Differentiating with Cybersecurity
Turning challenges into opportunities
Posted by Dave Uhryniak, financial services research leader, Deloitte Services LP, on July 16, 2013
As financial services companies strive to separate themselves from the crowd, differentiation can perhaps be implemented through capabilities or functions that have traditionally been viewed as secondary or tangential to the primary products and services. Consider smartphones. All smartphones offer the same primary functionality of providing voice and data connectivity. Prior to 2007, mobile phones differentiated mainly through design innovation and became smaller and sleeker. The iPhone changed the rules when it sought to further differentiate from peers by offering a touch-screen capable of adjusting to the vertical or horizontal position of the device. Tangential offerings such as these may be transformed into differentiating factors that create a sustainable competitive advantage.
New ideas for differentiation
In perhaps much the same way, financial institutions might create a sustainable competitive advantage with cybersecurity. Cyberattacks, or attempts by hackers to damage or destroy a computer network or system, are rising in both frequency and cost, with financial services increasingly targeted. In Q1 2013, there were 477 total global cyberattacks, an increase of 51 percent from Q4 2012 and 37 percent higher than Q1 2012.1 In Q1 2013, financial services were targeted 115 times or 24 percent of total global cyberattacks. As the frequency of attacks increases, so does the cost. According to one study, the average annualized cost of global cyberattacks on financial services rose by nearly 12 percent in 2012 to $16.4 million per incident.2
Rising market demand for cybersecurity may offer opportunity to differentiate
Initially, cybersecurity was driven by regulatory mandates, which defined the minimally acceptable functionality and resulted in standardized offerings from individual institutions. However, the commoditization of cybersecurity may change as financial services companies adapt to threat evolution. The increased importance could lead to rising market demand for more targeted cybersecurity offerings, and thus new points of differentiation. In fact, it’s not beyond the realm of possibility that in the near term, consumers may be more likely to include the quality of cybersecurity offerings when they choose financial services providers. Companies that successfully utilize – and publicize – unique and effective cybersecurity capabilities will likely stand out in a crowded field.
Tangential offering may provide differentiation opportunity
The financial services business is becoming more challenging, and as a result, distinguishing from the competition becomes even more important. Imagine a financial institution that is thought of by consumers as being impenetrable to cyberattacks. Would this reputation help to drive new business? Could the reputation be leveraged in marketing campaigns? Would consumers accept paying fees because they want to be with a financial institution that is ultra-secure? If you answered “yes” to those questions, then leveraging a tangential cybersecurity service to grow the primary business could potentially be a viable strategy to create a competitive advantage.
2 Ponemon Institute, 2012 Cost of Cyber Crime Study: United States, October 2012