Today’s rapid technological developments have transformed the financial services industry. In particular, the expansion of FinTech and the adoption of personal banking technologies have led to many new financial services, processes, and delivery methods.
These technological expansions mean that the finance industry as a whole handles massive amounts of sensitive data on a daily basis. But with these new opportunities come new threats, making data security vital to contemporary financial operations.
However, data security has been a struggle for financial institutions both big and small. Information gathered by Boston Consulting Group indicates that financial firms and service providers are 300 times more likely to experience a cyberattack than other companies.
According to this same report, financial firms are also largely ill-prepared to handle the current digital threats against their companies and their industry as a whole. To remain competitive and avoid the considerable costs of a data breach, leaders and managers in financial services should be aware of the biggest digital threats to their industry, as well as the best cybersecurity solutions available to them.
To start, there are 3 key elements of maintaining data security in financial services to consider:
- Prioritize Data Security for All Employees
- Audit the Cybersecurity Practices of Third-Party Vendors
- Establish a Reliable IT Team and Infrastructure
Keep reading to learn more about these 3 tips and how to use them against top threats to the financial services industry.
Top Threats to Data Security in Financial Services
A 2019 report from Verizon found that data breaches in financial services accounted for 10% of all data breaches globally that year. Understanding the major external and internal threats to data security in your industry is the first step in building a stronger IT framework for your organization.
External Threats to Data Security
Many leaders are unaware of the biggest computer security threats to business IT. Understanding the different types of cyberattacks that threaten data security in financial services—what they are, how they operate, and what puts you at risk—is vital to ensuring your organization’s protection.
Distributed Denial of Service (DDoS) Attacks
Distributed denial of service (DDoS) cyberattacks cause a website or application to become unusable for a period of time. In a DDoS attack, a cybercriminal can target a specific network by overwhelming it with requests. This creates a service backlog that prevents real users from being able to use a site or app.
DDoS attacks can also be used to mislead cyberdefense efforts. For example, cybercriminals will sometimes launch a DDoS attack to direct attention away from their efforts to hack a company’s data system. This could help cover the tracks for the deployment of a CryptoVirus, which can spread through a company’s network and render its data useless.
In 2015, DDoS attacks were the most frequent cyberattacks aimed against financial institutions. One reason for the recent rise in this type of cyberattack has been the increased presence of the Internet of Things across the finance industry.
The Internet of Things (IoT) describes the “smart devices” (such as voice-controlled home appliances, like the Amazon Echo) that allow companies to use consumer data and patterns to develop more customized consumer experiences. DDoS attacks exploit the weak security of the internet connections which power IoT devices. As the finance industry continues to adopt and rely on IoT technologies, DDoS attacks will remain a major threat to data security in financial services.
In a backdoor attack, a hacker can access a secured data system by installing a “backdoor” malware application. These applications can grant hackers undetected access to a company’s entire data system, including confidential employee and customer information that can be used for identity theft, blackmail, and other harmful purposes. With an advanced backdoor attack method called a trojan attack, a backdoor application can continuously operate once it is installed, even once the data system’s vulnerability has been fixed.
As seen in this February’s attacks against the U.S. financial sector, backdoor attacks have played a large role in threats to data security in financial services during 2020. In recent years, hackers have also administered new trojan malware to target banking institutions. With these trojan attacks, hackers steal money directly from the target company, as well as collect confidential company data that can then be sold to other cybercriminals.
These trojan attacks typically begin as phishing emails, which are sent to banking employees by hackers and are disguised to look like internal company emails. Unsuspecting employees then open email attachments with malicious coding, allowing the hackers to access the target company’s internal data systems.
Attacks Against Web Applications
Online word processing software, spreadsheet tools, and email services (such as Google Docs, Microsoft Office, and Gmail) are common across the business world. These programs and services give financial professionals easy access to communication and data organizing tools, optimizing daily business operations for an increasingly digital world.
In addition, the expansion of digital web applications across both local and global banking institutions has given consumers more direct access than ever to their monetary assets, accounts, and other services. However, financial web applications are also at risk of being exploited by hackers, as seen in the high-profile Equifax data breach in 2017.
