Mobile Banking Compliance Requirements: Does Your Product Comply with Latest Trends?

Complying with an ever-changing regulatory environment in the banking industry seems to be a distant dream for one too many banks. And those financial institutions that are successfully adopting mobile applications, have an even more significant number of regulations to comply with. While the price of meeting the mobile banking compliance requirements is high, the non-compliance causes reputational damage, financial and legal loss, and increases technical debt. Keep reading and learn about the latest mobile banking compliance requirements and ways to meet them.

What are the major mobile banking compliance requirements?

With the appearance of face recognition, fingerprint, electronic signatures, and other new technologies implemented in mobile banking apps, businesses gain larger shares of clientele. The application of new technologies also poses new ways to compromise the sensitive financial data of their clients. To proactively safeguard data, countries, and financial associations make more and more efforts in imposing mobile banking requirements on all financial institutions. These requirements also concern mobile banking applications that operate with personal data and are used as a source of breaching financial data.

The latest mobile banking compliance requirements

The policymakers and regulators keep their focus on enhancing cybersecurity, bolstering digital identities and online authentication, and safeguarding consumers as they shift to digital payments and currencies. Here are a couple of the latest mobile banking compliance requirements issued in recent years:

Improvements in digital identity protection

• Denmark substitutes NemID with enhanced MitID to approve payments and logins.
• Canada launches the Voila Verified Trustmark program that issues trust marks to organizations that demonstrate compliance with PCTF components.
• The European Commission is finalizing a toolbox for member states that will list specific architectures, best practices, standards, references, and guidelines for creating digital wallets.
• The Federal Council of Switzerland's government is developing publicly-owned E-ID infrastructure. It will be used by the identity providers, agents, relying parties, or identity wallet providers.
• The US National Institute of Standards and Technology is releasing a draft of Digital Identity Guidelines for public comment to counter phishing attacks with phish-resistant authenticators.

Personal data protection initiatives

• In Japan, Enforcement Rules for the Act on the Protection of Personal Information took effect on April 1, 2022, obliging entities to report data breaches to the Personal Information Protection Commission and enforce regulations on the non-compliant actors.
• Switzerland passed the Swiss Data Protection Act that obliges companies to immediately report serious data breaches to the Federal Data Protection and Information Commissioner.

While the mobile banking audit checklist with compliance requirements is growing bigger and bigger, the nature of issues stays the same.

1. Improper platform usage
2. Insecure data storage
3. Insecure communication
4. Insecure authentication
5. Insufficient cryptography
6. Insecure authorization
7. Poor code quality
8. Code tampering
9. Reverse engineering
10. Extraneous functionality

For instance, according to OWASP research on the banking application malfunctioning shows a slight shift but not full disappearance of basic issues like broken authentification.

As we can observe, the major mobile banking compliance requirements concern personal data security and call for enforcing direct responsibility for data breaches on the side of the financial institution. We can roughly divide the top mobile banking compliance requirements into the following categories.

Privacy

Data privacy is one of the primary mobile banking compliance requirements that aim to protect such sensitive information as social security numbers, passwords, and other personal data crucial for making online money transfers. To ensure data privacy, it’s advised to follow the basic mobile banking compliance checklist that includes:

1. Allowing users to use two-factor authentication and manage accesses quickly
2. Providing an option to tie their payment app to a credit card instead of a bank account
3. Alerting users about activity on their credit cards, bank account, and payment app
4. Encrypting sensitive files using file passwords
5. Educating users about ways of protecting their private information
6. Allowing users to choose which personal data they share with the banking app
7. Reminding users about application updates through reliable channels

This checklist adherence to contemporary legal frameworks, and it is a step towards a mobile banking policy that addresses compliance problems and phishing attempts.

Security: physical, technical, and administrative security measures

Data breaching can happen almost anywhere and anytime: during a transaction, through downloaded malware, insecure internet connection, in the bank office, through embedded finance solutions , and on servers. Thus, it’s important to go beyond adhering to mobile banking compliance requirements. Security should be a number one priority at every step and level of your solution. Here are a couple of ideas on how to improve security:

1. Ensure physical and virtual security of servers and data carriers that operate with personal data
2. Work with business analysts to circle out the latest mobile banking compliance requirements and adjust your solution architecture to ensure a proper level of security
3. Conduct cyber security sessions for your employees
4. Create and follow a mobile banking security policy and action plan that activates in case of data breaching

Breach Notification: required steps in case of a data breach

Governments and financial institution unions are making serious advances in the direction of enforcing responsibility for data breaching among fintech service providers. For instance, in the US, banks are legally obligated by FDIC, OCC, and Fed rules to notify their regulators about data breaches in the next 36 hours after the breach identification.

For those banks with mobile applications, it’s crucial to know and abide by the rules and mobile banking compliance requirements of their target countries. Software-wise, it’s more than advised to boost digital financial solutions with AI and ML-based malware identification tools.

