The Main Data Security Issues in the Financial Industry

Cybersecurity issues are becoming a challenge for many industries. Along with technological advancements, the security landscape is always changing, pushing businesses and their clients to invest more time and resources into fraud detection. Phishing, ransomware, and other exploitation attacks are becoming increasingly popular, especially in the financial landscape.

While scammers and bad actors are becoming more sophisticated, organizations need to find new ways to protect their data from getting compromised. Keep in mind that their reputation is at risk. Large amounts of data and money, which, if fallen into the wrong hands, can disrupt the whole economy.

Why is Cybersecurity Important in the Financial Sector?

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Financial services experience large losses due to cybercrime, making them more likely to become targets. According to the Actuary, the average cost of data breaches is 40% higher compared to other industries. For this reason, companies operating in the financial sector are concerned about their safety. As per IBM, the finance and insurance sectors were the most targeted industries by hackers globally from 2015 to 2020.

It’s essential to control fraud and use special security measures to prevent cybercrime. Otherwise, financial service providers risk bumping into countless threats that could result in data breaches, including:

• Spoofing
• Malware
• Insider threats
• Fraudulent third-party providers

Looking at the large cyberattack numbers and the ever-evolving security landscape, financial institutions need to put data security first. A successful plan will help select the right data protection initiatives to prevent the most common threats that financial institutions face today. On top of that, it’s important to monitor different security controls of the overall IT system to spot fraud before it leads to data breaches.

How Do Data Security Issues Affect Banks?

Banks, financial institutions, and other businesses can face indirect damages from data breaches. That means data security issues can result in non-compliance fines and lost revenues, not to mention interruption to operations. Hackers have the ability to restrict access to certain company systems, disrupting normal operations due to malware and other malicious code.

Let’s take a closer look at the key data security challenges that the financial industry faces today:

• Cloud-based attacks

While cloud service providers are working hard to ensure complete security, criminals find new ways to breach the cloud. Like other industries, more banks store data and software systems in the cloud, making cloud-based attacks an alarming threat to security. To minimize these threats, cloud providers and banks need to choose the right resources and tools that would protect their data from unauthorized access.

• Social engineering

Social engineering threats can occur in more than one step. Typically, the bad actor first does their research by collecting data about their victim. The goal is to find security gaps and weak points that are necessary to succeed in the attack.

That’s why social engineering has many different forms. It can be phishing or any other fraudulent action that tricks the victim into revealing sensitive information. It’s essential to inform employees about such attacks to be prepared to spot the red flags immediately.

• Cross-border data exchanges

Cross-border data transmission is on the rise, and compliance specialists are working hard to keep data and its transfers safe through regulations. Especially in the financial sector, proper measures are needed to safeguard data throughout the whole cycle: when in use, in motion, or at rest. Consequently, cross-border data security assessment is vital to stay clear of fraud and cyberattacks.

• Third-party risks

Most companies work with multiple third-party service providers, exposing new security gaps in their systems. Organizations that work with sensitive data need to monitor and report their partners and vendors constantly. For example, financial organizations use special AI-powered tools to run real-time background checks on their partners.

Such Bussiness Verification services flag suspicious customers linked to any company while reviewing their risk levels. On top of that, today’s digital tools remove the responsibility of reviewing multiple data points manually. This is vital in the financial sector since it minimizes human error and makes the work easier for security and compliance specialists.

Final Thoughts

All players in the financial industry can enhance their security systems with stronger tools and better internal controls. Everyone follows strict data security policies and uses appropriate tools, and chances are you’ll prevent cyberattacks. Educating employees on maintaining cybersecurity hygiene will put a first defense layer against the potential risks of data breaches. That’s why communication remains one of the top priorities regarding banks and cyber-financial incidents.