Companies worldwide will incur an estimated annual cost of $10.5 trillion due to cybercrime by 2025, marking a substantial rise from the $3 trillion recorded in 2015. Financial services firms may be stuck facing a significant percentage of these damages, as the Boston Consulting Group found that cybercriminals are 300 times as likely to target financial services firms than any other industry.
The reason is straightforward: financial services companies, including accounting, investment, insurance, and consulting firms handle highly sensitive data like financial credentials and personally identifiable information daily. This data has tremendous value to attackers, who could redirect payments, sell private data on the dark web, or hold critical files for ransom to extort large sums.
Many people assume only large banks and institutions are at risk, but the reality is cyber threats put companies of all sizes in the crosshairs. Smaller firms often have fewer dedicated cybersecurity resources and staff but just as much to lose from an attack.
So, understanding the most common threats and assessing your threat surface is the first key step to building a strong defense. Here are some of the top cyber threats to financial services firms, the consequences of an attack, and how to reduce your risk.
The cyberattacks common in the financial services industry
Financial services firms are a key target for many cyber threats from various actors with different objectives. Here are some of the top threats.
Social engineering attacks
Social engineering attacks are manipulative tactics cybercriminals use to trick individuals into revealing sensitive information, such as login credentials, financial details, or more. By exploiting human psychology and curiosity, attackers persuade their targets to break standard security practices.
It can lead to unauthorized system access, data breaches, and other severe consequences. Two common methods of social engineering attacks include phishing and business email compromise.
Phishing is an attack in which cybercriminals use email, or sometimes text messages or phone calls, to trick unsuspecting individuals into revealing sensitive information, such as passwords, credit card numbers, or personal data, or otherwise furthering the attack. Phishing typically tries to make victims believe they are interacting with a trustworthy source.
Phishing attacks are widespread and rely on psychological manipulation and the exploitation of human vulnerabilities to achieve their objectives. A single link or file click can launch malware or lead to a compromised account. Stealing just one employee's credentials gives attackers a stepping stone into company systems.
Business Email Compromise (BEC)
BEC refers to a social engineering attack in which attackers gain unauthorized access to business email accounts to deceive or defraud organizations. Typically, the perpetrators impersonate trusted individuals, such as executives or vendors, and manipulate employees into taking fraudulent actions, such as initiating unauthorized wire transfers or disclosing sensitive information.
BEC attacks can lead to significant financial losses and compromised data. The FBI reports BEC scams alone have cost global victims more than $50 billion since 2013. From December 2021 to December 2022, there was a 17% surge in identified global losses related to BEC.
Both phishing and BEC exploit human nature and relationships of trust. Comprehensive employee training is key to helping staff identify subtle indicative signs of social engineering attacks before falling victim. Enabling multi-factor authentication provides an additional critical layer of protection even if login credentials are compromised.
Malware and ransomware
Malware refers to all types of malicious software, like viruses that infect systems and networks to steal data or money. Ransomware is a specific type of malware that encrypts files on devices and servers until the victim pays the ransom demand.
In 2021, the financial sector represented 22% of ransomware attacks. Financial firms house massive troves of sensitive client data and files, making them prime targets and ideal victims for ransomware schemes. A successful attack can lock staff out of critical systems and data, crippling operations. Quick detection and rapid response are crucial to preventing widespread encryption across shared drives and limiting overall damage.
However, malware threats extend beyond just ransomware. Banking trojans are tailored strains of malware that steal online banking credentials and payment card data from infected computers. Spyware gathers confidential data and tracks activities, snooping for anything of value like account numbers, passwords, or personal data. Robust and layered anti-malware defenses are a requirement to defend against these evolving cyber threats.
Financial companies store highly sensitive and regulated data which, if breached, can have massive ripple effects for consumers and the company. In 2022, the average cost of a data breach in the financial industry worldwide was nearly $6 million.
Most security experts agree it's largely a matter of when, not if, a breach will happen. Financial services firms must prepare for both breach prevention and timely incident response.
Insider threats refers to the risks posed by individuals within an organization who misuse their access privileges or exploit their position to compromise the security and integrity of systems, data, or assets. These individuals could be current or former employees, contractors, or business partners.
Insider threats can involve intentional actions, including unauthorized data access, theft, and sabotage, or unintentional actions, such as accidental misdelivery. Financial services firms face significant challenges in mitigating insider threats due to the access employees have to valuable financial data and systems.
Your firm needs stringent access controls and multi-factor authentication over the most sensitive systems and data repositories. Monitoring for abnormal patterns of access can also help catch issues early. Proper security training and awareness are critical for all employees and third parties handling highly confidential data.
DDoS attacks aim to overwhelm systems and make online resources inaccessible to users. Attackers typically flood servers with more junk web traffic than they can handle or exploit vulnerabilities in website codes and functionality.
Even brief downtime during DDoS attacks can have major client and revenue implications for financial services firms. Corero's white paper reveals that the average cost of a DDoS attack in the U.S. is approximately $218,000, excluding any expenses associated with ransomware.
Customers may suddenly be unable to access online banking portals, mobile apps, websites, or customer service resources. Considering the massive reliance on digital channels in finance, DDoS mitigation and protection should be high on your priority list.
