Financial institutions hold the keys to an enormous amount of consumer data, from their clients’ personal details to transactional data. For banks, this information provides valuable insights into their customers’ needs and gives them the ability to make data-driven decisions. But to criminals, it can mean a whole lot more.
With so much at risk, data security is not only a business imperative for the financial industry, but a legal obligation enforced by Federal Deposit Insurance Corporation (FDIC), Federal Reserve System and other federal and state regulators.
Here’s how data fraud mitigation, encryption and cloud security can help financial institutions keep customer data secure across communication channels and databases.
Fraud mitigation
Fraud is big business. According to the FTC, the 2.6 million financial fraud incidents reported in 2023 cost consumers more than $10 billion, a 14 percent increase over 2022, which was a 30 percent increase over the previous year. Nearly half of the amount lost was related to investments. It’s little wonder, then, why security and fraud protections ranked highest among criteria consumers consider when choosing where to conduct banking.
Perpetrators of bank fraud use an array of tactics to separate financial institutions and their customers from their money. Identity and credential theft are popular methods of gaining access to funds, with data often obtained through hacking and phishing. Once a criminal knows enough about an individual to steal their identity, it’s open season on their financial holdings.
Through fraud mitigation, institutions can identify weaknesses in their security regimes that fraudsters could exploit to gain customer data. With more and more transactions occurring in the digital banking sphere, and with bad actors’ ability to pivot to avoid new protections, continual analysis of an institution’s security is paramount.
Data encryption
Encryption is a process that converts readable data into ciphertext for storage or transfer. Typically, encryptors use one of two main protocols—AES, or advanced encryption standard, is designed for protecting data where it lives, while TLS, or transport layer security, provides additional protection when data is moved across platforms, networks and devices.
By encrypting data, financial institutions can reduce fraud, identity theft, cyberattacks and regulatory risks, bringing peace of mind to consumers. It’s so effective that criminals use it, too, once they find an open door and gain valuable data they can use to obtain ransom from victims. But encryption by a financial institution on the front can render that information useless to perpetrators.
Cloud security
Concerns over privacy and data security are inevitable and constant for financial institutions undergoing digital transformation, the process of leveraging digital technologies to overhaul business operations and services. And as the complexity of an organization’s IT stack increases, its data security decreases.
The ultimate destination for storage of these vast digital assets is often the cloud, which can be used as primary or backup storage for data. That’s why cloud security is such a crucial piece of an organization’s digital transformation. This means providing protection for data however it’s needed in cloud environments, where accessibility and a lack of transparency with some third-party providers are leading issues.