Enforcement of data breach investigation with GDPR

The GDPR is the most important data protection regulation in the EU that created a resonance in the tech industry and dictated new mobile banking compliance requirements. All digital companies, including financial institutions, have to comply with the regulation’s rules in order to protect sensitive user data and avoid penalties.

It’s a common practice for digital businesses to ask users to give permission for gathering data. This process also includes a list of on-and-off line processes related to data collection:

• Performing an information audit to determine who is responsible for handling data at the firm.
• Making privacy notifications and data processing operations transparent.
• Integrating data protection by design principles into all organizational processes.
• Establishing procedures for data security evaluation, breach, and awareness.
• Implementing accountability for GDPR standards compliance and empowering responsible parties with the authority to assess and execute data protection policies.
• Making contacts between the business and any third parties that handle personal data.
• Ensuring that any information your company holds on data subjects is completely transparent, accessible, and protected by their legal rights.

Choosing compliant business associates

The mobile banking compliance requirements also concern all third-party service providers and partners that have access to user data. Thus, by gathering user data, financial institutions are obligated to make sure that there are no mobile banking compliance issues neither in their own system nor in the parters’. The same requirements apply to the fintech development outsourcing companies that build fintech solutions for banks .

How to avoid mobile banking violations?

As a rule, phishing attempts and compliance problems are caused by unreliable, flawed user entry and authentication techniques. That’s why mobile banking security procedures have become more stringent over time. Nowadays, banks must employ newer, more secure systems that don't rely on user participation (and are thus resistant to phishing efforts) and adhere to contemporary legal frameworks in order to address these issues. Here is a draft of a mobile banking compliance requirements checklist for three key areas that banks must really take into account when developing their mobile security procedures.

1. Secure onboarding and reactivation

Security, intuitiveness, and trust are the three vital elements that help brands build trust with clients. However, when you mix mobile banking compliance requirements and regulatory compliance, things get complicated. Some banks build trust by making a secure onboarding process and account reactivation.

1. Let people use the app without registration at first. One way to do this is to allow users to use an app initially, without having to fill in private data. Some banks choose to gate some of the deeper functionalities behind a signup form. In short, prove the value of your app first before asking them to register.

2. Include safety measures. Increase users’ sense of security by taking safety measures that demonstrate a serious commitment to protecting their data. For instance, log users out instantly after a certain period of time, even if they are still using the app. Or think about sending in-app notifications each time the clients make a purchase.

3. Explain why the application needs personal information. Each new user must provide personal information to an app as part of the registration process. Some banks increase the level of trust by outlining plans for the information and how they intend to use it.

Those users who are unfamiliar with your company or who have just downloaded your app won't be eager to share any personal information. They will, however, be more willing to share their information if the application explains how the software will use it and how their experience will be significantly enhanced.

2. Ensure strong customer authentification

From large to small, international banks are implementing Multifactor Authentication. The MFA is a security measure that requires users to confirm their identity by presenting a variety of proof including a password, a security token, or by using biometric verification techniques.

And while the MFA isn’t on the list of actual mobile banking compliance requirements, they are already up and running in the majority of leading fintech applications. Take a look at a list of MFA implementation best practices:

1. Reduce the number of redundant passwords through single sign-on
2. Create and set security protocols to execute MFA methods
3. Request at least two information bits during the authentication process
4. Consider biometric authentification

3. Empower users with an in-app protection

Create mechanisms that will ensure in-app mobile protection and inform users about potential problems. With in-app mobile protection, users can easily delete threats from their own devices, learn about potential issues, and prevent devices from malfunctioning.

Banks and fintech firms can use the track signals from mobile devices by connecting payment provider systems via API. They might use the information, for instance, to create an incident in their Security Information and Event Management (SIEM) system or to thwart a fraudulent payment in their Fraud Detection System (FDS).

Fulfill mobile banking compliance requirements with Binariks

Binariks has robust experience in creating fintech apps that adhere to the specific mobile banking compliance requirements and enable security at each stage of product development. We offer a wide arsenal of services including financial software development and mobile app development conducted by solution architects, business analysts, engineers, and quality assurance experts with hands-on experience in the fintech industry.

Recently, Binariks finished building a secure commercial messaging platform for a Swedish IT company. This solution allows banks, companies, and government agencies to authenticate people over the phone or online by using a national electronic identification method.

Prior to the collaboration with Binariks, the customer used a variety of independent applications that offered various services connected to the Swedish Bank ID verification. The programs that were already in use were neither reliable nor safe enough to operate with national identity codes. We helped our client to bring the solution to another level by combining the features of all apps into one highly scalable solution.

As a result, the platform allows users to:

• authenticate with their bank ID before they may view messages
• receive requests from other businesses and use BankID to react to such requests
• complete GDPR forms and then be recognized by their SSN

Our team of experts helps fintech businesses all around the world extend their business opportunities by leveraging new technologies and meeting essential mobile banking compliance requirements. Drop us a line and we’ll help you to create reliable, secure, and innovative solutions.