Data Security in Banking Industry: Its Importance, Threats and Solutions
The banking industry evolved spontaneously in the last decades like every other industry. The financial sector embraced new technology and found ways to implement a “customer first” approach to its services. While we acknowledge the benefits it brings (ATMs, mobile apps, online customer care, etc.), we see and fear the dangers that follow. This adoption of digital tools shows a strong need to prioritise data security in the banking industry. To prove the relentless onslaught of cyberthreats, cybersecurity ventures estimate the global cybercrime cost will reach $10.5 trillion by 2025. Also, statistica ranks the financial sector 2nd based on the average cost of a data breach. So what’s next? Premium data security! In this blog, we’ll go over the importance of data security in the banking industry, threats to it, and how to solve them. Why is Data Security Important For Banks? One thing every industry runs by is data, and the banking sector isn’t left out. There’s a lot of data out there, and banks make use of a wide range. Yes, they use, handle, and store basic personal data like name, age, address, etc., but there are more delicate data at stake (BVN, NIN, credit card details, etc.). These kinds of data attract cybercriminals who use them for financial frauds, identity thefts, targeted attacks, and many more. So, stopping malicious actors from accessing sensitive data remains the ultimate goal for the banking industry. But that’s not all; there are other consequences of cyberthreats that data security curbs. Some are; Loss of Trust and Reputational Damage Trust is the bane of every banking institution. It’s so easy to know why customers place so much trust and expectations in their banks to keep their information safe. Terribly, data breaches shatter this relationship. While the same customers may grant other industries a second chance, they don’t give banks the same regard (money is a factor). Once a data breach occurs, the trust is broken and the reputational damage irreparable. Compliance with Regulations Banks must comply with a number of data regulations to achieve maximum data protection and security. These laws were enacted by countries and industries to grant data subjects (data owners) more control over how organisations use their data. For instance, the GDPR governs the EU, and its requirements remain applicable to all organisations handling EU data regardless of their location. Also, all Nigerian banks are subject to the NDPA (Nigerian Data Protection Act). Under these laws, compliance is non-negotiable, and severe consequences follow traces of non-compliance. So, data security in the banking industry ensures data integrity and improves compliance with these strict laws. Financial Loss Not complying with data regulations comes with heavy financial implications. Why? The regulations place heavy fines on non-compliant organizations. For instance, the NDPC fined Fidelity Bank for the use of the data subject’s information without consent. Aside from the penalties imposed, there are several procedures necessary to minimise the impact of a data breach, and they don’t come cheap. This and lawsuits by customers puts banks in serious financial crisis. To prevent such sticky situations, banks are better off implementing maximum data security measures. It’s a ‘better safe than sorry’ situation. 5 Common Threats to Data Security in Banks With massive amounts of sensitive and personal data possessed, banks remain a constant target for cyberattacks. While the banks put up some kind of effort, the ever-evolving modus operandi of cybercriminals undermine it. Now, banks must stay aware of the potential types of cyberattacks coming and plan accordingly. Here are the banking sector’s most common cyberthreats. Phishing Phishing attacks remain the biggest thorn in the banking sector’s flesh. According to Statista, in 2023, around 27.32 percent of total phishing attacks worldwide targeted financial institutions. Cybercriminals pretend to be credible authorities and deceive individuals to reveal sensitive details like account number, credit card number, password, etc. Usually, these actors insert links to malicious websites in emails and text messages. When it comes to banking, there’s a special type of phishing called whaling. A common example is an email from a company’s CEO or top official to the finance department. The attacker, posing as the CEO, requests a wire transfer to an external account for a confidential deal. The attacker will include words or operational details to lend credibility to the story. This results in a terrible situation. Insider Threats Not all threats come from outside the bank; some come from inside the bank. Tired and disgruntled workers, contractors, and even third-party vendors pose risks to banking institutions. Because they can intentionally or unintentionally leak sensitive data to unauthorised persons. A real-world example of insider threat occurred in 2019. Capital One experienced a massive data breach when a former Amazon employee exploited a vulnerability in the bank’s cloud server to access sensitive customer information. The breach affected over 100 million customers and caused serious financial and reputational damage to the bank. Distributed Denial of Service (DDOS) DDOS attacks involve bombarding a bank’s online services with so much traffic that the system slows down or crashes. This act makes all online banking and payment unavailable, and it disrupts operations and leaves the system vulnerable to further attacks. Third-party and Supply Chain Attacks No organisation operates alone, and banks are no exception. At one point or another, the need to outsource tasks to external agencies pushes through. Banks rely on third-party vendors to supply various services, from cloud storage to payment processing, and this opens them up to more vulnerabilities. For an effective partnership, third parties need access to certain data, and they may possess poor data security practices. A hit on such a vendor equals a hit on the affiliated bank. Malware and Ransomware Malware is another threat to data security in the banking industry. Malware is malicious software (mal-ware) that attacks a system, steals data, and is even capable of a shutdown. Ransomware, on the other hand, locks users out of their own systems while the criminals request money in exchange for access. Ransomwares contribute a whole lot to the financial costs of data breaches—around $4.54 million, excluding the ransom cost itself. For example,
