Impact of CrowdStrike outage, Patelco lawsuit: Top tech news July 2024

July 31, 2024 5:30 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In July's roundup of top tech news: Banks weigh in on the fallout from CrowdStrike's outage, Patelco Credit Union navigates an ongoing legal battle over ransomware attack, JPMorgan Chase shares how it is using tech to help fight fraud and more.

Click here to read last month's roundup of top tech news.

JPMorgan Chase & Co. Ahead Of Earnings Figures

Angus Mordant/Bloomberg

How JPMorgan Chase is fraud-proofing its branches

Article by Carter Pape

The head of identity for consumer and community banking at JPMorgan Chase said in June that the bank is bringing more technology into its branches to ward off fraud and make life easier for tellers tasked with identifying it.

JPMorgan Chase is moving robust identity checks to the start of interactions inside branches by having each customer prove their identity at kiosks that ask for their account password or identification documents, rather than having a teller check the customer's driver's license by hand. That's according to Stefan Schubert, the bank's head of identity for consumer and community banking, who spoke at a roundtable at American Banker's Digital Banking conference in Boca Raton, Florida, in June.

The change is part of the bank's overall strategy of expanding its branch network, which it has done faster than any other large national bank in recent years, and renovating roughly 1,700 branches to establish a new customer experience.

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CrowdStrike CEO George Kurtz

David Paul Morris/Bloomberg

Tech issues afflict banks, Microsoft after critical CrowdStrike glitch

Article by Carter Pape and Miriam Cross

Early in the morning on July 19, a buggy software update issued by CrowdStrike began causing some Windows users to boot their computers into the blue screen of death. The problem appeared to also be affecting Microsoft Azure, the company's cloud services offering.

Australian and New Zealand banks reportedly experienced outages to online banking services during the day. Airlines experienced a spike in delays and flight cancellations at the onset of the errors just after midnight East Coast time. NBC News, Sky News and several Australian broadcasters temporarily stopped broadcasting live content.

The problem seemed to have a mixed impact on U.S. banks, but the financial services sector had not suffered any systemic impact, according to the Financial Services Information Sharing and Analysis Center, or FS-ISAC, a consortium of roughly 5,000 financial services companies advancing cybersecurity and resilience. The consortium's members collectively have $100 trillion in assets.

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Outages Roil Banks, Airlines, Crowdstrike Shares Plunge

Andrey Rudakov/Bloomberg

CrowdStrike hints at root cause of sweeping IT outage

Article by Carter Pape

During a widespread IT outage that started on July 19 because of an issue with CrowdStrike's cybersecurity software Falcon Sensor, the company acknowledged a "content update" lay at the heart of the fiasco. The following day, the company offered a few additional details and promised more information to come.

The July 20 blog post discloses that a "logic error" in an updated file led to the blue screen of death on Windows systems, but details on how this logic error occurred remain unclear. The company is conducting a root cause analysis, the blog post reads. It has not provided a timeline for publishing this analysis.

The error prevented numerous Windows users from logging into their computers, including at Fifth Third Bank. At TD Bank, digital systems were disrupted. Synovus Financial had to implement "contingency plans" to minimize disruptions to clients. All branches and bank offices of Canandaigua National Bank, a $5 billion institution in Canandaigua, New York, were affected.

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3176216 A black guy works in a call center.

VadimGuzhva - stock.adobe.com

Call centers and bank branches are major fraud liabilities

Article by Carter Pape

Recently released results from a survey by American Banker's parent company Arizent indicate that as banks look to protect their digital channels from automated fraud, branches and call centers have been left behind, leaving them more vulnerable to branch-based fraud activities.

The finding is one of many in the research on maximizing fraud prevention while minimizing customer inconvenience. The research is based on a May survey of 158 banking professionals, including executives and upper management at banks of various sizes, mostly banks with more than $10 billion in assets.

The survey results explain why banks including JPMorgan Chase have been looking to strengthen their fraud protections inside bank branches, why bankers see potential in the use of AI to fight fraud in call centers and the opportunity banks have to form more consortia for sharing fraud data and insights.

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everettovrk - stock.adobe.com

Is generative AI the answer to core modernization?

Article by Penny Crosman

Generative AI can reduce the time and cost of modernizing legacy core systems, according to consultants at large firms like Accenture and McKinsey.

