Undoubtedly, cybersecurity is critical, especially in the banking sector. We face evolving cyber threats and attacks from bad actors who try to steal personal and financial data. That’s why protecting it must be the top priority for financial institutions and banks.
According to the Financial Stability Board (FSB), “a major cyber incident, if not properly contained, could seriously disrupt financial systems, including critical financial infrastructure, leading to broader financial stability implications.” To prevent such situations, banks must implement proper protection and risk management. How can they protect customer data? And what threats do they face?
Top cybersecurity threats in banking
Nowadays, customers are exposed to many types of cybersecurity threats, with financial institutions among the prime targets. These include attackers gaining access to customers’ personal data, compromising bank systems, or manipulating people into revealing sensitive information.
#1: Phishing attacks
Such social engineering attacks involve, for example, messages or emails that aim to trick users into revealing their sensitive data, such as login credentials or credit card numbers. Attackers keep improving their messages to make them appear legitimate and forge emails or texts from banks. They may also impersonate a bank employee or a friend to request sensitive information to access one’s account.
Phishing attacks are extremely dangerous. They can target anyone and become increasingly sophisticated. Now, with the use of AI, hackers have gained another way of evolving their phishing methods. They try to convince their targets to click a malicious link or provide financial details over a phone, enabling them to steal their information or break into the account.
#2: Malware: Ransomware
Malware means malicious software, and these attacks infect devices and networks for various criminal purposes. Ransomware is one of the popular malware types. In this case, attackers aim to encrypt people’s devices and block access unless a ransom is paid. Ransomware can corrupt files through phishing messages, malicious downloads, network spread, and other sources.
Ransomware has changed and evolved over the years. Users can be targeted through their emails by, for example, malspam (malicious spam), which includes malware or links to malicious websites. Another infection method is malvertising (malicious advertising), which directs users to malicious servers.
#3: Distributed denial of service (DDoS) attacks
Such attacks attempt to impact the normal traffic of a server, service, or network. They overwhelm the bank’s online system with traffic and block users from accessing banking services. DDoS attacks utilize botnets, a collection of hijacked connected devices that perform the cyber attack.
DDoSing is popular among hacktivists and cyber vandals. Sometimes, such attacks are used as a means to weaken one’s competition or disrupt their services. In the case of banking, this means people can’t access their accounts or make transactions.
#4: Mobile vulnerabilities
As the use of mobile devices is increasing, banks are also becoming more vulnerable to cyber security threats. Attackers can target mobile banking apps with flawed code to infect the device with malware or gain access to user accounts.
Mobile devices are also targeted with phishing to convince users to download malicious apps or click fraudulent links. Attackers try to steal one’s bank login credentials or intercept financial transactions. Moreover, mobile devices can be lost or stolen and used by unauthorized actors to access one’s sensitive information.
#5: Third-party risk and remote workforce
Banks use third-party vendors who provide them with different services, like access to advanced technologies, risk-management tools, cloud services, and more. Each vendor can be a target of cyber attacks. If the attack is successful, the bank may be cut off from the service, and as a result, customers may be impacted. More vendors mean more possibilities for attacks. To reduce that exposure, banks standardize outbound partner traffic e.g. through proxy servers, giving vendors a single allowlisted IP while enabling inspection and logging of data flows.
A very similar problem refers to a remote workforce. Each remote employee may introduce a new security challenge. These include working outside the organization network or using public unsecured networks. The oversight of how employees handle data security procedures or software updates is also harder to handle for the organization.
Cybersecurity risk factors in banking
Banks face a wide range of cybersecurity risks that can arise from external attacks, internal mistakes, or institutional weaknesses. Understanding these factors is essential for building strong defenses, ensuring compliance, and maintaining customer trust.
| Type of risk | Description | Recommendations |
| External | Common threats like supply chain attacks, cybercrime landscape changes, or fraudulent emails exploiting banking customers. | Strengthen cyber defenses, perform regular security audits, and maintain a proactive approach with threat intelligence monitoring. |
| Internal | Insider threats, weak passwords, poor employee training, or non-compliance with internal procedures. | Conduct employee awareness programs, implement multi-factor authentication (MFA), and perform security audits regularly. |
| Institutional | Outdated network security, lack of regulatory compliance, or overreliance on third-party providers. | Follow strict guidelines from regulatory bodies, apply robust cybersecurity measures, and ensure continuous compliance with data privacy laws such as GDPR (General Data Protection Regulation), the UK Data Protection Act, and the CCPA (California Consumer Privacy Act) |
How can banks mitigate risks from third-party vendors?
