Challenges and Best Practices for Financial Data Security

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Online transactions are abundant these days. Consider the mobile banking and digital payment systems at your whim, around every corner.

They certainly make life more convenient for consumers, small- to medium-sized businesses (SMBs) and large franchises. But they also force financial institutions to face a myriad of challenges.

Let’s dive in and explore some key challenges and best practices for data security in the financial industry so you can protect your customers’ sensitive information as best as possible.

Financial Data Security Challenges

A Statista report notes data breaches affected 61 million victims in the financial services industry between 2022 and 2023.

What’s more, the cost per data breach is higher than it’s ever been in the U.S. In 2023, it cost an average of $9.48 million to recover from a single data breach.

Knowing the top challenges financial institutions face helps prepare you if and when a cyberthreat arises.

Cyberthreats’ Sophistication

Cyberthreats are becoming more sophisticated, so they’re often difficult to combat. Commonplace attacks are more easily evolving into multistage attacks — and in turn, your data is more susceptible to jeopardization.

Financial institutions in particular are prime targets for cybercriminals based on the sheer amount of valuable data they possess within various data types:

Income
Expenses
Assets
Liabilities
Cash flow

These data types make an organization appealing for threats. And the threat range is broad, from ransomware attacks and phishing scams to insider threats and advanced hacking techniques.

Regulatory Compliance

The financial industry is subject to stringent data security and privacy regulatory requirements such as these:

General Data Protection Regulation (GDPR)
California Consumer Privacy Act (CCPA)
Industry-specific regulations, like Payment Card Industry Data Security Standard (PCI DSS)

Complying with these regulations adds layers of complexity when securing your data. You have to continuously monitor your compliance and adhere to their evolving standards in real time.

However, staying compliant may be hard to manage when you’re busy running your business.

IT experts at CMIT Solutions of Bothell specialize in data security measures and can help you monitor your compliance so you have more time to focus on your business and daily workload. We also make it a priority to keep up with regulation changes so your center of attention remains on your clients.

Legacy Systems and Infrastructure

Many financial institutions still rely on legacy systems with weak characteristics:

Outdated infrastructure
Outdated software
Inadequate patch management
Inherent security vulnerabilities

All these factors make legacy systems more vulnerable to exploitation. For instance, they lack the necessary security controls to protect data from modern cyberthreats that know how to weave through weak defenses.

Insider Threats

Intentional or unintentional insider threats pose significant risks.

Malicious insiders with access to sensitive data may considerably damage your financial institution. Something is in it for them, and they abuse the access you trusted them with.

Meanwhile, negligent employees and third-party vendors may inadvertently compromise your business’s security through simple, unintentional mistakes while performing their daily work.

These are common human errors:

Not updating or creating strong passwords
Falling victim to phishing scams
Sending data to the wrong recipients via email
Not applying software updates

Employee training programs and workshops help combat simple human error (and thus insider threats). If your budget allows, it’s money well spent because their knowledge may save you serious funds during data recovery processes.

Third-Party Risks

Financial institutions often collaborate with third-party vendors and service providers to deliver services:

Cloud computing
Payment processing
Invoice creation
Client communication
Data analytics

However, outsourcing functions to your third-party providers introduces additional security risks.

For example, your vendors’ security posture may not meet the same standards your financial institution holds. It’s also difficult to monitor the exact processes your vendors follow when they aren’t in-office or as readily available as your standard employees.

What Are the Best Practices to Secure Big Data in the Financial Industry?

Now that you know some of the financial industry’s top data security challenges, let’s explore best practices to keep your information secure.

Implement Strong Authentication Mechanisms

Enforce multi-factor authentication (MFA) for customers and employees accessing all sensitive systems and data at your institution.

MFA adds that much-needed extra layer of security. It requires users to provide multiple types of authentication before working with any client or company records. These are common MFA mechanisms:

Passwords
Biometrics
One-time codes

The more types of authentication you require, the better.

Still, be sure to consider the added time this tacks onto your employees’ work efforts. If it becomes too much of a hassle to access documents, you might see decreases in productivity. Finding the right balance is key.

Encrypt Sensitive Data

Use encryption techniques to protect sensitive data both in transit and at rest.

Encrypting data ensures that even if someone intercepts or steals it, it remains unreadable and unusable without specific decryption keys.

Hold Regular Security Audits and Assessments

Conducting regular security audits and assessments is a wise investment. This effort helps your business identify vulnerabilities, gaps and areas for improvement to ensure your data is as secure as possible.

These are top ways to audit and assess your data health:

Penetration testing
Vulnerability scanning
Security risk assessments

All of the above and more give you a proactive footing. From that point, you can not only identify potential security weaknesses but also remediate them.

Conduct Employee Training and Awareness

As we briefly mentioned, investing in comprehensive cybersecurity training programs gives your employees a knowledge boost.

These programs, workshops and certification classes teach employees about common threats, how to identify them and how to respond if suspicious activities occur.

Of course, enlisting vetted and trained IT specialists is also a great defense if managing employee education becomes taxing. But remember — well-informed employees are your first line of defense against cyberthreats.

Use Secure Development Practices

Implement secure coding practices, and conduct regular code reviews to find software and system vulnerabilities.

You can follow secure development frameworks in several ways. For example, you might start an Open Web Application Security Project (OWASP). It’s designed to help minimize software vulnerability risks.

Monitor and Detect Anomalies

Deploy advanced security monitoring technologies that detect and respond to suspicious activities, unauthorized access attempts and other anomalous behaviors in real time.

These tools include the following:

Intrusion detection systems (IDS)
Security information and event management (SIEM) solutions
User behavior analytics (UBA) platforms

Again, the more tools and solutions you adopt, the better.

Practice Vendor Risk Management

We explained earlier how third-party risk is one of the top data challenges the financial industry faces. With that said, establishing robust vendor risk management processes is vital.

To mitigate third-party risks, consider the security posture of all your vendors and service providers.

You can tackle this by performing due diligence assessments and contractually mandating your security requirements. The latter gives you peace of mind on top keeping your business as safe as it can be.

But remember to regularly monitor vendor compliance to ensure they’re meeting those standards. If this is too time-consuming, IT specialists can certainly take on the task!

Create Incident Response and Contingency Plans

It’s wise to have a response plan in place so you can act quickly if a crisis occurs.

Develop an incident response plan and business continuity/disaster recovery (BC/DR) strategies. These must be unique to your business, and you should regularly test them.

The more sound your plan and strategies are, the more prompt and coordinated your response is in the event of a security incident. Predefine your procedures and protocols so you’re not guessing what to do at the moment. This minimizes the impact of data breaches and other incidents while mitigating any subsequent reputational damage.

Contact CMIT Solutions of Bothell for Financial Data Security

Given the importance of safeguarding sensitive financial information and maintaining client trust, data security remains a top priority for the financial industry.

Ultimately, a holistic approach helps you control your financial data’s integrity and confidentiality.

Along with adopting best practices to tackle challenges, CMIT Solutions of Bothell is here to help. Our vetted IT specialists provide a range of services and have years of experience to help ensure your institution has top-notch security.

Featured image via Unsplash

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