Understanding Cybersecurity for Financial Services

Capital One. ICBC. Equifax and Experian. What do they all have in common?

They’re all major financial institutions, and they’ve all experienced equally major data breaches or cyberattacks in the past decade.

It’s no surprise: Simply put, the finance sector experiences more cybercrime than other industries. According to a recent report, 77% of financial organizations detected a cyberattack in 2023, compared to 68% among other industries. Not only that, the financial sector also experiences more targeted attacks on their IT infrastructure, including both on-prem and cloud infrastructure, than other sectors.

Today, we’ll take a closer look at the issue of cybersecurity in financial services, including the top threats faced by the industry. We’ll also discuss strategies to bolster defenses and strengthen security postures in the finance sector.

Why cybersecurity is critical in financial services

Financial institutions are prime targets for cybercriminals due to the vast amount of valuable information they process and store. From personal banking details to corporate transactions, the sector is full of high-stakes data that, if compromised, can result in severe financial losses and reputational damage.

What’s more, security incidents can have far-reaching consequences. Given the interconnected nature of the global financial system, a breach at one institution can quickly lead to vulnerabilities at others. Here are just a few of the top security considerations in the sector.

Protecting sensitive data. Financial institutions deal with an abundance of confidential information, including client data (account details, Social Security numbers, transaction records) and organizational data (IP, balance sheets, budgets, analytics). As such, cybersecurity incidents can easily lead to severe repercussions like identity theft and financial fraud.

Preventing financial loss. Any compromise in data security can lead to significant economic repercussions, both for the financial institution itself and for its customers. With cyberattacks comes a high risk of fraudulent activities — including unauthorized transactions, account takeovers, and payment fraud — all of which can impact an institution’s bottom line. Strong cybersecurity programs can help identify and prevent the sophisticated criminal schemes that exploit vulnerabilities in financial systems and processes.

Maintaining customer trust. Trust is the cornerstone of the financial sector, both for individual consumers and for large enterprises doing business with banks and other financial organizations. A single cybersecurity incident can shatter the faith that B2B and individual customers place in that organization, whether it be for personal or corporate banking, for retirement portfolios or for long-term business partnerships. Even the perception of inadequate security measures can lead customers to reconsider where they do business, making cybersecurity absolutely paramount in the sector.

Maintaining availability. We often focus on the ways that cyberattacks compromise valuable data, but it’s important to remember that security incidents can also significantly disrupt essential services. In fact, cyberattacks were the number one cause of downtime in 2023. From payroll to insurance claims to online banking apps, critical services can be taken offline by ransomware attacks, recovery processes, and more — often leading to significant financial losses and damaging an institution’s credibility. Strong cybersecurity measures are needed to minimize downtime and mitigate losses.

Meeting regulatory compliance. Financial organizations are subject to stringent regulatory frameworks: the General Data Protection Regulation (GDPR), the Payment Card Industry Data Security Standard (PCI-DSS), the Sarbanes-Oxley Act, and the Gramm-Leach-Bliley Act (GLB), to name a few. These frameworks protect the confidentiality of customer data by imposing strict requirements on how financial institutions collect, store, and process sensitive information. Non-compliance — including due to weak security measures — can result in hefty fines, legal consequences, and reputational damage, undermining confidence in the organization’s ability to protect sensitive data.

Top cybersecurity threats in financial services

From global fintech platforms to local credit unions, finance organizations face a wide range of cyberattacks. The pandemic has only exacerbated the problem: As the Bank for International Settlements reports, the financial sector experienced the second-largest share of pandemic-related cyberattacks, second only to the healthcare sector.

Today, nation-state attackers, organized cybercrime games, and hacktivists all pose threats to the financial services industry. Here are the top five ways they’re attacking systems around the world.

1. Phishing and social engineering

Phishing and social engineering attacks are prevalent in finance, posing significant risks to both institutions and their customers. Phishing encompasses a wide range of tactics, including deceptive emails, SMS messages (smishing), and phone calls (vishing), to trick individuals into clicking on malicious links or divulging sensitive information.

Financial firms in particular see many business email compromise (BEC) incidents, where attackers gain unauthorized access to business email accounts to impersonate trusted individuals like executives or third-party vendors. From there, attackers can perpetrate various forms of fraud — to the tune of $50 billion globally since 2013.

