More than 1,800 cybersecurity incidents impacted the global financial industry in 2022. Moreover, In late 2023, a powerful ransomware attack targeted the U.S. financial services division of the Industrial and Commercial Bank of China (ISBC), the largest bank worldwide. These figures demonstrate how banks remain primary targets for hackers due to the valuable data and assets that they store and manage.
It is necessary to have an in-depth understanding of the main issues that threaten financial institutions to implement effective cybersecurity practices that can help strengthen a bank’s IT infrastructure. Read this post to learn more about cybersecurity in banking. Discover the primary challenges that you can face and how to overcome them.
What is Cybersecurity in Banking?
Banking cybersecurity covers approaches, technologies, protocols and solutions that protect a bank’s environment and data against cyber threats. The definition includes threat detection, IT monitoring, endpoint security, online fraud protection, data analysis tools and identity and access management, among others. Encryption protocols, storage management solutions along with data protection and recovery workflows are also part of the cybersecurity domain.
Common Bank Cybersecurity Threats and Vulnerabilities
The evolution of banking services, cash cutbacks and a shift to digital payments made banks rely on IT solutions more. Due to this increasing dependency, cybercrimes are among the most hazardous troubles for financial institutions. However, issues and vulnerabilities that banking cybersecurity should cover may vary depending on malicious actors’ goals, methods and tools.
Ransomware
Ransomware is a specific type of malware that infiltrates an organization’s system, encrypts the data at reach and then demands a ransom to provide the decryption key. The rate of ransomware attacks in financial institutions has been rising throughout 2023, with more than 64% of organizations attacked compared to 55% in 2022, according to the report by Sophos. At the same time, 81% of organizations confirmed that their data was encrypted by ransomware, which is 50% more than throughout 2022 and the highest level in three years.
Remote Workloads
The COVID-19 outbreak with its forced isolation period made organizations adopt remote work all around the world. The shift posed a challenge for IT security teams that now put additional effort into protecting remote workloads. Even when workers use corporate devices corresponding to an organization’s security policies, they may need additional software and less protected network connections to enable remote work. Consequently, such devices become exposed to hacking attempts.
Phishing
Phishing, which refers to tricking the message recipient into clicking a malicious link or downloading an infected attachment, is among the oldest cyberattack methods. Compared to other hacking approaches, phishing messages are easier to compose and deliver, barely trackable and inexpensive. Although simple, phishing emails remain notably effective: 9 out of 10 successful hacks begin with a phishing attack.
Cloud-Based Cyber Attacks
With the growth of internet accessibility, speed and connection stability, organizations now prefer cloud storage instead of local repositories. Cybercriminals are aware of this and they have adapted accordingly by trying to exploit vulnerabilities in cloud environments. As of July 2023, cloud data breaches occurred in 39% of organizations within the last year.
Supply Chain Attacks
Modern banking involves third-party solutions to provide efficient services, including card acquisition, client management, virtualization and other critical elements. The set of third-party solutions enabling both internal and external workflows creates complex environments with multiple security vulnerabilities. Cybercriminals target such solutions, exploiting their weaknesses to deliver malicious code to a bank’s environment, customers and partners.
Social Engineering
Social engineering is a breach and fraud method that tries to trick individuals into giving up sensitive information. Cybercriminals deceive clients, bank employees and executives via emails, messengers, phone calls or even personal interactions. Social engineering attacks are flexible, evolving and especially dangerous because detecting them on time is difficult.
Banking Cybersecurity Challenges
Reacting to threats and mitigating the impact of cyber attacks can be challenging for several reasons. The major challenges for banks to deal with are:
Untrained Employees
Employees who are unaware of cyber threats are more likely to make mistakes even if IT instructions are flawless. As a result, they can leave a sticker with system login credentials on their monitor or click that fatal link in a phishing email, causing severe data loss and operational disruption. In general, 95% of data breaches result from human error.
Talent Gap
The banking industry is huge and continuously growing, meaning that the demand for cybersecurity professionals is also increasing. Therefore, banks need more experts than the labor markets can offer. This can impact the quality of cybersecurity for banks since they might not be able to find experienced IT specialists.
Budget Deficiency
Licensing, proper integration and using cybersecurity solutions to effectively deal with cyberthreats require significant financial investments regardless of the bank’s size and net worth. Building even the basic protection systems for smaller banks can take up a decent part of their budget. Large banks are scaled up and out, raising security costs along with the growth of their IT infrastructures.
Weak Passwords
Weak passwords are a common problem for individuals and organizations, but their impact on cybersecurity in the banking sector can be especially sensitive. Employees and clients tend to set simple passwords that they can remember. However, hackers can easily guess or brute-force such passwords to break through the bank’s IT protection. A breach at any level can lead to negative consequences and possibly irreparable damage.
Mobile Devices
Mobile banking is convenient and fast, which makes smartphones a critical part of financial services provision, posing additional cybersecurity challenges. A client or a team member can, for instance, download a third-party app compromised by spyware or connect to an unsecured network while transmitting financial data. Also, cybercriminals can steal and use a device belonging to a specific person to enable or directly conduct their attack.
Social Media
Malicious actors actively exploit social media to find banking credentials that careless clients can expose. In addition, such online platforms are beyond the control of banking cybersecurity experts, which provides multiple social engineering tactics for cybercriminals. After browsing for sensitive banking information from a tricked client, a criminal can get access to financial assets. In case a hacker acquires employee data, they can sneakily operate inside a bank’s environment using the compromised identity.
