Cybersecurity in banking: the complete guide

When it comes to cybercrime, attackers tend to go where the money is, and that means banks need to be especially cautious. While some criminals attempt to steal large sums of money, others aim for different targets, such as valuable customer data, which can be just as damaging — if not more so. But regardless of target, a successful breach of your bank’s cyberdefenses can lead to a host of issues, including operational disruption and reputational damage, to say nothing of the millions of dollars in fraud-related costs.

Luckily, there’s a way to combat these attackers — and all while rapidly modernizing your bank’s tech infrastructure and overhauling the customer experience. In this guide, you’ll learn the basic concepts of cybersecurity, common threats, incident prevention and response, how to become secure by design, and more. Let’s get started.

What is cybersecurity in banking? 

Cybersecurity in banking is the practices, technologies, and strategies that financial institutions use to protect their systems, data, and customers from cyber attacks. This includes safeguarding sensitive financial information, such as account details, personal data, and transaction records against unauthorized access, theft, or attack. By implementing advanced security technologies, monitoring systems for vulnerabilities, and educating both employees and customers, banks can stay ahead of cybercriminals and maintain the integrity of their operations. 

Why is cybersecurity important for banks? 

Cybersecurity is important for banks due to their role as custodians of not only money, but also sensitive personal and financial information. The high value of this data means banks are prime targets for cyberattacks, making it essential for them to protect themselves in various ways. Customer trust is another valuable commodity that banks can’t afford to lose. Even a single breach can damage a previously solid reputation and erode customer confidence, leading to loss of business. And financial loss is, of course, another major consideration.

How does cybersecurity impact customers and their trust in banks? 

Cybersecurity has a profound impact on customers’ trust in their bank. Breaches can undermine confidence in a bank’s ability to protect sensitive personal and financial data, and statistics back this up. Consider the fact that 80% of consumers in developed nations will defect from a business if their information is compromised, according to a recent survey. Trust is vital for banks because it directly influences both customer loyalty and the institution’s reputation, both of which can take a major hit in the wake of a security breach.

What are the most common cyber threats that banks are facing? 

Some of the most common cyber threats that banks are facing include phishing schemes and social engineering attacks, both of which are increasingly powered by AI, according to Brian Vlootman, Backbase’s Chief Information Security Officer (CISO). After that, there’s simple credential theft, where attackers leverage stolen access rights to log in, followed by a lack of effective vulnerability management and the deployment of ransomware and malware. Origination and onboarding journeys in particular are feeling the brunt of the attacks, particularly when it comes to social engineering. In other cases, attackers are taking advantage of weak authentication protocols to log in as a normal end-user. The exploitation of application vulnerabilities continues to be one of the main ways attackers compromise a banking system. Distributed denial-of-service (DDoS) attacks also remain popular and are frequently leveraged against banks. 

What are phishing attacks and how do they target banking customers? 

Phishing attacks are a type of cybercrime where attackers deceive individuals into providing sensitive information, such as login credentials, credit card numbers, or other banking details. These attacks often involve impersonating trusted entities — like the bank itself — using social engineering to trick victims into responding. By using fake login pages, fraudulent emails from the bank, or even fake text alerts, for example, cybercriminals can get access to a bank’s systems, and even one incursion can have massive repercussions, both for the customer and for the bank. Back in 2007, Swedish bank Nordea lost between seven and eight million krona — roughly $1.1 million USD — as the result of a phishing attack that McAfee called the “biggest ever” online bank heist at that time. 

What are ransomware attacks and how do they affect banks? 

Ransomware attacks are a type of cyberattack where malicious software — also known as malware — encrypts a victim’s data or systems, rendering them inaccessible. The attackers then demand a ransom in exchange for a decryption key. Banks and their customers are particularly susceptible to ransomware attacks due to the sensitive information they safeguard, which can lead to operational disruptions, financial losses, data breaches, and a loss of customer trust. Just look at the example of CNA Financial in the U.S., who paid a $40 million ransom back in 2021 and you'll understand the potential risks here. 