2. Ransomware

Ransomware poses a perennial threat to financial institutions, with attackers leveraging encryption tools or RaaS (ransomware-as-a-service) subscriptions to hold data hostage until the ransom is paid. The impact of a successful ransomware or malware attack on a financial institution can be catastrophic, resulting in financial losses, regulatory fines, reputational damage, and legal liabilities.

The financial services sector is particularly lucrative for ransomware operators, thanks to the potential for large payouts and to organizations’ desire to avoid downtime. As a result, the rate of ransomware attacks in the finance industry is rising rapidly, from 34% in 2021 up to 64% in 2023.

3. Insider threats

Insider threats pose a significant risk to all kinds of institutions, but financial services firms are particularly vulnerable because of the sheer amount of sensitive systems and data in play. These cyber threats can be difficult to contain, taking an average of 85 days to contain and costing over $15 million per incident.

Insider threats can manifest in various forms, from negligent behavior to a disgruntled employee seeking revenge. They can even encompass a careless contractor or vendor inadvertently leaking confidential data. But, regardless of their form, they regularly result in data breaches, fraud, and reputational damage for financial services organizations.

4. Advanced persistent threats

Advanced persistent threats, or APTs, are sophisticated, long-term attacks orchestrated by skilled hackers. Unlike traditional cyberattacks, which may be opportunistic or short-lived, APTs are meticulously planned with stealthy infiltration and persistent monitoring of networks. The goal is to gain unauthorized access to sensitive information and systems over an extended period of time in order to exfiltrate as much valuable data as possible.

APT attacks on payment networks are often carried out by well-funded and highly organized threat actors, who work carefully to maintain access and siphon off sensitive data related to financial transactions. They’ve hit numerous financial targets, including a major South African bank, and cost their victims millions.

5. Supply chain attacks

Supply chain attacks represent a significant and growing threat in the finance sector. These attacks target the interconnected networks of third-party vendors, exploiting vulnerabilities in smaller partners and suppliers to gain access to large enterprise systems. Once the attacker gains access to the vendor’s network or infrastructure, they can leverage that position to launch attacks against their ultimate targets.

Supply chain attacks can spread quickly, impacting thousands of businesses in some cases. They’re also difficult to detect and mitigate, making them a major threat to financial services companies.

Strengthening cybersecurity in the finance sector

In our ever-evolving threat landscape, financial institutions must find strategies to mitigate cyber risks, protect client data, and ensure the integrity and resilience of their operations. Below, we offer a few suggestions to help safeguard sensitive financial data, protect critical IT infrastructure, and uphold regulatory compliance.

Invest in robust data security technologies. Implementing firewalls, encryption, access controls, intrusion detection systems, advanced threat monitoring tools, and other cybersecurity solutions is a fundamental step in fortifying your defenses. To identify and address vulnerabilities more thoroughly, consider adding AI- and ML-enhanced technologies to automate security processes and perform advanced pattern recognition.

Conduct employee training. Educating your staff is just as important as choosing the right technologies. Teaching employees about cybersecurity best practices and raising awareness about common threats can go a long way toward mitigating the risk of human error. Employee training programs should cover topics like phishing awareness, password hygiene, multi-factor authentication, and incident response protocols.

Perform regular updates and patches. Keeping software, operating systems, and security solutions up to date is crucial for addressing known vulnerabilities and weaknesses. Automated patch management systems can even streamline the process and ensure regular updates.

Create risk management and incident response plans. Developing a comprehensive incident response plan — including procedures for reporting, communication, investigation, and recovery — will help your organization respond swiftly and effectively to cyber incidents. Similarly, putting a risk management process in place will help your company avoid preventable threats in the first place.

Collaborate with finance industry partners. Sharing threat intelligence and collaborating with other financial institutions on security initiatives can enhance the entire finance sector’s collective defenses against cyber threats. Information sharing among public and private sectors can also facilitate new insights and promote best practices for mitigating common risks.

Consider ShardSecure. The ShardSecure platform for advanced data security, privacy, and resilience renders sensitive data unintelligible and of no value to attackers. With our innovative approach to end-to-end encryption, we protect financial data on-prem, in the cloud, and in hybrid-cloud architectures.

The ShardSecure platform can also help financial services companies maintain their business continuity in the event of a ransomware attack, data breach, or other cyber incident impacting data integrity or availability. We support compliance with data protection regulations like the GDPR, and our self-healing and automatic alert features help enable faster detection and recovery.

To learn more about how ShardSecure can help financial services organizations, visit our finance or resources pages today.