Implementing robust third-party risk management practices (TPRM) can help banks mitigate vendor risks:
- First, it’s necessary to check the security and reliability of vendors and define clear contracts covering data protection, compliance, and penalties for breaches.
- Second, regular audits and monitoring are essential to review vendor performance, security practices, and compliance standards.
- Finally, banks should implement advanced security controls such as access controls, data encryption, and multi-factor authentication.
What are the best practices for cybersecurity in digital banking?
To ensure proper security of mobile and online banking platforms, financial organizations must start protection at the development stage. Using frameworks and tools with built-in security features helps identify security gaps early and supports operational efficiency across systems.
Recommendation #1: Secure code and architecture
Security begins at the foundation. Banks should use secure coding frameworks and continuous testing tools to prevent attackers from exploiting vulnerabilities in the bank’s network or other sensitive systems.
Recommendation #2: Data encryption and multi-factor authentication
Data encryption is one of the most effective ways to safeguard sensitive financial data. Even if unauthorized parties gain access, the information remains unreadable without a decryption key. This ensures that account details and login credentials can’t be exploited by hackers.
Multi-factor authentication (MFA) adds an extra layer of defense. Whether it uses one-time codes, facial recognition, or fingerprint scans, this method makes sure that only authorized users can access their accounts. When combined with encryption, it provides stronger protection against identity theft and other sophisticated cyber threats.
Recommendation #3: Regular audits and updates
To keep systems resilient, banks should conduct frequent security audits, software updates, and patch management. These technical checks help uncover weak links before threat actors can take advantage of them and support the continuous improvement of cyber defenses.
Recommendation #4: Risk management
Effective risk management goes beyond technical audits. It involves identifying systems and applications with sensitive data, analyzing potential risks, and adapting mitigation strategies as threats evolve. Regular assessments help financial institutions anticipate and reduce possible cyber threats before they escalate.
Recommendation #5: Regulatory compliance
The banking sector must strictly comply with regulations to offer the proper protection of customer data and financial systems. Depending on the market, banks must follow specific regulatory requirements, such as GLBA (Gramm-Leach-Bliley Act), a US law requiring the implementation of strong cybersecurity measures for banks and customer data privacy practices. In the European Union, GDPR (General Data Protection Regulation) must be implemented, which requires businesses to protect the personal data of EU residents.
Recommendation #6: AI-driven monitoring and analytics
Using machine learning, advanced analytics, and threat intelligence helps detect anomalies and cyber breach attempts in real time. In the financial services industry, artificial intelligence also supports automation of threat detection and response, speeding up mitigation to minimize damage.
What’s more, AI can learn and adapt to the changing cybersecurity environment. Over time, it can recognize new and emerging threats. Such applications of AI are especially valuable for safeguarding cloud environments that store sensitive data. These tools help financial organizations respond quickly, prevent ransomware attacks, and protect critical data in cloud storage.
Recommendation #7: Network and system security
Strong network and system security are essential to defend against unauthorized intrusion. Secure configurations, firewalls, and intrusion detection systems help identify and block suspicious activity.
Network security also encrypts communication channels to safeguard information such as transaction records and bank account information. System security, in turn, controls access to critical infrastructure, allowing only verified users through strong authentication and authorization procedures.
Recommendation #8: Identity and access management
Identity and Access Management (IAM) governs how employees and systems access internal resources, reducing the risk of insider threats or accidental exposure. Proper access management also improves operational efficiency by aligning user permissions with business needs.
IAM is often combined with multi-factor authentication for added protection, particularly during login. This approach strengthens cyber defenses and helps financial institutions protect critical systems from internal misuse or external compromise.
Incident prevention and response
To stay secure, banks must be ready not only to prevent incidents but also to respond effectively when they occur.
| Incident type | Prevention measures | Response actions |
| Data breach | Encryption, access control, cloud security, regular penetration testing. | Activate incident response plan, notify affected institutions, assess legal consequences, and reinforce controls. |
| Ransomware attack | Backup systems, threat intelligence, and employee training. | Isolate infected systems, restore from backups, and improve cyber resilience. |
| Phishing campaign | Awareness training, voice recognition verification, and email filtering. | Block malicious domains, alert banking customers, and monitor for identity theft. |
| Insider threat | Background checks, access restrictions, and behavior monitoring. | Revoke credentials, investigate access logs, and review own systems for compromise. |
| DDoS or service outage | Redundant infrastructure and load balancing. | Respond quickly to restore banking operations and communicate with affected institutions. |
Top cybersecurity framework for banks
A few frameworks guiding banks in cybersecurity are worth mentioning. These are, for example, the NIST, CBEST, and CIPHER frameworks.
