According to IBM’s 2024 Cost of a Data Breach report, finance has the second highest breach costs of the 17 industries studied
By AJ Thompson, CCO, Northdoor plc
IBM’s 2024 Cost of a Data Breach report has highlighted the increasing cost for organisations that suffer a data breach in the finance sector. The report found that the average cost of a data breach is now at $6.08 million, which is a staggering 22 percent higher than the global average of $4.88 million and the second highest cost of the 17 industries studied. It is also a three percent increase compared to 2023.
The report found that there were three initial attack vectors, phishing (16 percent of all breaches), compromised credentials (15 percent of all breaches) and cloud misconfiguration (12 percent of all breaches). The average total cost of a breach of 50 million records is $375 million, with the average cost of a ransomware related breach coming in at $4.91 million.
Why do cybercriminals target the finance sector?
Financial services handle highly sensitive data like financial credentials and personally identifiable information (PII) daily. This data is incredibly valuable to threat actors, who can use it to redirect payments, sell PII on the dark web, or hold critical files for ransom to extort huge amounts of money.
Although large financial institutions are inevitable targets, smaller firms with fewer dedicated cyber security teams and resources to deal with cyber threats have just as much to lose from an attack.
Malicious threat actors are taking advantage of digital transformation and pose a growing threat to the global financial system, financial stability, and confidence in the integrity of the system.
The use of legacy systems
It is also still very common for financial services to use legacy systems for core business functions. The sector has a heavy and complex regulatory environment in which they operate. Working to tried and tested methods that adhere to the current regulations is the safest and to many, the best option.
However, many systems are also outside of Microsoft support leaving the organisations open to massive vulnerabilities like data loss, system breaches, and potential regulatory headaches.
Another one of the major pitfalls of legacy systems is that they are often left to their own devices going largely unnoticed until there is a problem. The lack of regular use and updates can lead to security vulnerabilities, making them easy targets for cyber criminals.
The financial sector is only second to healthcare on the data breach list, with an average cost of a breach coming in at $.6.08 million. The time it takes to identify and contain a cyberattack within the financial sector is also worryingly high. IBM’s report found that it takes 168 days to identify an attack and an additional 51 days to contain it.
Digital disruption
The financial sector has experienced unprecedented digital disruption in recent years. Financial institutions face stiff competition from FinTech companies and BigTech players like Apple, Google, and Amazon, which leverage technology to offer innovative financial services to their customers. While these technological advancements provide opportunities to streamline operations and enhance customer experiences, they also introduce new cybersecurity risks.
Financial institutions are struggling to balance the need for robust cybersecurity measures with the demand for seamless user experiences. As we have seen, legacy systems are still in use in many organisations making it easier for cybercriminals to exploit vulnerabilities. Also, ensuring that third-party vendors adhere to stringent cybersecurity standards adds another layer of complexity.
The impact of the cyber skills shortage
There is an acute shortage of cybersecurity expertise in the finance sector, leaving many financial institutions vulnerable to cyber threats. Ignoring the cybersecurity skills gap can have dire consequences for financial institutions. Cybersecurity breaches can lead to significant financial losses, reputational damage, and legal repercussions.
IBM’s report found that more than half of breached organisations are facing high levels of security staffing shortages. This issue represents a 26.2 percent increase from 2023, a situation that corresponded to an average $1.76 million more in breach costs. Even though one in five organisations say they used some form of Generative AI (GenAI) security tools, which is expected to help close the gap by boosting productivity and efficiency, the skills gap remains an issue.
Maintaining Consumer Trust
Trust is the cornerstone of the financial services industry. Customers entrust their money and personal data to financial institutions, expecting them to keep it safe. Any breach of this trust, such as a data breach or a successful cyberattack, can severely damage a financial institution’s reputation and customer relationships. By protecting financial transactions and customer data, cybersecurity in financial services helps maintain consumer trust. It reassures customers that their data and money are safe, fostering confidence in the financial institution’s services.
AI and Automation
This year’s report found that organisations that applied AI and automation to security prevention saw the biggest impact from their AI investments compared to three other security areas: detection, investigation and response. In total an average cost saving of $2.22 million over those organisations that didn’t deploy AI security technology.
Those who used incident response (IR) teams and testing made cost savings of $248K compared to those who didn’t use IR. Those who used an identity and access management (IAM) strategy that supports hybrid environments and user experience, also made cost savings of $223K, as opposed to those who did not. The 28 percent of financial institutions that extensively used AI and automation security tools made cost savings of $1.9 million versus those who didn’t use any AI and automation security tools.
As we have seen, one of the main routes in for cyber criminals is through employees, third-parties and other suppliers. Supply chains in the finance sector tend to be incredibly large and complex and so many organisations find it almost impossible to have any insight into where vulnerabilities might lie in the network.
Going beyond threat detection
AI and automation’s contribution to finance cybersecurity goes beyond threat detection- it is incredibly proactive in prevention as well. Traditionally, security measures often rely on known patterns of attack, leaving organisations vulnerable to new and evolving threats. Using AI allows organisations to adapt to threats by detecting anomalies that may not conform to established attack patterns.
AI can help identify suspicious behaviour within a finance sector, such as employee access patterns suddenly changing, or if there is an unusual volume of data accessed after hours. AI systems can flag these activities for investigation and this rapid detection allows security teams to respond swiftly, minimising potential damage.
Correlating data manually can also be a time consuming if not impossible task. However, AI can collect data from multiple sources, providing a comprehensive view of potential threats. This allows for early detection of advanced, multi-stage attacks that might otherwise go unnoticed.
Turning to third-party IT consultants
Financial institutions play a critical role in the global economy, facilitating transactions, offering credit, and enabling individuals and entities to invest and grow. Financial institutions handle a huge amount of money and sensitive data, making them a very attractive target for cybercriminals.
The only way to effectively protect financial institutions is to have a 360-degree, 24/7 overview of the whole supply chain. With internal teams struggling with workload already, many are turning to qualified third-party Security Operations Centres provided by IT service consultancies. They have teams of experts who can supplement internal teams allowing for a comprehensive view of where vulnerabilities lie. This then allows financial organisations to have urgent conversations with supply chain partners to shut the vulnerabilities before they are exploited by cybercriminals.
Financial institutions can protect their operations, comply with regulatory requirements, and maintain customer trust in an ever-evolving cyber threat landscape by engaging third-party IT consultants. These consultants who ensure that vulnerabilities are found, shut and critically, remain shut. By deploying AI and automation security solutions, the financial sector can navigate the complexities of cyber threats and emerge stronger and more secure.
