Security challenges facing financial institutions
In recent years, financial institutions have been forced to up their cybersecurity to protect against a spike in destructive attacks, ransomware and “island hopping”— a term describing the process of undermining a company's cyber defenses by going after its vulnerable partner network, rather than by a direct attack.
According to a February 2022 survey by VMware, many of the financial institutions surveyed plan to increase their security budget this year:
- Seven out of 10 financial institutions aren’t spending more than 12% of the overall IT budget on security.
- Most financial institutions plan to increase their budget by 20% to 30% this year.
- IBM’s most recent report on cyberattacks found that the financial industry is already spending the second-most of any industry fighting off attacks, with an average cost of $5.72 million per data breach.
Despite increased efforts by financial institutions to combat security threats, there are several reasons for alarm. A full 44% of the executives surveyed said that their growing use of partners and suppliers exposes them to significant security risks. Some 30% said their budgets aren’t sufficient to ensure proper cybersecurity, while several pointed out that the criminals are better funded, according to an interview by ThoughtLab.
No longer are the days of a stereotypical hacker working alone. Today, cyber hacking is a multibillion-dollar enterprise, so financial institutions must stay ahead. As the stats and trends signify, cybercrime grows exponentially each year and so do the risks to governments, business, organizations and consumers.
Innovative security offerings
As the risks of cybersecurity attacks on the financial industry rapidly increase, it takes additional effort to stay on top of growing fraud risks, data breaches and fast regulatory changes. Financial institutions must implement extra security in the areas of:
Artificial intelligence and risk management
Artificial Intelligence (AI) in risk management can help detect fraud and data risk with greater precision and scale. AI augments human intelligence with extensive analytics and pattern-prediction skills. In the tech world, AI-powered analytics may dramatically speed up compliance procedures while also lowering expenses.
AI and risk management perfectly align when there’s a need for handling and evaluating unstructured data. It’s estimated that risk managers of financial institutions will focus on analytics and stopping losses in a proactive manner based on AI findings, rather than spending time managing the risks inherent in the operational processes.
There are assets financial institutions can leverage to prevent data breaches, cyberattacks and fraudulent activities on the network — including blockchain technology. Unlike a traditional centralized server, blockchain is a distributed server with properties of an impassable wall, and it is currently impossible to bring malware into it.
Blockchain can eliminate the authentication process as a potential attack spot, because with the use of this technology, companies can authenticate devices and users without the need for passwords. Also, each transaction is timestamped and digitally signed so it can’t be reversed or tampered with. Thanks to blockchain technology, cybersecurity promises a new dimension of conducting business transactions safely.
Staying compliant — and how technology can help
As the range and nature of compliance and banking regulations evolve, banks are tapping into a wide range of digital technologies to drive compliance innovation.
Modern developers see significant productivity gains by reusing existing software libraries or customizing components as part of new projects. They compose and configure the new application functionality, rather than rewriting everything from scratch.
One of the significant innovations in microservices occurred when enterprises found ways to break larger monoliths into smaller applications. These smaller apps could be reused, rather than rewritten.
The most successful organizations move to microservices gradually, one service at a time. Similarly, compliance teams should consider how to expose the existing compliance process to facilitate reuse; companies may want to start by exposing these processes through middleware.
On the automation side, compliance teams can benefit by automating compliance testing. This reduces the expertise required to identify and rectify issues. It also frees up compliance teams to identify edge cases and find further opportunities to test out new business services.
Transform with Insight.
In this time of rapid digital evolution, Insight is uniquely poised to take your financial organization to the next level. Our deep partner relationships offer the leading banking technology and can help you adopt solutions to overcome the many challenges facing financial organizations today, including AI/big data, cybersecurity, customer experience innovations and more.
Discover technology you can bank on with Insight.