Cybersecurity in banking has become more important than ever as the rapid evolution of digital banking has resulted in customers finding it more convenient to manage their finances through online channels, exposing banks and financial institutions to increased levels of cyberattacks. Growing geopolitical tensions in 2022 have also contributed greatly to the rise in cyberattacks in the financial sector.
According to GlobalData estimates, the global cybersecurity industry in the retail banking sector will grow from $7.9 billion in 2020 to $11.6 billion in 2025 at a compound annual growth rate (CAGR) of 8.1%.
Cyberattacks driven by digital transformation
The uptake of modern technology, the increasing use of digital channels to compete with fintech companies, and the growth in digital currencies all make the financial sector more vulnerable to cyberattacks. With the increased shift to digital banking, banks have been forced to adopt interfaces that emulate what is being offered by purely digital firms. The risk is that rapid digital transformation can lead to cybersecurity gaps, with serious implications for the banking sector. These gaps include a failure to properly secure digital banking apps or to properly manage and store sensitive data.
Fintech generally has the advantage of being built on the cloud, with cybersecurity built in from first principles. Banks need to take greater caution to protect customer data. If there were to be a string of cyberattacks targeted on traditional banks, consumers would inevitably choose to move to what they perceive to be the more secure fintech firms.
Regulating the financial sector
Banks have always had to be vigilant when it comes to their security as they guard sensitive customer data alongside large amounts of money. When customers give banks their money, there is an expectation that it will be secure, and there must be a guarantee of this security. In the UK, the Financial Services Compensation Scheme (FSCS) protects deposits of up to GBP85,000 ($103,000) if a bank fails.
In addition, banking is one of the most heavily regulated industries in the world. Regulation surrounding data loss and breaches is expected to increase in the coming years as authorities adjust to the new digital order. The EU’s General Data Protection Regulation (GDPR) penalizes failure to report a breach within 72 hours and threatens fines for up to EUR20 million ($20.3 million) or 4% of turnover for a data breach, whichever is higher.
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Financial regulators globally are issuing more stringent guidance on third-party risk management and operational resilience. As geopolitical tensions increase, authorities plan to increase cybersecurity compliance obligations. GlobalData’s latest report, Cybersecurity in Banking, examines cybersecurity developments in the banking sector and analyses areas of the cybersecurity value chain that banks should pay most attention to.