Managing our finances from the palm of our hand has ceased to be a novelty and has become the standard. Digital banking, driven by financial innovation and the demand for a better user experience, has redefined our relationship with money. However, this ecosystem of instant transfers, intuitive apps, and 100% online services rests on two fundamental pillars that, though often invisible to the end user, are crucial: increasingly strict regulation and a constant battle against security threats.
The rapid digital transformation of the financial sector has forced regulators to act to protect consumers, foster competition, and ensure system stability. At the same time, cybercriminals have sophisticated their methods, making security a dynamic and top priority challenge for all institutions. Understanding this dual scenario is key to operating confidently in the world of digital finance.
Far from being a brake, European regulations are laying the groundwork for a more open, competitive, and above all, secure digital financial market. Several directives and regulations are the cornerstone of this new architecture.
From PSD2 to PSD3: Opening the Financial Ecosystem
The Second Payment Services Directive (PSD2) was revolutionary by introducing the concept of open banking. It forced banks to share, with prior customer consent, account data with third-party service providers like other fintechs. This enabled the emergence of financial aggregators and new payment solutions.
Now, the industry is preparing for PSD3. This new directive, along with the Payment Services Regulation (PSR), aims to refine its predecessor’s edges. Its main goals are:
- Strengthening fraud prevention: Introducing measures like the obligation to verify the match between the IBAN and the account holder’s name on transfers, a key step to prevent scams.
- Improving consumer rights: Clarifying responsibilities in fraud cases and increasing transparency.
- Leveling the playing field: Giving non-bank payment service providers more direct access to EU payment systems, fostering competition.
DORA: The Digital Armor of the Financial Sector
While PSD3 focuses on payments, the Digital Operational Resilience Act (DORA) deals with the system’s “plumbing.” Its goal is to ensure that the entire European financial sector can withstand, respond to, and recover from any disruption or threat related to information and communication technologies (ICT).
Set to apply from early 2025, DORA requires financial entities—from banks to crypto companies—to implement a rigorous ICT risk management framework. This includes:
- Conducting advanced resilience testing periodically.
- Actively managing and monitoring risks from external technology providers, such as cloud services.
- Reporting serious security incidents to authorities.
Essentially, DORA forces institutions to prepare for the worst-case scenario, ensuring service continuity.
Major Security Challenges in the Digital Era
The regulatory framework sets up defenses, but attacks continue evolving. Financial institutions face a complex and ever-changing threat landscape where technology and psychology play crucial roles.
The Human Factor: The Most Exploited Link
Despite technological advances in security, humans remain the prime target of cybercriminals. Social engineering techniques are the main entry point for fraud:
- Phishing: Fraudulent emails impersonating banks to steal credentials.
- Smishing: The same technique via SMS messages, especially dangerous due to immediacy and user trust in the channel.
- Vishing: Scams through phone calls where criminals pretend to be bank managers requesting sensitive data.
The Threat of Artificial Intelligence in Fraud
The same AI that helps banks detect fraud patterns is used by criminals to enhance attacks. An increase in AI-based fraud is expected, such as deepfakes (voice or video impersonation to authorize transactions) or highly personalized, convincing phishing emails, making them almost indistinguishable from legitimate communication.
Cloud Security and Third-Party Management
The migration of infrastructures to the cloud and reliance on external technology providers, as highlighted in DORA, introduces a new security perimeter that must be managed. A security breach at a single cloud service provider could affect multiple financial institutions simultaneously. Hence, third-party risk management has become a critical discipline for the sector’s overall security.
Innovation and Vigilance: The Constant Balance
Digital banking is advancing at a dizzying pace, introducing new business models and opportunities for both companies and consumers. However, this progress would be unsustainable without the trust provided by a secure and regulated environment.
Regulations like PSD3 and DORA should not be seen as burdens but as the scaffolding needed to build a more resilient, transparent, and competitive financial system. For users, this means greater protection and control over their data and money. For institutions, it represents a continuous challenge of adaptation but also the opportunity to differentiate through excellence in security and regulatory compliance. The future of banking will not only be digital but will fundamentally depend on this delicate balance between technological innovation and constant vigilance.