NIST cybersecurity framework
The National Institute of Standards and Technology has prepared a voluntary cybersecurity framework. It provides guidance to manage cybersecurity risks, and was made to fit organizations of any size, sector, and maturity. The framework includes guidance on practices and controls to achieve cybersecurity efforts.
It defines core functions to govern, identify, protect, detect, respond, and recover. These functions relate to one another and should be addressed concurrently. Some are continuous, and the rest act when a cybersecurity incident happens.
The NIST CSF is a complex document with helpful guidance regarding cybersecurity measures. The newest framework is available here.
CBEST vulnerability testing framework
The Cybersecurity Baseline Expectations for Systemically Important Banks (CBEST) framework was created by the Bank of England and focuses on cybersecurity controls for large banks. It promotes a testing approach that corresponds to attacks aimed at compromising and disrupting business services.
CBEST is an intelligence-led security testing framework designed to help regulators and organizations understand weaknesses and vulnerabilities in their systems and take remedial measures.
Cybersecurity and privacy framework for Privately Held Information Systems (the CIPHER framework)
The CIPHER framework is a set of methods and best practices for the cybersecurity of Privately Held Information Systems (PHIS). PHISs are computer systems owned by organizations that contain private data collected from customers. The CIPHER framework focuses on digitalized data and electronic systems. Its main points include versatility, practicality, as well as user-friendly and user-centric approach.
Versatility means the methodology can be applied to any organization, regardless of the technologies it uses, and remain effective even as those technologies evolve or become outdated. This means it can work well even if technology becomes outdated. The practical feature involves a list of guidelines and controls to follow that are set to enhance or check data protection. CIPHER focuses on key users, PHIS owners, developers, and citizens.
What are the best cybersecurity frameworks for banks and financial institutions?
Several industry-recognized frameworks guide banks and financial institutions in strengthening cybersecurity. Key examples include the NIST Cybersecurity Framework, ISO/IEC 27001, PCI DSS, and DORA (EU). They ensure robust security, regulatory compliance, and protection against relentless cyber threats.
Challenges in implementing cybersecurity in banking sector
Implementing proper security controls and measures in the banking sector is a complex task. Financial institutions face many challenges that can weaken their cybersecurity defenses. What are these challenges, and how can they be overcome?
Security awareness gap
One challenge is the lack of employee awareness about cybersecurity in banks. Attackers can target employees and trick them into giving up access or sensitive information. Institutions can help decrease that problem with regular trainings. Employees should be informed about possible threats and how to react to mitigate any cybersecurity risks.
Insufficient resources
Proper protection of the institution requires investment in technology and expertise. Apart from organization-wide cybersecurity measures that can be implemented, there’s also a need to find experts who can deal with cybersecurity for banks to introduce controls and mitigate risks. It can be challenging to find experienced specialists qualified in banking and cybersecurity who can take responsibility for data security and effective risk mitigation.
Evolving cyber threats
Even though employees are trained to recognize attacks and know how to react when an incident occurs, cybercriminals keep devising new methods to trick people into revealing sensitive information. Adapting to the changing cybersecurity environment is necessary to implement effective cybersecurity measures.
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Cybersecurity checklist for small banks
Even with limited resources, smaller banks and credit unions can achieve strong cyber resilience by prioritizing these key measures:
- Run regular vulnerability scans and updates. Review systems and payment processing platforms to spot weaknesses early. Patch outdated software to prevent threat actors from exploiting security gaps.
- Apply multi-factor authentication (MFA). Secure access for employees and customers with MFA using one-time codes, facial recognition, or fingerprint scans to block unauthorized logins.
- Encrypt all customer and financial data. Protect transaction records and bank account information in both local systems and cloud storage to limit the impact of cyber breaches.
- Maintain and test an incident response plan. Outline clear roles and actions for handling cyber incidents. Test the plan regularly to ensure quick response and operational efficiency.
- Use and share threat intelligence. Collaborate with financial and investment firms to detect fraud early and anticipate sophisticated cyber threats targeting smaller banks.