Cloud security threats
As financial services firms continue adopting cloud computing, their threat landscape has expanded beyond the four walls of corporate environments. Misconfigurations in cloud storage or financial applications can accidentally expose sensitive data. Similarly, vulnerabilities or flaws in a cloud vendor's own security could also trickle down to their customers.
Threats like compromised credentials, denial of service attacks, system exploits, and malware also apply to the cloud. Ensure any cloud vendors you leverage can provide adequate security for the sensitive data stored and applications hosted there and that any cybersecurity solutions you rely on can detect and respond to cloud-based threats.
Nation-state and advanced persistent threats (APTs)
Nation-state cyber threats come from government-funded bodies conducting espionage, often to steal confidential data for political, economic, or military gain. Advanced persistent threats, or APTs, refer to sophisticated threat groups like state-sponsored or criminal syndicates that dedicate tremendous time and resources toward compromising high-value targets. Financial services firms with important clients or government-related information are at heightened risk of state-sponsored cyberattacks.
According to the Financial Services Information Sharing and Analysis Center, global tensions could fuel further attacks by state-backed hackers and patriotic hacktivists. Their stealth, patience, and continuously evolving tactics make them exceptionally challenging to detect and stop earlier.
The Cyber Security Handbook for Financial Services.
Learn what our experts say about cyber security in the finance industry, including top tips to protect your practice.
The risks cyberattacks pose to financial services firms
A successful cyberattack on a financial services provider often results in direct financial loss from stolen funds or extortion—but indirect follow-on costs like business disruption, regulatory noncompliance fines, and reputational damage frequently exceed the initial monetary impact. The total fallout can range from thousands to millions of dollars depending on the company's size and the breach's scale.
Some of the most concerning potential business impacts include:
- Direct theft of funds: Fraudulent wire transfers and ransom demands can lead to immediate, direct financial loss. A study by Comparitech discovered that ransom demands range between $180,000 and $40 million, with an average demand of $6.9 million.
- Exposed data: Cyberattacks can cause the loss or exposure of sensitive customer data like account numbers, Social Security numbers, credit card details, or personal financial information. This can lead to widespread identity theft, credit card fraud, and costly legal and regulatory procedures if personal information is compromised.
- Extended downtime of critical systems: Malware, ransomware, or distributed denial-of-service (DDoS) attacks can prevent employees from accessing software, files, and servers needed to perform their work. This may also mean that customers can't access their accounts or required services, either.
- Regulatory noncompliance, legal action, and fines: Financial services companies operate in a climate of regulation and oversight. Failing to sufficiently protect sensitive client data and appropriately disclose breaches can lead to significant fines and lawsuits. In May 2023, the New York Department of Financial Services fined OneMain Financial Group $4.25 million for violating cybersecurity regulations. The charges included improper password storage and inadequate risk management with third-party data.
- Loss of customer trust, loyalty, and business: This consequence particularly damages financial services firms that rely heavily on reputation and relationships to earn and keep client business. Data breaches or service outages can cause customers to lose faith and promptly switch providers.
Given these risks, no financial services provider can afford to ignore or downplay the danger cyberattacks pose in today's increasingly digital landscape. Sensitive data, mission-critical systems, and customer trust make financial firms prime targets for everything from opportunistic cybercriminals to sophisticated nation-state hackers.
Cybersecurity best practices for financial services firms
Regulatory requirements around consumer data protection are increasing. Given the highly sensitive nature of the data housed by financial services, following rigorous cybersecurity best practices is a must. Some of the key steps to implement include:
- Perform regular risk assessments to understand threats, vulnerabilities, and potential business impacts. These assessments help inform and guide cybersecurity road maps and budgets.
- Implement layered defenses with tools like firewalls, threat monitoring and detection solutions, data loss prevention controls, and robust data encryption. The goal should be building a failproof cyber defense.
- Require multi-factor authentication across all systems, accounts, and devices to securely verify user identities before granting access.
- Provide continuous cybersecurity awareness training to all employees, not just technical staff. Routinely test employees with simulated phishing emails to identify gaps and make sure they remain vigilant.
- Strictly control access to sensitive systems and data with role-based, least-privilege permissions. Continuously monitor accounts and access patterns for any anomalies that could signal compromise.
- Have a thorough incident response plan ready in case of a confirmed breach. It enables you to respond promptly to breaches, mitigating potential damages and further fortifying your security posture. Ensure you also have the technical ability to carry out the incident response plan, meaning access to a team of proficient cybersecurity professionals.
- Smaller firms with limited dedicated cybersecurity resources should partner with a reputable cybersecurity solutions provider like Field Effect. The right partner can provide your firm with 24/7 threat monitoring, detection, and response powered by an entire team of cybersecurity experts.
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Safeguarding your financial firm
Today's complex cyber threat landscape for financial services firms requires specialized solutions. Understanding and mitigating risks from social engineering attacks, data breaches, advanced persistent threats, and more is important, but managing these cybersecurity threats should not take time away from your clients and essential business activities.
At Field Effect, we believe that cybersecurity should be accessible and manageable for all businesses, regardless of their size. Our flagship product, Covalence, is a user-friendly platform that simplifies cybersecurity. It detects and responds to abnormal behaviors, pinpoints threats and vulnerabilities, and provides crucial security for your organization.
Partner with Field Effect today and take the first step toward a safer, more secure future. Don't just react to cyber threats: anticipate them, be prepared, and stay one step ahead.