementing tools that can quickly and accurately detect fraud or red-flag activities, such as AI-driven authentication and verification technology from Jumio.

Explore Jumio’s entire suite of solutions for banking and financial services to see how we can help you improve your mobile banking security.

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