Question

Question 1: In the past 3 years, give an example of one Bank Security breach?

Question 2: In your opinion, are Bank mergers beneficial or detrimental to the general public?

Question 3: Are bank branches still necessary? If so, why??

Answer 1

Q 01.  An example of Bank Security breach in the last 3 years is the case of Capital One Bank.

Capital one is among one of the largest banks in the United states being a major market player in credit card issue. The security breach resulted in compromise of data of approximately 106 million people including Name, Date of birth, Social Security Numbers, Bank account details, Credit scores, Contact details etc.

The data breach was a result of misconfiguration of a firewall thereby allowing the perpetrator to access the remote server of Capital One. The Capital One data is being hosted in the cloud servers of Amazon Web Services (AWS). The hacker, Ms. Paige Thomson was able to exploit a configuration vulnerability in the Amazon Web Services’ Meta data Services and thereby accessing Capital One data. The hacker left a digital trail and hosted details in Github which led to unravelling of the security breach.

This case sheds light on the need of continuous monitoring of security configuration, due diligence, auditing of Information system to ensure system security. Cyber resiliency can be cultivated only through continued practice of these factors. The growing world of data is making these crucial now than ever before underscoring the need of strong consumer protection regulations.

Q 02.  Are Bank Mergers beneficial or detrimental to general public?

Mergers and Acquisitions in general are aimed at bringing economies of scale, improving financial performance, creation of synergy benefit, better access to larger market, access to skilled human resource and tax benefits for the entities involved in the process.

When two or more banks decide to merge the impact on the general public is tremendous. Fewer competition in the market may result in businesses charging more for the services. But generally when two or more companies merge, the banks will be capable reducing the cost of transactions and providing improved customer service.

Merger also allows the banks to access improved technology. Amidst the increasing importance of technology in banking sector, most of the small and mid-sized banks have a hard time making enough capital investment in technology. A merger provides an effective way of bringing high end technology and innovative products to the customers. Big market players have an advantage here since they might already possess adequate technology. The merger will further enhance their online footprint.

The merger may also result in increase in number of branches of a bank. This makes it easier for the customer to access the bank and improve customer relationship. Hence merger of banks will lead to improved customer service and satisfaction.

Although the merger is expected to prove advantageous to the customers, it can also prove detrimental if the merger of the bank negatively impacts the work culture of bank and affects the customer satisfaction The customer needs to keep track of the transactions involved with each bank and this may prove time consuming. The merger may result in an increase in customer grievances and there must adequate customer support services at this time to ensure continued customer loyalty.

Hence, the effects of merger overall may prove beneficial to general public.

Q 03.

The Bank Branches are still the major source of procuring investments/ deposits which is the backbone of banking industry. Although the digital transactions contribute to cost reduction, the existence of branches is essential as the marketing tool of banks to attract new potential customers and retain existing ones. The number of Physical branches of banks across the globe are reducing as per reports of IMF (2017-18) with a few exceptions of Hongkong, India and New Zealand.

IMF Financial Access Survey (2019: key trends and developments) states that the increased digital banking in high income economies cannot be considered as a decline in access but considers the same to be only a shift in form of financial access. Whereas in low and mid-income economies the increase of banking branches is a result of unmet demand for banking services.

The decreasing number of physical branches are mainly due to increased cost of opening and maintaining a physical branch and operating challenges. The bank has to provide quality services and track the customer engagement which will be much easier in a digital world. The costs of processing and approving transactions digitally is much lesser compared to the physical processing of the same encouraging banks to be growing participant in mobile and internet banking. In developed economies, the growing digital banking is continuing to replace the physical branches.

In case of customers in low income/remote areas/elderly, they are more likely to visit physical branches than to transact digitally. The lower rates of financial /internet literacy also makes the digital banking harder in a low income economy. The existence of physical branches ensures the customer with trust and good faith in the bank. It is the most relevant tool to improve financial performance of banks and to market new products.

Hence, The bank branches are still relevant.