​How Financial Services Protect Their Users

Investing your personal money in any of the many financial services that exist presents an element of risk. The level of risk will change depending on how much is invested and in what kind of service. For example, opening a savings account possesses very little risk at all and is the most common financial investment people across the world make.

However, after the global financial crash and a few other events that have seen people lose some of their investments, many people are now more aware about protecting their investments. There are a number of ways all sorts of financial services ensure the safety and security of their users and their money.

Online Security

Arguably the biggest safety challenge for every kind of financial service that has appeared in the past couple of decades has been that of online security. Many years ago the main risk of customer investments being stolen was through banks and other financial institutions being physically broken into. Nowadays the greatest risk is from them being hacked and millions taken online, from a remote location by thieves that can be a lot harder to trace.

Cyber-attacks have been growing in number, frequency and strength at a similar rate to protective measures. There have been a number of high-profile attacks, such as the TalkTalk breach and Carbanak attack, which found over $1 billion had been stolen from over 100 banks in just two years. All financial services should have measures in place to protect their customers’ investments and personal data online, but there are a number of challenges involved and potential solutions.

  • Challenges
  • Solutions
  • Stop Losses
  • Maximum Trades
  • Trader Trust

Preventing and protecting finances and information against the threat of a cyber-attack involves all sorts of different challenges. There is the financial challenge itself, of affording the costs of implementing security measures, such as investing in software or outsourcing the task to a professional firm.

The internet has also allowed a lot of people to work from home and other external locations within financial companies. This introduces fresh challenges to maintain security policies when working out of the office, when transferring information securely. Threats to online security are also advancing and diversifying, with protective software quickly becoming out of date and sometimes struggling to keep up with the ever-changing threats.

In order to protect customers and users, around 90% of financial services have an information security framework in place. These will be made up of many different elements, including policies, training, education, cyber risk management and audits, to ensure that financial and personal information is as safe as possible.

The level of information security frameworks will differ from business to business, with SMEs spending less time and money on theirs compared to huge corporations, but also being less at risk. There are many different pieces of software that are installed by financial institutions, along with cloud based security, used by smaller businesses.

Much larger global banks, lenders and other financial corporations will have a dedicated offshoot of their IT departments whose sole aim is to protect financial and informational data. This will involve developing new systems to combat the evolving threats and monitoring existing ones, enabling them to stay more up to date than just installing a piece of software.

Financial Services Regulation

Every country has their own governmental financial services regulation, such as the Australian Financial Security Authority (AFSA). These are in place to not only oversee financial companies and check that they are working within the law, but also to protect the interests of everyday investors who are using them.

Each one will have a set of laws and regulations in place that financial institutions must abide by to keep their users safe. The financial services will be doing everything in their power to meet these standards, not only so that they are operating within the law but to further protect their customers’ financial assets and data.

Savings Protection

Savers have become more and more aware of the risk involved when depositing their money into any kind of savings or bank account. Therefore, it is important that anyone depositing their savings into a bank account is familiar with the protection measures that are in place, should the worst happen and the institution shuts down.

The financial services will take out professional insurance to ensure their customers are covered in case the worst happens. This means that should there be another financial crash or the bank goes under, that they will receive financial compensation to ensure all their savings are not lost. It adds an extra level of safety and security for the users, along with providing another element of trust for savers.

Trading Safety and Security

It’s not just banks and financial services that offer savings options which have measures in place to ensure the safety and security of their users. There are many other investment services and practices where it is important that users are protected, such as share trading with IG or making commodity investments and forex dealings.

Here a lot more of the responsibility is on the user, as there is also a greater amount of risk involved, yet the financial services have their own protective measures in place.

All forex traders provide stop loss functions to prevent traders from losing too much in one or more trades, should they make a loss. This means that a trade will stop at a certain percentage or pip loss, with the maximum amount varying between financial services.

They will also have a maximum amount that can be traded at a time, to avoid users losing more than they can afford in one go, which can happen due to leverage. Some will also allow users to self-regulate by changing their settings so that they can only make trades a certain number of times each day.

Brokers will hold their and client money with banks that they trust while often using their own funds to hedge client trades. Trust letters are also used to ensure client money and the broker’s assets remain separate.

There are many ways financial services strive to protect their users, so be sure to check any you hope to use are regulated and up to date regarding security.

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