In financial services, hackers tend to target online banking websites and applications. These tend to have weaker security infrastructure than other applications that are linked to internal data systems.
In fact, the FBI recently released a warning to mobile banking users regarding a potential increase in web application attacks against financial services. During the COVID-19 crisis especially, more consumers have relied on mobile banking and finance options, making these applications a key target for hackers.
Internal Threats to Data Security
According to a 2016 report published by IBM, 60% of all cyberattacks result from insiders within companies. Even if you feel confident that none of your employees would seek to harm your company, internal threats also include the actions of third-party vendors, as well as both malicious and accidental behavior. Maintaining data security in financial services, therefore, means preparing for the possibility of an internal threat.
IBM’s report found that a quarter of internal cybersecurity incidents were unintentional. Accidental malware downloads and employees falling for convincing phishing email scams are common ways that your IT system’s data security can be compromised.
The other 75% of internal attacks occurred with the insider’s full knowledge. Even if an employee doesn’t want to hurt your company, a hacker could blackmail or threaten them into malicious action. Low morale among staff can also lead to a more lax attitude regarding your company’s data security.
Because the financial services industry handles such large amounts of sensitive data on a daily basis, all employees should understand the role they play in maintaining their company’s data security. Boosting morale and requiring periodic cybersecurity training for all employees are important steps to take for internal data security in financial institutions.
Third-Party Vendor Vulnerabilities
The financial services industry has greatly benefited from associations with third-party vendors, who can provide recruitment management services, cloud data services, human resources, and more. However, while your own institution may have high data security standards, some third-party vendors may put your company’s information at risk without your knowledge.
In 2019, for instance, a large data leak in the U.S. banking sector left over 24 million financial records exposed to the public. The breach resulted from mistakes made by a Texas-based, third-party firm that offers data and analytics for financial institutions.
Performing cybersecurity risk assessments with potential third-party vendors before signing a service contract can help you avoid these types of internal threats to your organization.
3 Key Elements of Maintaining Data Security in Financial Services
Now that you know more about the threats facing your industry, how can you use this knowledge to improve your firm’s cybersecurity? Consider these 3 key elements of maintaining data security in financial services to get started.
1. Prioritize Data Security for All Employees
It is always important for everyone at an organization to be committed to its cybersecurity, but especially in the finance industry. Even low-level employees may handle sensitive client information on a daily basis. This is why it’s vital for employees, managers, and finance leaders alike to have solid data security protocols to follow in their daily operations.
Adding two-factor authentication to business logins, embedding digital threat-spotting techniques into all employee onboardings, and creating actionable incident response plans for potential cyberattacks are a few key steps that financial firms can take to improve data security among employees.
2. Audit the Cybersecurity Practices of Third-Party Vendors
Today, third-party vendors are involved in many aspects of financial operations. To reduce risks associated with third parties, be sure to conduct cybersecurity risk assessments on all potential vendors before any service contracts are signed.
Even if your company is currently involved with a third-party vendor, continuous risk monitoring is also important to ensuring that these service providers maintain proper data security standards.
3. Establish a Reliable IT Team and Infrastructure
The cyberthreats facing financial services today are more challenging than ever. While there are many ways to enhance a financial institution’s data security, it will be difficult to implement lasting changes without a robust and prepared IT team and infrastructure in place.
If you do not have an IT team, or if these activities fall outside the scope of your IT department, outsourcing additional IT help could be the solution. Fully managed IT service providers can supply your company with technology and cybersecurity solutions tailored to the needs of the finance industry.
Enhance Your Financial Firm’s Data Security with Guardian Computer
Don’t let the challenges of data security in financial services bog you down or keep you from proper cybersecurity! For over 20 years, Guardian Computer has secured data systems and everyday tech operations for clients ranging from private equity to turnaround management. We were also recently named one of the world’s best managed service providers.
With Guardian Computer’s on-call services, our tech experts can respond quickly to any IT project or cyber emergency that comes our way. For long-term support and solutions, our fully managed IT services offer you ongoing assistance, monitoring, and protection.
Call us at 504-457-0005 or contact us online to talk to our team about what we can do for you!