The financial industry’s battle against costly data breaches
Data breaches in the financial industry are becoming more frequent and increasingly costly, presenting significant challenges for financial institutions. According to the latest IBM Cost of a Data Breach Report 2024, the average cost of a data breach in the financial industry has reached $6.08m. This amount is 22% higher than the global average of $4.88m, placing finance as the second most expensive industry for data breaches, trailing only healthcare. Alarmingly, the cost of breaches in finance has risen by 3% since 2023.
Common attack vectors
IBM’s report identifies the primary attack vectors as phishing (16% of breaches), compromised credentials (15%), and cloud misconfigurations (12%). The average cost of a ransomware-related breach is $4.91 million, and breaches involving 50 million records can cost up to $375 million.
Why is the financial industry a prime target?
The financial industry handles sensitive data daily, including financial credentials and personally identifiable information (PII). This data is highly valuable to cybercriminals who exploit it to redirect payments, sell PII on the dark web, or hold critical data ransom. Both large institutions and smaller firms are at risk, especially those with fewer resources dedicated to cyber security. The use of outdated legacy systems further exacerbates these vulnerabilities, as many are outside of Microsoft support and lack regular updates.
Digital transformation and cyber risks
As financial services evolve digitally, they encounter new cyber security challenges. Competition from FinTech and BigTech firms drives innovation but also introduces new vulnerabilities. Many institutions struggle to balance the need for robust cyber security with seamless customer experiences. Additionally, managing third-party vendor risks adds complexity to securing financial data.
Cyber security skills shortage
The financial industry is experiencing a shortage of cyber security professionals, which leaves many institutions vulnerable. Over half of breached organisations face high levels of security staffing shortages, a 26.2% increase from 2023. This shortage has contributed to an average increase of $1.76 million in breach costs. While Generative AI (GenAI) tools are being adopted to mitigate these gaps, the skills shortage remains a significant issue.
The role of AI and automation in cyber security
AI and automation are proving vital in the fight against cyber threats. Organisations that use AI and automation in security prevention save an average of $2.22 million compared to those that do not. These technologies go beyond traditional threat detection by proactively identifying and preventing potential breaches. For example, AI can flag unusual employee access patterns or suspicious data activity for investigation, allowing security teams to respond quickly.
Organisations that use AI and automation in security prevention save an average of $2.22 million compared to those that do not. Share on XTurning to third-party experts
With internal teams stretched thin, many financial institutions turn to third-party IT consultants for additional support. These consultants provide a 360-degree, 24/7 view of the supply chain, identifying and addressing vulnerabilities before cybercriminals can exploit them. Financial institutions can strengthen their defences by partnering with IT consultancies, ensure compliance with regulatory requirements, and maintain consumer trust.
Conclusion
The financial industry must continue to evolve its cyber security strategies to combat the rising costs and complexities of data breaches. Leveraging AI, automation, and third-party consultants can help financial institutions protect sensitive data, reduce breach costs, and preserve consumer trust.
Rising costs of data breaches in the financial industry infographic
Read the Cost of a Data Breach Report 2024 – Financial Industry