The financial industry is no stranger to data breaches. Financial institutions have access to millions of personally identifiable information (PII) records, which they must secure to the highest standard. The value of this data is open knowledge – hackers will actively search for existing cybersecurity weaknesses to gain unauthorized access to customers’ financial information.
Finance companies must implement effective prevention measures to protect sensitive data and avoid data breaches, along with the legal, financial, and reputational damage that follows.
This article explores how finance companies can prevent data breaches through robust security measures.
What is a Data Breach?
A data breach occurs when an unauthorized individual copies, transmits, views, or steals sensitive data. Hackers use this data to commit lucrative cybercrimes, such as identity theft and insurance fraud.
Data breaches can expose the following types of data:
- Financial data, including credit card and bank account numbers
- Social Security numbers
- Driver’s license details
- Other personal data, such as phone numbers and residential addresses
- Intellectual property
- Trade secrets
Common data breach causes include:
- Undiscovered data leaks
- Poor network security
- Software vulnerabilities
- Software misconfigurations
- Physical theft, such as stolen laptops
- Third-party breaches
Learn about the difference between data leaks and data breaches >
Why Finance Companies Must Secure Sensitive Data
It’s no surprise that finance companies top the list for highest costs per breach in IBM and Ponemon Institute’s 2022 Cost of a Data Breach report, second only to healthcare. Strict legal and regulatory requirements surrounding the industry result in harsh fines for non-compliance – a telltale sign of inadequate data protection standards.
Learn more about cybersecurity regulations for financial services.
The 2017 Equifax data breach serves as a stark reminder of the consequences for companies that fail to secure customers’ financial data. The large-scale breach impacted 147 million customers, costing the credit reporting agency up to $700 million.
Equifax displayed several instances of poor cybersecurity, which ultimately allowed hackers to exfiltrate data from internal systems, including:
- Failure to update software. The attackers exploited a well-known vulnerability (CVE-2017-5638), for which a patch was available in the six months leading up to the breach.
- Failure to segment the ecosystem. The attackers gained access to several servers after initially hacking Equifax’s web portal. Learn best practices for network segmentation.
- Failure to encrypt. The attackers found and exploited plain-text usernames and passwords, escalating privileges to access customer PII. Learn more about encryption.
These cybersecurity failures demonstrate why the financial sector must invest heavily in improving security standards to safeguard sensitive data.
Learn more about the biggest cyber threats affecting financial services >
How Finance Companies Can Prevent Data Breaches
Below are six strategies your organization can implement to protect against data breaches. For a more technical guide on preventing data breaches, refer to this post.
1. Provide Security Awareness Training
Verizon's 2022 Data Breaches Investigations Report found that 82% of reported breaches involved a human element. Educating employees through cybersecurity awareness programs helps avoid security breaches caused by human error in all organizations, including small businesses.
Phishing scams and leaked credentials are two common attack vectors that are preventable through awareness training.
Password Hygiene
Weak passwords are easy to crack using brute-force methods, and reused passwords quickly become an issue in the event of a data leak.
Employees should receive training on how to create secure, unique passwords and other best practices for keeping their credentials safe, such as:
- Regularly updating passwords
- Not sharing passwords
- Understanding the security risks of password managers
- Setting up multi-factor authentication (MFA)
Implement this secure password checklist into your security awareness training >
Phishing Scams
Cybercriminals use phishing scams to trick employees into disclosing sensitive information. They exploit this data to compromise corporate systems and commit more serious cybercrimes, such as data exfiltration, malware injections, and ransomware attacks.
Phishing emails have defining characteristics, such as poor spelling and grammar, unusual requests, and a sense of urgency. Teaching employees how to identify these traits helps prevent business email compromise and potential data breaches in the making.
Learn how to spot phishing scams >
2. Conduct Due Diligence
Finance companies handle hundreds to thousands of third-party service providers, many of whom also have access to their sensitive data. While your organization may take its data security seriously, vendors are often lacking in their cybersecurity practices.
Remember, a third-party data breach is still a first-party problem. Your company’s reputation will be on the line if any customer data is exposed, regardless of how the breach occurs. Heavy financial and legal penalties are also applicable in such instances.
You must conduct due diligence on all potential vendors by performing a risk assessment before onboarding. Risk assessments identify weaknesses in a vendor’s cybersecurity, allowing you to decide whether or not to take on the associated risks and commence the partnership.
Use this free vendor risk assessment template >
3. Manage Vendor Risk
Risk assessments are just one element of a vendor risk management (VRM) program. Effective VRM involves all stages of the vendor lifecycle. Ensuring your vendors maintain a healthy security posture and remediate any emerging cyber risks is crucial to preventing third-party data breaches.
Learn how to choose a cyber risk remediation tool for finanical services >
Maintaining visibility over an ever-growing vendor inventory can prove difficult with manual tracking methods, such as spreadsheets.
Complete vendor risk management solutions streamline this process throughout the entire lifecycle, offering in-built questionnaire templates, real-time cyber threat detection, and automated remediation workflows.
Learn how UpGuard helps finance companies reduce third-party risk >
4. Maintain Compliance
Finance industry laws and regulations, such as PCI DSS and the GDPR, mandate strict data privacy controls. Adherence to these requirements demonstrates your organization is up to industry standards and provides a baseline for managing regulatory risk. Implementing a robust enterprise risk management framework that outlines regular auditing schedules helps identify compliance gaps and prioritize risk remediation.
Learn how to comply with the top 12 financial cybersecurity regulations >
5. Identify Data Leaks
Data leaks are the accidental exposure of sensitive information, either physically or on the Internet. Undiscovered data leaks can directly facilitate a data breach. For example, cybercriminals can use open source methods to find leaked corporate credentials on the web and hack into employee accounts to access internal data.
Prompt data leak detection and response is the key to preventing further compromise. Effective data leak detection solutions continuously monitor all layers of the web to identify data leaks affecting an organization and its vendors, enabling fast remediation.
Learn how finance companies can prevent data leaks >
6. Continuously Monitor Your Attack Surface
According to Palo Alto research, cybercriminals waste no time scanning for security vulnerabilities and will begin to scan the attack surface within 15 minutes of their exposure. With finance companies already a prime target for cyber attacks, they must respond quickly to new CVEs to avoid compromise. Manual detection methods fail to stay updated with the dynamic threat landscape.
Attack surface management solutions continuously monitor an organization’s and its vendors’ attack surfaces, providing real-time vulnerability detection and security ratings to instantly assess an organization’s security posture at any given time.
Learn how UpGuard protects finance companies from data breaches >
