Technology Service Providers for Banks (CRS Report for Congress)
| Release Date |
Revised June 20, 2019 |
| Report Number |
IF10935 |
| Report Type |
In Focus |
| Authors |
Darryl E. Getter |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Recent surveys indicate that convenience is the primary
reason why consumers select their preferred bank or credit
union. Convenience in the form of mobile and online
banking has become an important contributor to consumer
satisfaction. As more banking transactions are delivered
through digital channels, financial institutions that lack the
in-house expertise are increasingly relying upon third-party
vendors, specifically technology service providers (TSPs).
TSPs develop the software and customer interfaces for
customer account and payment services as well as maintain
the digital technology.
In light of growing reliance on TSPs, regulators are
scrutinizing how banks manage their operational risks, the
risk of loss having to do with failed internal controls,
people, and systems, or from external events (as defined by
the Basel Committee of Bank Supervision). Rising
operational risks, specifically in the form of cyber risks
(e.g., data breaches, insufficient customer data backups, and
operating system hijackings), have compelled regulators to
scrutinize security programs aimed at mitigating operational
risk. Cyber-related disruptions can potentially weaken
public trust and confidence in the financial system, thus
increasing the potential of a systemic risk panic (i.e., run on
bank) event. Consequently, managing cyber-related risks
(relative to other types of financial risks) and the associated
costs have grown in importance.