Applying generative AI to core upgrades "is one of the most transformative ideas that I've seen early in the generative AI lifecycle," said Michael Abbott, global banking lead at Accenture, in an American Banker podcast earlier this year. "It's the ability to reverse engineer 30, 40 years of legacy Cobol code into close to its original requirements."

The technology is still in early days and it's not perfect, he acknowledged. "But we're seeing 80% to 85% accuracy in reverse engineering legacy code into requirements, and then using engineers to modify that and structure it a little bit better, and then you can forward engineer it back into a modern architecture," Abbott said.

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Feb 14, 2020 Milpitas / CA / USA - Patelco branch in Silicon Valley; Patelco Credit Union is a community credit union present in most of Northern California, particularly the San Francisco Bay Area

Sundry Photography via Adobe Stock

Patelco faces multiple lawsuits over ransomware attack

Article by Carter Pape

Amid the fallout of a cybersecurity breach, Patelco Credit Union faces at least four lawsuits over its alleged failure to adequately secure customer information including Social Security numbers and driver's license numbers.

The credit union, based in Dublin, California, said that it suffered a ransomware attack on June 29, which led the credit union to shut down many of its day-to-day banking systems. On July 11, 12 days later, members were still unable to view their account balances, access online and mobile banking, receive monthly statements or add or edit automated bill payments.

According to the four lawsuits against Patelco filed by various members, each filed in U.S. District Court in the Northern District of California, the credit union sent members notifications about the data breach starting June 30. However, the lawsuits also allege that the credit union has not disclosed what data had been stolen.

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"If a fintech partner went bankrupt or had other issues, we are in control of those deposits," said Teri Hodgett, chief risk officer at Sunrise Banks, at left. Reid Whiting, chief banking officer of Five Star Bank, is at right.

What is a BaaS bank's responsibility post-Synapse collapse?

Article by Miriam Cross

The meltdown experienced by middleware provider Synapse created a quagmire as the amount of money owed to customers of Synapse's fintech clients far exceeds what their partner banks can account for. Observers and bankers say this is an anomaly in the banking-as-a-service space.

"Reconciliation discrepancies are common, but not usually on a large scale," said Michele Alt, partner at Klaros Group. "You rarely, if ever, hear of a challenge like this."

Yet more failures of financial services startups could be on the horizon, all of which would require orderly wind-down, off-boarding and disbursement of funds — and prompt banks to consider where reconciliation practices and messaging about the realities of fintech banking to consumers could be improved.

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David Paul Morris/Bloomberg

How U.S. Bank climbed to the top in mobile app customer satisfaction

Article by Penny Crosman

U.S. Bank was recently ranked at the top of two sets of consumer surveys about the quality of mobile banking apps.

In Javelin Strategy & Research's annual mobile banking scorecard, the Minneapolis bank took the No. 1 position by being easy to use and having strong security controls, according to Emmett Higdon, digital banking director at Javelin. Bank of America and Wells Fargo were second and third, respectively.

"U.S. Bank pays attention to the things that matter," Higdon said.

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Synapse Data Spat Deepens Crisis Over Fintech App Users Cash

SOPA Images/Photographer: SOPA Images/LightR

'It's always a black box': One fintech's ordeal working with Synapse

Article by Miriam Cross

Turmoil in the banking-as-a-service space is spurring banks, fintechs and middleware providers to rigorously consider which clients or partners they choose.

Artem Fedyaev, the CEO and co-founder of challenger bank GrabrFi, experienced this turmoil firsthand. In 2021 he tried to launch GrabrFi as an offshoot of Grabr, the peer-to-peer marketplace he built in 2015. GrabrFi is meant for freelancers and remote workers who live outside of the U.S. but receive income from U.S.-based companies. It lets users from 28 countries open checking accounts in the U.S., where they can receive their salaries in U.S. dollars.

In the three years since, he has integrated with three different middleware providers, including Synapse, and rotated between several prospective sponsor banks in his quest to bring his idea to market.

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Graeme Sloan/Bloomberg

FedNow's first year, and its impact on real-time payments

Article by John Adams

The Federal Reserve's FedNow real-time payment network will mark its first anniversary on July 20, but it's not the only network with reason to celebrate.

The Clearing House's RTP Network, which launched six years ago, had its first $1 billion day on June 28. It's likely not a coincidence, given the influence, fast growth and potential scale of the government–backed FedNow system, which has also likely drawn attention to the RTP network.

The "rising tide raises all ships" nature of the networks' relationship will be key as each provider attempts to add banks, support international payments and eventually clear the hurdles that prevent the networks from working together.

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