The threat of data breaches continues to increase, with the number of U.S. cybersecurity incidents tracked in 2017 hitting a new record high of 1,579% – a 48% increase over 2016. 8.5% of the data breaches reported in 2017 involved the financial sector, impacting organizations such as banks, credit unions and credit card companies. The global financial sector has always been a primary target for cyberattacks because of the tremendous value of the information to which these organizations often have access. In fact, financial services firms are hit by cyberattacks a staggering 300 times more frequently than businesses in other industries.
Certain attacks impacting the financial sector, including Distributed Denial of Service (DDoS) attacks, continue to increase in size and frequency. Social engineering, including spearphishing, is another form of attack increasingly used by cybercriminals to infiltrate financial organizations. In 2016 and 2017, cybercriminals targeted 100 banks in 30 countries via a spearphishing campaign dubbed “Carbanak,” stealing roughly $1.3 billion over an 18-month period. This campaign, which encouraged high-level employees to download malware that infiltrated bank networks, underscores the critical threat posed to the financial sector by spearphishing and other forms of social engineering attack.
High cost of cybersecurity incidents
A recent report from the Ponemon Institute and IBM found that the average total cost of a data breach in the U.S. reached a record high of $7.35 million in 2017 across all industries, up 5% from 2016. While that figure is already alarming, the cost of breaches in the financial sector can be exponentially higher. For example, while the average cost to U.S. businesses per record lost or stolen in a breach was $225 across all industries in 2017, the cost for financial organizations was $336 – an increase of 49%.
The specific types of attacks frequently used to target financial entities likely contribute to these higher costs. For example, malware attacks cost financial organizations an average of approximately $825,000 to resolve. For DDoS attacks, which specifically target online banking services, the cost skyrockets to an average of approximately $1.8 million. Even worse, DDoS attacks impact the customer-facing resources of financial organizations more severely than in other sectors.
These costs can be even more significant when cybersecurity incidents impact brand loyalty and trust, which can in turn lead to customer churn. Companies that experience less than 1% customer churn had an average total data breach cost of $5.3 million, while those that experience churn greater than 4% had an average total cost of $10.1 million, according to the Ponemon Institute and IBM. This should be especially concerning for financial organizations, as they experience the highest rate of customer churn following a data breach of any industry. As a result, one out of every five financial institutions cited damaged brand trust or reputation as their top concern pertaining to data breaches.
Real danger of losing customers
A 2016 survey of identity theft and fraud victims found that 12.3% of respondents left their credit unions, 28% left their banks, and 22.4% left their credit card companies as a result of unauthorized activity on their accounts. The danger of customer churn for financial organizations that experience a cybersecurity incident is very real, and protection against cyber threats should therefore be a top priority – as it should be for companies in all industries.
Strategies for taking care of cybersecurity incidents
As the number and severity of cyberthreats increase on a daily basis, raising awareness of these risks among financial institutions has fortunately proven largely successful. Some financial organizations have reported that simply hearing about cyber incidents impacting other entities in the sector has influenced them to invest more in their own security. Other top reasons cited for increased cybersecurity investment include upper management wanting to improve defenses, experiencing a cyberattack and customer demand.