How to Improve Data Security in the Banking Sector
After listing the common threats and challenges, we can now explore methods to improve cyber security for banks. Consider adopting the following recommendations to make your IT protection more effective. Some tips help decrease the probability of security breaches and reduce the chance of a follow-up disaster. Other practices explain how to restore the production environment and mitigate the consequences of a successful cyberattack.
Employee Education
An educated staff is more resilient to human error, which is the main reason leading to security breaches. Employees who are aware of cybersecurity threats can, for example, identify a phishing email and prevent a cyberattack. With appropriate knowledge and training, qualified team members can also play a vital role in mitigating the negative outcome even after a breach happens.
Consider investing in cybersecurity awareness training not only for IT professionals. Train and educate all your employees including client managers, customer support operators, department chiefs and executives. Instructing clients can also help them protect their bank assets against fraud attempts.
Strong Credentials Stored Right
This point is about using strong passwords that a hacker can’t guess. A reliable password consists of at least 8 symbols that don’t follow any obvious logic. Make sure to include uppercase and lowercase letters, numbers and special characters in your password.
Weak password example: 123abcdef
Strong password example: xL5*Qn&7gP!aN
Secondly, a strong password stored incorrectly is a weak password. Bank employees and clients need to know that keeping credentials exposed means handing them to a hacker. Stickers at the workplace, notebook notes and text files on the corporate computer are risk factors. The most secure way to store passwords is to memorize them. Alternatively, consider using password management solutions that require an employee to remember only the master password.
Multi-Factor Authentication and Identity Management
Multi-factor authentication is a commonly accepted practice that adds a security code sent via SMS, email or other channel before login confirmation or changing the settings. The additional security layer can help prevent unauthorized system access when account credentials are compromised.
Identity management inside the IT infrastructures of financial institutions means strong employee verification through personal cryptographic keys or biometric data (fingerprints, face scans, among others). Additionally, distributing rights, functions and responsibilities between employees using role-based access control can prevent hackers from causing serious damage using a single compromised account.
Widespread Encryption
Banks can qualify nearly all the data as sensitive and should enable high-end encryption for all their records. The data must be protected from unauthorized viewers during transfer and while residing in storage.
Note: Avoid treating the digital space inside a bank’s IT perimeter as safe. Hackers can place interception tools after bypassing the security system. They don’t disrupt regular workflows or cause notable performance changes but send copies of the data flowing through the invaded channel to a hacker’s storage.
Network Segmentation
When checking an organization’s infrastructure to plan the attack, a hacker can mark priority targets quicker and simpler if the internal network is unitary. Network segmentation means using firewalls, tiering data storage and managing access inside the IT security system to create barriers and confuse intruders. A segmented internal network of a bank can significantly mitigate the damage from a cyberattack that would otherwise be devastating.
Active Threat Monitoring
Although antivirus solutions may not detect the latest malware, they can still alert IT security teams about suspicious behavior inside an organization’s infrastructure. Cybercriminals can use less advanced, detectable tools to inject more sophisticated malware. With active threat monitoring integrated, an IT team can reveal potential breaches as they occur and proactively react to attacks before they develop into disasters.
Regular Security Revision
Organizations may deprioritize revisions of workflows and systems after the initial setup, focusing on revenue growth or the development of key services instead. However, similar to the non-stop evolution of cyberattack methods and tactics, security strategies require regular checks and timely updates to remain effective. Such “health checks” can help to patch vulnerabilities and eliminate trojans before malicious actors use them in their attacks.
A common recommendation is to revise security policies and data protection workflows at least once a year. Still, financial institutions, which are priority targets for cyberattacks, might need revisions every three to six months.
Cybersecurity Testing
Information security for banks requires regular testing to ensure its efficiency and reliability. With thorough testing, IT specialists can evaluate the timing and resources that they would have in emergencies. Penetration testing, risk assessment, vulnerability and configuration scans, application and API checks, among other cybersecurity testing methods additionally highlight weaknesses and bottlenecks in the system. Specialists can fix vulnerabilities revealed during test sessions that hackers might otherwise exploit.
Regular Automated Data Backup
Backups are the last line of defense when dealing with cyberattacks. When a disaster has already occurred and the main site is inoperable, a backup can be used to restore data and the IT environment. Due to the complexity of infrastructures and the volumes of financial data to protect, manual backups or legacy data protection solutions won’t suit the needs of even small banks.
Modern all-in-one data protection solutions provide automated backup and recovery by schedule or on demand. With such solutions, data backup workflows are deeply customizable and can cause little to no impact on production environments. In case of disaster, swift recovery ensures minimal downtime, securing a bank’s data and reputation.
Conclusion
Cyber security in banking refers to the set of solutions and practices to protect a bank’s infrastructure and data from cyberattacks. Financial institutions are among the primary targets for hackers who use ransomware, social engineering, supply chain attacks and other tactics to steal, encrypt or delete sensitive data. The lack of qualified employees along with insufficient budgets, the adoption of social media, online banking and remote work make data protection a challenge for security professionals.
To improve the efficiency of banking cybersecurity systems, IT teams can consider educating and training colleagues and executives in different departments. Strong passwords, segmented networks, identity management, all-round encryption, threat monitoring, infrastructure revision and testing are other recommendations to boost the protection of the bank’s environment. Last but not least, integrating automated data backup and recovery workflows can help banks maintain control over sensitive data if a successful cyberattack results in data loss.