What is a DDoS attack and why are banks prime targets? 

A DDoS attack is a type of cyberattack that aims at disrupting the operations of a bank’s online services, such as websites, mobile apps, or payment systems. Criminals leverage a network of compromised computers — known as a botnet — to flood a bank’s servers with requests or data packets, exceeding the server’s capacity to process requests. This causes the system to slow down, crash, or become unresponsive. Since banks present a large attack surface, hackers are able to use this method to distract security teams while they launch additional cyberattacks, allowing them to extract a hefty ransom. Even Google has fallen prey to DDoS attacks, reporting in 2023 that it had mitigated the largest one of its kind, which peaked at 398 million requests per second.

What are insider threats in the context of banking cybersecurity? 

Insider threats in banking refer to the risks posed by individuals within the organization — such as employees, contractors, or business partners — who exploit their access to sensitive systems or data for malicious purposes. For example, a disgruntled employee could leak sensitive customer data as an act of revenge or for financial gain. Naturally, banks can present a desirable target for such attacks. Just look at Capital One, who suffered a 2019 breach that affected more than 100 million customers after a former AWS systems engineer exploited her access back.

What are the main cybersecurity regulations that banks need to comply with? 

While every region has its own regulatory bodies, there are some international standards like ISO/IEC 27001 that require banks to establish, implement, and continually improve security controls to protect sensitive information. Many banks also make use of the Basel III Operational Risk Framework to calculate their risk based on a standardized measurement approach. 

Key cybersecurity priorities across the globe include: 

• Incident reporting 
• Risk assessment 
• Third-party vendor management 
• Consumer data protection 
• Governance and accountability 

What are the penalties for non-compliance with cybersecurity standards? 

Penalties for non-compliance with cybersecurity standards can include fines, reputational damage, operational restrictions, and even legal consequences. For example, under the General Data Protection Regulation (GDPR) in the European Union, fines can reach up to €20 million or 4% of total global turnover of the preceding fiscal year, whichever is higher. And under the California Consumer Privacy Act (CCPA), penalties can range from $2,500 for unintentional violations to $7,500 for intentional ones, and these numbers add up quickly, given they’re multiplied by the number of impacted parties.

What can banks do to improve their cybersecurity? 

There are several basic things your bank can do to improve its cybersecurity: 

• Boost security awareness — Proper training is essential, not only for your staff but also for your end-users. Remember that humans will always be the top attack vector in any cybersecurity program, and data backs this up. According to a 2024 report from Verizon, some 68% of breaches involve a non-malicious human element, including phishing and social engineering. Training can go a long way towards preventing the average, low-level cyberattack. 
• Minimize credential/token theft — Credential and token theft continue to be the main methods for taking over someone’s account or otherwise compromising your banking systems. And with an estimated 22.62 billion credentials stolen in 2022 alone, the odds that your bank’s customers could be targeted is probably higher than you might expect. Passwordless approaches like Fast Identity Online (FIDO) can help, as can other emerging standards like Demonstration of Proof-of-Posession (DPoP). 
• Mitigate supply-chain risk — When you’re establishing a relationship with a new vendor, be sure to ask them whether they have a robust, secure-by-design approach to their software development lifecycle (SDLC) and if they are able to quickly detect when there’s been a breach. And instead of using limiting security questionnaires, use your resources to gain a deeper understanding of what each component or integration is doing, what data vendors have access to, and what normal vendor behavior looks like. 

What is cyber resilience and what steps can banks take to achieve it? 

