The Financial Services sector continues to evolve in 2024 with significant challenges and opportunities. GenAI and Machine Learning are providing highly valuable toolkits in the “arsenal” of banks and other financial institutions to effectively deliver their digital transformation programs. That comments on DIGI PAY BLOG Anestis Dimopoulos, Director, Head of Digital & Risk Advisory, Baker Tilly Southeast Europe.

At the same time, the fintech ecosystem, DeFI platforms and tokenization of traditional assets are rising more quickly and threating traditional FIs, although many of them are “spinning-off” neobanks to enter the market in areas that are not well placed traditionally. Regulatory requirements (e.g. EU DORA) are also a key consideration, especially to cyber risks and third parties risk management. Last but not least, the race/war for talent is growing in many dimensions, in technology but also in other functional areas. Baker Tilly is working closely with our clients and markets to support complex requirements and provide integrated solutions that give responses to all previous challenges share Anestis to us as well.

Digital payments face multiple challenges

Digital payments face multiple challenges, including security risks in the form of phishing, vishing (voice phishing) and smishing (SMS phishing). Malware infection and protection is also very critical to reduce the risk of identity theft and man-in-the-middle attacks. Third party risks are also very important, as security threats beyond the traditional boundaries are emerging more and more. Online payment service providers should focus on a 360 model covering adequately their threat surface (e.g. based on ISACA Digital Trust, NIST framework, PCI DSS, etc.), enhance multifactor authentication and raise awareness with their customers and business partners.

The risk profiles are at the same level in all countries in South East Europe (SEE)

Our experience, working with clients from most countries in South East Europe (SEE) and globally, indicate that the risk profiles are at the same level in these countries, added Anestis. Considering also the common EU regulatory environment, FS sector institutions in SEE implement more or less the same baselines in terms of compliance and cybersecurity frameworks. The key differentiator is the level of maturity of these internal controls, and how well established, tested and improved they are over the time, together with strong people awareness and control culture.

AML under increased attention and strong requirement from the regulators

Anti-Money Laundering solutions are getting a lot of attention, due to the increased level of risks but also increased attention and strong requirements from the regulators. International groups have to adhere to (potentially multiple) local central banks regulations, while at the same time the solutions implemented need to be localized and meet the country’s local risk profiles. Data quality is also a key challenge, while use of AI with specific use cases can help improve efficiency, prioritize high risk alerts, and building a network view of risk.

Looking forward for the next five years

Looking forward, there are some key trends that will shape the risk profile of the industry: Technology will keep changing how financial services are provided, considering new developments in AI, quantum computing and data science. That are the most important changes that will face the financial industry for the next five years tell us Anestis Dimopoulos, Director, Head of Digital & Risk Advisory, Baker Tilly Southeast Europe.

The risks seem that will remain around key risk themes (credit risk, regulatory compliance, cyber risks, liquidity risks, etc.) but differentiating in terms of size, source and nature (e.g. how the millennials behavior towards banking and credit will affect the services offered in the next 5-10 years?). Geopolitical risks are emerging recently and expected to be more and more on the table in the next few years.

Resilience is a key theme, driven also by EU regulations, and will require significant attention for financial services organizations.

Regulatory compliance requirements will continue to increase, with different expectations per jurisdiction.

The war for talent is still here, but mature organizations have already adapted to the new reality. In any case it will require a continuous effort and a people-centric culture to win and maintain the best talent, emphasized Anestis finally.