CIAM and Core Banking: Personalised and Secure Banking Services

Read how modern CIAM systems provide secure authentication methods that not only ensure an optimal customer experience for consumers.

Apr 27, 2023 - 3 min.

The pressure on banks to compete and innovate is constantly increasing. More and more consumers are taking advantage of online or mobile banking options. At the same time, traditional banks are losing customers to neo-banks that offer a better customer experience. The industry association Bitkom e.V. has already presented clear figures for 2021. For example, one in every two consumers has already switched their main account because a more convenient account was just a few clicks away. In recent years, this has forced traditional banking institutions to jump onto the digital bandwagon to keep their connection and customers. However, another side of the coin is that customers are increasingly wary of online banking. In a recent Bitkom study, for example, two-thirds of consumers said they were afraid of misuse of their online accounts. 

Banks are therefore facing a bit of a dilemma: their core banking system must live up to high customer expectations on the one hand and be secure on the other. Read on to learn how an advanced CIAM solution can help with this.

CIAM for core banking – a brief definition 

A core banking system is the beating heart of a bank and is often specialised for a certain type of banking business. In this case, the software supports the core processes as well as the most common transactions. These include loan applications, account openings, processing of cash transactions such as deposits and withdrawals, issuing and cashing checks, managing customer accounts and much more. A distinction is made as to whether the software is geared to businesses with private customers (retail banking) or corporate business customers (wholesale banking). Yet the various core banking systems have one thing in common: the use of the software is intended to provide bank customers with a high degree of security and a seamless customer experience. 

Especially when customers access their accounts online, for instance, to initiate transactions, it is important that they do not need to take unnecessary steps to log in and that their data and – in the worst case – cybercriminals do not target their accounts. To guarantee this, core banking should be supported by multiple authentication methods. To save customers the hassle of remembering passwords and usernames, a modern CIAM solution can be used to provide multi-factor authentication (MFA). 

Moreover, customers do not want to log into each application separately. Single sign-on (SSO) allows the customer to log in once and gain access to multiple services. This means that a customer can log into several banking services, such as online banking or a financial securities account. This not only increases convenience and ease of use but also improves customer loyalty.

Which security standards must a CIAM solution for core banking systems meet?

Banks not only have to meet the expectations and wishes of their customers but also face regulatory challenges that they must take into account when implementing a CIAM system:

One of the key issues is the security of financial data. Therefore, the CIAM system should include and deploy robust security measures to protect sensitive data. For example, it is critical for core banking that sensitive data is transmitted and stored in encrypted form, access controls are implemented, and account activity is monitored to detect and prevent fraudulent intent. 

This also includes adhering to compliance rules and meeting stringent regulatory requirements and regulations. Here too, data protection is a top priority. Banks must protect financial and consumer data in compliance with the GDPR and meet other regulatory requirements. Laws and regulations that play a role in this context include AML laws such as the German Money Laundering Act (GwG), Know-Your-Customer (KYC) requirements (KYC), PSD2 and the German IT Security Act 2.0. 

Role-based authorisation plays an additional role when it comes to ensuring the security of a core banking system. In this case, certain individuals are given specific access rights to data that is important for their respective jobs. For instance, a bank employee will have different rights than a financial analyst. This also prevents fraud attempts, among other things.

Advanced security: curbing fraud attempts

Similarly, adaptive authentication is important for protecting access to the core banking system and customer data. These technologies can be harnessed to identify fraudulent activities and to launch preventive measures. In this way, it is possible to detect suspicious login attempts to an account. Adaptive authentication is, therefore, situation-dependent: if a suspicious login attempt is detected, the customer can be asked to complete additional authentication steps to verify that a genuine customer and not a cybercriminal is logging in. 

User behaviour analytics (UBA) is also important to prevent attempted fraud. These involve analysing the behaviour of bank customers to identify suspicious patterns, for example, during the login. If a customer's behaviour deviates significantly from their typical behaviour, this may indicate a fraud attempt. 

Geolocation or location verification also provides an additional analysis tool for suspected fraud attempts. If a customer logs in with their smartphone, geolocation technologies can be used to determine an approximate location. A location different from the customer's usual movements may also indicate a fraud attempt.

CIAM: secure and efficient solutions for core banking systems

Banks must offer their customers digital solutions that are not only secure but also personalised, intuitive and efficient. The financial sector will remain in a state of flux in the future and will develop new and disruptive technologies. Examples of these include cryptocurrencies, NFTs and the adoption of Open Banking and Open Finance. Financial institutions must modernise their software infrastructure to remain attractive to their customers.


Efficient and Secure User Authentication with Single Sign-On