Cybersecurity and Financial Services
Updated April 12, 2023
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Credit: ArLawKa AungTun / iStock / Getty Images Plus
The financial industry uses cybersecurity to prevent and minimize damage from the near-constant onslaught of cyberthreats. According to IBM Security's X-Force Threat Intelligence Index 2022, 22.4% of all cyberattacks were focused on the finance industry in 2021. IBM data also shows the average cost of a data breach in this sector was $5.72 million in 2021.
On this page, we examine the role of cybersecurity in the finance industry. We explore which technologies cybersecurity professionals use and how various financial sectors take their own approaches to cybersecurity.
The Need for Security in the Financial Services Sector
The financial services sector has long been a primary target for cyberattacks. Early in the history of home computers, hackers were already breaking into secure networks: For example, in 1983, a group of Milwaukee teenagers hacked into the Security Pacific National Bank in Los Angeles — among other organizations — by using basic and default password credentials.
Consequently, cybersecurity in the financial industry has grown apace with the frequency and severity of these attacks. Financial organizations remain attractive targets because of their access to cash, their interconnectedness, and their outdated digital architecture.
While most cyberattacks focus on local and national financial services cybersecurity, the threat to global financial infrastructure has become a major concern. Without industry collaboration and preventative steps, a significant intrusion could disrupt the entire financial system worldwide. Below, we explore the major vulnerabilities and opportunities within this sector.
Common Vulnerabilities
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Digitized Operations: Many organizations in the financial sector rely on older technologies that slow their digitization transformation. When the COVID-19 pandemic forced much of the finance world to transition quickly, these organizations were left more vulnerable to cyberattacks as cybersecurity took a backseat to other initiatives. Financial institutions need to reprioritize their funding to address these concerns. -
Digital Touchpoints: In the age of digital banking, the number of touchpoints in the financial sector has increased considerably. Cyberattackers threaten mobile applications, social media, online banking, emails, and digital payments. Each of these channels needs dedicated cybersecurity approaches. -
Internal Threats: The finance industry has to defend against intentional and accidental threats from a growing consumer and employee population. Financial services staff have access to large amounts of data, meaning leaks both intentional and accidental can prove catastrophic. To thwart this, organizations have implemented limited access and time-based controls. -
Third-Party Service Providers: As the number of third-party vendors that financial services organizations work with increases, the more vulnerable these organizations can become. Third-party vendors can access financial systems and data, though they may not be as secure as the financial organization itself. Financial institutions must regularly assess and analyze these vendors to avoid any backdoor access points.
Emerging Opportunities
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Artificial Intelligence and Machine Learning: AI systems can improve fraud and anomaly detection with greater accuracy. AI can also automate regulatory changes, identify and report user behavioral changes, and trigger preventive actions against phishing and distributed denial of service (DDoS) attacks. -
Cloud Technologies: Cloud-based cybersecurity has become a crucial area of growth in all industries, including finance. As banks and other institutions adopt cloud technologies, they must ensure these infrastructures are secure. -
Blockchain Systems: Blockchain systems offer decentralized data storage. Blockchain cybersecurity allows users to freely access this storage of unalterable, trusted information. This system also provides transparency, while safeguarding important details using public and private keys. -
Secure Access Service Edge Solutions: This cloud-based network solution provides centralized management and security, user identification and authentication, and enhanced data protection. Financial services organizations can use these tools to improve user access while minimizing their own attack surface.
Finance-Focused Industries Using Cybersecurity
The financial services landscape employs workers from top cybersecurity fields because the sector attracts cyberattackers. In the following sections, we highlight the threats impacting subsectors of the financial industry as well as the ongoing efforts to protect against them.
Banks
Banks use cybersecurity to protect their assets, user data, infrastructure, and employees. They face regular attacks via social engineering, insider threats, phishing attempts, and malware. Banks rely on the work of cryptographers to protect their data and financial activities, but they also adhere to the industry's cybersecurity frameworks and compliance regulations.
Investment Firms
Investment firms face cybersecurity threats to operations like frontline investment strategies and trading algorithms, mid-level payments and settlements, and back-end finance and reporting. Many firms hire security architects to analyze and bolster vulnerabilities to data theft and ransomware, DDoS attacks, and internal and external fraud.
Insurance Companies
The personal and financial information insurance companies keep makes them an appealing target for cyberattackers. While they often hire their own security analysts to monitor and protect internal operations, insurance organizations also rely on state insurance regulators and national and international organizations to monitor and regulate cybersecurity activities.
Real Estate Services
In real estate, cyberthreats can compromise financial data, personal and corporate email addresses, and proprietary information. As a result, the industry encounters high numbers of social engineering and ransomware attacks. Without widely adopted standards or regulations, individual real estate organizations need to protect their own systems and customers with the assistance of cybersecurity software and security auditors.
Should You Invest in a Cybersecurity Career?
The financial services sector will likely remain a crucial cybersecurity frontier in the coming decades. The growing prevalence of online banking, transactions, and data storage will continue to draw unwanted attention from bad actors.
As a result, the U.S. Bureau of Labor Statistics (BLS) projects 30% growth between 2021 and 2031 for information security analysts in the finance and insurance industry — a much faster-than-average growth projection. Aspiring cybersecurity professionals can make themselves marketable by developing skills in emerging areas like artificial intelligence, cloud-based technologies, cryptocurrency, or blockchain.
According to the BLS, financial services organizations employed 15% of all information security analysts. This demand also correlates to higher-than-average salaries: Financial services cybersecurity workers made a median salary of $104,790 in 2021.
Get an Education in Cybersecurity
FAQ About Cybersecurity and Financial Industries
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How crucial is cybersecurity in the financial services sector?
Without cybersecurity, the financial industry has no protection from threats to customer data and financial assets. The more the sector relies on digital touchpoints and transactions, the more crucial cybersecurity becomes. The industry also needs knowledgeable professionals to help banks and other institutions comply with cybersecurity regulations.
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Which financial industries need security the most?
Every financial industry has their own need for cybersecurity, but chief among them is the banking subfield. The high volume of customers and transactions makes banks a large target, one that is susceptible to human error and vulnerabilities.
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What is the biggest threat facing the banking industry?
According to a 2021 Trend Micro report, the banking industry encountered a 1,318% year-over-year increase in ransomware attacks between the first half of 2020 and the first half of 2021. Ransomware has massive consequences for banks, as they can cause these institutions to lose money and data. The Financial Crimes Enforcement Network reported that filings about ransomware damages totaled nearly $1.2 billion in 2021.
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How often do cyberattacks happen at investment firms?
While the exact numbers are unclear, the increasing frequency of cyberattacks at investment firms inspired the U.S. Securities and Exchange Commission (SEC) to develop several initiatives to help protect the industry. In 2017, they established the Cyber Unit to prevent and investigate attacks. The SEC also developed mandatory cybersecurity policies and procedures for firms, even punishing those who fail to do so.
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