Cyber resilience is “an organization's ability to prevent, withstand, and recover from cybersecurity incidents,” per IBM, and it’s a little deeper than just cybersecurity basics. To continue building your bank’s defensive capabilities and establishing a framework for cybersecurity excellence, you should assume you’ll eventually be infiltrated and: 

• Engineer for detection — The best way to improve your cyber resilience is to increase your ability to detect a compromise as early as possible. One important metric to track is dwell time, meaning the time between the initial compromise of your systems and eventual detection. Remember that the application itself has the best context to flag abnormal behavior, meaning you’ll get the most actionable alerts by making sure detection engineering starts the moment you design the software. 
• Reduce the blast radius — It will go a long way if you can make sure that every component is restricted to allow access to other components only when there’s a legitimate reason to connect. You should strongly consider restricting access on the network and making sure applications don’t connect with more privileges than strictly necessary. That will make it harder for an attacker to operate in your environment without being spotted. 
• Build a defensible security architecture — With the proper measures in place, your bank will stand a good chance of preventing the attack from spreading, meaning you can minimize the impact of the incident. In a restricted environment, attackers can only do so much, and they’re unable to move around with impunity, giving you a fighting chance at keeping the damage to a minimum. Implementing zero-trust principles will help you reduce the risk of a breach — by being able to detect them more quickly when they occur.

What does it mean for a bank to be secure by design? 

For a bank to be secure by design, it means that cybersecurity measures are integrated into its systems, processes, and operations from the outset, rather than being added as an afterthought. This proactive approach ensures that security is a foundational component of all technology, applications, and workflows used by the bank. Key features include: 

• Integrated security architecture 
• Data protection 
• Compliance from day 1 
• Threat modeling 
• Minimized attack surfaces 
• Continuous security updates 

How can banks become secure by design with a unified platform model? 

Unfortunately, no legacy system in the world can help your bank achieve true cyber resilience. These outdated, siloed solutions simply aren’t equipped to address the new kinds of threat we’re seeing on the market, and they leave plenty of vulnerabilities to exploit. That means your bank needs to rapidly modernize its tech infrastructure, but actually pulling this off is easier said than done, given the complexity of undergoing digital transformation at scale. Luckily, there is a way to progressively modernize at lower risk and cost, using a unified platform model. 

With a progressive approach to modernization, your bank will be able to identify friction and transform one banking journey at a time, eventually creating a single, powerful platform. By leveraging incremental change and iterative improvements, you’ll be able to modernize your most important customer journeys and underlying processes, all while mitigating risks and maximizing both customer and business value. It’s an end-to-end, modular process that saves you time and money, reduces complexity, and accelerates delivery, allowing you to respond quickly to cyberattacks and quickly turn around any cybersecurity initiative, thanks to the power of a platform model.

How is generative AI empowering phishing and social engineering attacks? 

Now that a fake persona is only a prompt away, your bank will be facing increasingly sophisticated tech incursions as time goes on. It’s easier than ever for attackers to use AI to scan a customer’s social media profiles and online activity, then construct a more effective phishing or social engineering attack that could push the limits of your skill to combat. Luckily, this same tech makes it easier for your bank to detect abnormal behavior and flag it as it happens. But never forget that vigilance is key, as GenAI continues to evolve. 

How can generative AI be used to prevent various types of cyberattack? 

While AI can certainly be used for cyberattacks, it’s equally helpful for preventing them. For example, with advanced monitoring techniques, powered by AI, banks will soon be able to detect aberrant behavior from employees and third parties, mitigating insider threats. The same is true of customer activity, making it increasingly difficult for cybercriminals to leverage stolen credentials for personal gain. 

How can biometric and behavioral authentication help combat fraud? 

In the near future, banks will move towards authentication mechanisms like facial recognition, voice recognition, and behavioral biometrics — like typing patterns or device usage habits — in order to combat fraud. These methods reduce reliance on traditional passwords, which are often a weak link in a bank’s security. With new methods for authentication, it will be significantly more difficult for criminals to conduct cyberattacks like phishing and social engineering.

It’s becoming increasingly clear that cybersecurity isn’t simply a regulatory requirement — it’s a strategic necessity. To protect sensitive customer data, maintain trust, and ensure operational resilience in an increasingly digital landscape, banks need to adopt a proactive approach by becoming secure by design, using a platform model to embed security directly into their systems. Advanced technologies like AI can also go a long way towards preventing common cyberattacks, but legacy systems need to be addressed before banks can properly harness them. In short, banks across the world need to act now to strengthen their cyber defenses, become cyber resilient, and foster trust in a rapidly shifting cybersecurity environment.