How encryption can help the finance industry win the battle against cyberattacks
Why fully functional data-in-use encryption is THE tool to help financial institutions mitigate the costs of data breaches.
Over one-third of CFOs said cybersecurity is among their highest concerns according to Jefferson Wells' new 2022 CFO Priorities Survey. More than 200 CFOs in the United States were asked to share their top priorities, and their concern is more than justified.
CFOs also need to understand the battle against cyberattacks clearly. When compared to other industries, security requirements for the finance industry are already tight. With data security as a big game changer in 2023, employees must be aware of best data security practices, as human error is also a significant threat.
However, cybersecurity is a C-suite-level issue involving implementing clear policies, training, a cybersecurity division, digitisation, transformation, and attracting the best talent. These are all part of a robust strategy that complies with cybersecurity regulations.
A research report by Proxy also showed that modern data breaches targeting large-scale financial institutions are on the rise, especially among those with underdeveloped cybersecurity protocols. With increased cyber threats, changing regulations & compliance, and the digitisation of banking and commerce, financial institutions are a top target for hackers with unprecedented amounts of information on bank accounts, credit cards, retirement funds, and other data in their systems. Leaks have resulted in millions of user records and cost millions to companies that faced major cybersecurity issues.
The cost of a data breach
- $5.97m: The average cost to financial institutions of a data breach in 2021 (Banking Journal)
- $590m: Ransomware fees paid by financial institutions during the first six months of 2021 (Berkley Financial Services)
Hacks in financial institutions in 2022
The financial sector ranked second across all industries for data breaches in 2022, right behind the government sector according to Flashpoint's 2022 Financial Threat Landscape. More than half of the incidents were caused by general hacking, which includes techniques such as phishing, e-skimming methods, malware, and ransomware. To mention a few:
- Lakeview Loan Servicing: The fourth-largest mortgage loan servicer in the United States suffered a breach that affected more than 2.5 million consumers.
- Crypto.com: One of the best-known cryptocurrency exchanges in the world faced an incident that led to unauthorised withdrawals worth up to $35m.
- Flagstar Bank: A June 2022 investigation determined that 1.5 million customers were reportedly affected, having their names and other personally identifiable information (PII) exposed.
- Receivables Performance Management: In October 2022, the debt collection company based in Lynnwood, Washington, first notified about 3.7 million customers about suffering a data breach 18 months earlier.
- California Department of Finance: In December 2022, California Cyber Security Integration Center (Cal-CSIC) confirmed and identified an intrusion. The state has been focused on a plan to evaluate, contain and mitigate future vulnerabilities with the California Privacy Rights Act (CPRA).
How to take protective action to prevent a financial data breach
Legislative cybersecurity mandates are ever-evolving in light of the current cyber landscape. Technical requirements are becoming more stringent to meet the finance industry's increased cyber risks. The bad news is that breaches will continue. The good news is that technology is evolving just as fast.
As cybersecurity experts, the best way to enable teams to continue working in a fluid and collaborative way is to encrypt data. Vaultree enables teams to work on fully encrypted data as if it's unencrypted. This form of encryption drastically reduces your risk of a data breach. There's no better time to ensure that your financial data is always encrypted. If a leak occurs, data-in-use encryption persists, rendering the data unusable to bad actors.
As a matter of fact, the Federal Trade Commission (FTC) requires financial organisations to encrypt their data if it's feasible. MFA is compulsory, as is the encryption of financial data. There have been many challenges that have made encryption difficult or infeasible. However, with fully functional data-in-use encryption technologies, the complexity, speed issues, and data processing requirements of traditional encryption have been removed.
How encryption can help you protect your data
Let's talk about some serious encryption firepower. Cutting-edge techniques allow financial institutions to perform computation and search on fully encrypted data at near plaintext speeds if they’re applied in the right manner based on technological breakthroughs.
Let's break it down. Data-in-use encryption is like magic for computation - it allows you to perform calculations on encrypted data without ever having to decrypt it. That means you can analyse your customer's sensitive information, from risk management to fraud detection, while keeping their data private. It also enables secure multi-party computation, where you can collaborate with other financial institutions to gain insights without ever compromising the privacy of the individual data sets.
Here are a few examples of how encryption can be applied to specific financial services and processes:
Credit risk assessment: Financial institutions can securely share and analyse the credit information of potential borrowers without revealing the individual's identity or credit history to other institutions. This would allow for a more accurate and comprehensive assessment of credit risk while maintaining the privacy of the borrower's information. The same goes for data science projects like default probability models or threat modelling.
Fraud detection: Financial institutions can detect fraudulent activity in real-time without compromising customer data privacy, by performing efficient search and analysis on encrypted transaction data.
Investment portfolio management: Vaultree's SDK allows for secure multi-party computation, enabling financial institutions to analyse and manage investment portfolios without revealing individual customers' data to the other parties. You can combine it with machine learning models to help predict the portfolio's performance, making investment decisions more accurate.
Risk management: Financial institutions can perform various types of analysis, including stress testing, scenario analysis and risk assessment for specific products, portfolios or the overall institution.
Compliance: Financial institutions are subject to regulations that require them to protect sensitive customer data. Adding the capability to apply access controls, monitoring, and auditing can help financial institutions comply with regulatory requirements like GDPR and HIPAA.
These are just a few examples of how fully functional data-in-use encryption can be applied to specific financial services and processes, allowing financial institutions to maintain their customers' data privacy while still gaining valuable insights.
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