Nairobi — Commercial banks have identified cyberattacks as a key risk to innovation as they continue to inch towards digitalization, a new survey shows.

The banking sector innovation survey conducted by the Central Bank of Kenya(CBK) noted that 92 per cent of banks and 86 percent of microfinance banks(MFBs) identified cyber-risks as one of the top three innovation-related risks.

The cyber risks in banks target data privacy and threaten data security for the bank customers and the safety of their funds.

Further, the survey noted that 71 per cent of MFBs and 67 percent of banks consider third-party and vendor management risks as the second top innovation related risk.

"This correlates with the majority of the institutions who responded to using an outsourced or collaboration and partnership approach to development of innovative products," the survey noted.

CBK noted that due to the increase in cybersecurity fraud incidences, institutions have invested in virtual security, to ensure that platforms are secure for the customers.

On digitalization, CBK noted that 92 percent of the institutions have adopted or developed a mobile banking solution (app or USSD) to assist in their administration of banking and customer-relationship services.

Only four institutions (two banks and two MFBs) have not adopted or developed a mobile banking solution (app or USSD).

According to the survey, Application Programming Interfaces(APIs), Big Data and Data Analytics, Biometrics Technology, and Cloud-Computing continue to be the major innovations whose developments are considered important by financial institutions.

A recent report by the Kenya Bankers Association noted that nearly six out of every ten bank customers (58.5 percent) prefer Mobile Banking up from 52 per cent in 2020.

"The increase may be attributed to the challenges introduced by the pandemic and its containment measures, which have entrenched the use of contactless banking services," the survey noted.