- Train employees continuously. Educate staff to recognize phishing, fraudulent emails, and insider threats—your first line of defense against cyberattacks.
- Stay compliant with data protection standards. Follow strict guidelines from regulatory bodies like GLBA and GDPR to prevent legal consequences and protect consumer trust.
GDPR compliance for US banks with EU customers
As US-based banks expand their international services, they must navigate complex data privacy obligations that go beyond domestic regulation. The General Data Protection Regulation (GDPR) sets strict rules for how organizations collect, manage, and transfer personal data belonging to EU or UK residents. Non-compliance can lead to significant financial penalties and reputational harm, making a structured, transparent approach key.
To meet GDPR obligations:
- Establish clear data governance. Document how customer information (such as social security numbers, transaction records, and account identifiers) is collected, stored, and shared across systems. Accurate mapping demonstrates accountability to European regulators.
- Define lawful processing purposes. Use personal data only for specific business objectives, such as verifying identity, performing payment processing, or preventing fraud. Communicate these purposes clearly to maintain transparency.
- Apply compliant data-transfer safeguards. When transferring critical data from the EU or UK to the United States, rely on recognized mechanisms such as Standard Contractual Clauses (SCCs) or other approved arrangements that align with regulatory bodies’ requirements.
- Respect individual rights. Offer customers control over their information—allowing them to access, correct, or erase data upon request. Provide clear channels for privacy inquiries.
- Respond swiftly to privacy incidents. In the event of a data exposure or cyber breach, notify supervisory authorities within 72 hours and inform affected customers
- Conduct routine compliance reviews. Perform regular internal and external audits to verify that privacy policies, vendor contracts, and data-handling processes meet GDPR expectations.
What are the latest cybersecurity trends in banking?
The latest cybersecurity trends for banks are an answer to the evolving threads. The key trends include passwordless authentication, thanks to biometrics and FIDO standards. AI-powered cybersecurity has also been implemented to detect threats and prevent risks. Banks also implement better encryption and multi-factor or biometric authentication to prevent data breaches.
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Conclusion
Looking at the evolving threat landscape, it’s critical to implement proper cybersecurity measures in the banking and financial sectors. Finance and banking services are at the top of cybercriminals’ target lists, and new cyber threats in a banking sector are emerging that need to be addressed.
The development of AI gives banks a glimpse of new possible threats that need to be faced. That’s why it’s crucial for banks to invest in cybersecurity solutions to safeguard their systems and data.
FAQ
How do banks handle cybersecurity for cloud-based systems?
Banks implement many solutions to handle cybersecurity for cloud-based systems. These include data encryption, access control, firewalls, network security, compliance standards (e.g., ISO 27001, SOC 2), real-time threat monitoring and detection, and many more. These ensure proper data security and prevent unauthorized access to sensitive information.
What technologies are emerging to strengthen banking cybersecurity?
New, emerging technologies have a great impact on banking cybersecurity. They help fight evolving cyber threats. For example, artificial intelligence helps analyze data to identify and prevent potential threats. Banks also employ encryption techniques resistant to attacks to safeguard sensitive data. Cloud computing services now also offer robust cybersecurity tools to protect stored data. Moreover, banks implement biometric authentication along with behavioral biometrics to add another layer of security to the sensitive data.
What is the role of AI in banking cybersecurity?
AI and machine learning protect banks by analyzing massive data for suspicious patterns, detecting fraud and account takeover attempts in real time. For example, AI can identify unusual login behavior or transaction anomalies and trigger preventive actions like multi-factor authentication or transaction blocking. This helps banks respond faster, reduce false alarms, and enhance overall security while easing analyst workloads.
What are the costs of a data breach for a regional bank?
Data breaches at regional banks often cost millions in direct losses due to remediation, fines, and system downtime. Beyond significant financial losses, these breaches cause operational disruptions and weaken customer loyalty, leading to long-term reputational damage. For instance, account takeover attacks at a global bank caused over $27 million in annual losses before deploying AI defenses.
What is the average cost of a data breach in the financial sector?
The financial sector faces the highest breach costs across industries—averaging about $6 million per incident. Costs vary with factors like institution size and breach scope but generally include regulatory fines, legal fees, remediation efforts, and the impact of stolen customer data. AI-enhanced detection and prevention help reduce these costs by catching threats earlier and limiting damage.
