The frequency and cost of data breaches in the financial sector are on the rise, posing significant cybersecurity challenges for banks. Digital banking security is a growing concern as these breaches become more frequent and costly.
According to IBM’s Cost of a Data Breach Report 2024, published in September, the global average data breach cost jumped 10% in one year to reach $4.88 million, the most significant increase since the COVID-19 pandemic.
The United States leads the world in data breaches, with an average breach cost of $9.36 million, followed by the Middle East ($8.75 million), the Benelux region ($5.9 million), Germany ($5.31) and Italy (4.73 million).
However, it is the financial sector that is a prime target for cybercriminals seeking highly valuable customer data, including financial credentials and personal identity information. The IBM report rates it as the second-highest industry worldwide in terms of the average cost of a data breach – behind healthcare – with the cost rising to $6.03 million this year, up from $5.9 million in 2023.
With cyber threats evolving at an alarming rate in today’s digital world, relying on legacy banking systems is akin to “leaving internal doors open” to attacks—and this is where financial institutions should consider a zero trust network that advocates the “never trust, always verify” principle.
Here, we explore how zero trust security can help banks protect their data, boost customer trust and brand reputation, and lower the incidence of cyber-attacks by bad actors, including phishing and stolen or compromised credentials, IT failure, human error, and ransomware, among others.
What is zero trust security?
The concept of zero trust networks is based on the principle of “never trust, always verify,” which does not automatically trust users even if they come from a secure network and have been verified.
The concept emerged from the shortcomings of perimeter-based security models. Although the phrase has existed since 1994, the shift towards “de-perimeterizing” network security began in 2009. While zero trust security has evolved and is currently employed by some platforms and banks, most still rely on the old API gateway-based model.
This approach is likened to the analogy of a locked house. Banks’ traditional network security systems rely on perimeter-based security, similar to locking the front door of a house but leaving internal doors open.
In contrast, zero trust security involves locking all internal doors and only granting access to authorized individuals, thereby offering enhanced security and protection against internal network attacks.
Banks can securely integrate with third-party services by continuously verifying API connections and access permissions. Ultimately, this framework safeguards customer data, and fosters trust in digital banking services as it requires continuous verification of every access request by employing strict identity authentication methods such as multi-factor authentication (MFA) and least privilege access, ensuring users only have the minimum necessary access.
Why banks should implement zero trust security
Protecting data is a challenge that continues to persist in the banking sector, with 30% of global banks saying cybersecurity is a strategic business priority, according to a 2023 study conducted by Forrester Consulting on behalf of Sopra Steria.
The Forrester study also found that 23% of respondents believe that ensuring cybersecurity across their networks and infrastructure is among the top challenges in digital banking today.
In a separate report, Forrester notes that zero trust security can help power a radical change in technology capabilities that creates the foundation for trusted businesses.
Not only does it provide enhanced security and protection against internal network attacks, but it also increases brand trust. It can accelerate new engagement models and emerging technologies to help future-proof a bank’s growth strategy, enable faster delivery of new products, and secure integration of fintech partners.
The dynamic nature of zero trust security, with its constant evaluation of risk and trust, benefits immensely from artificial intelligence (AI) and the predictive and analytical prowess of machine learning (ML), according to a report by Pilotcore.
“AI and ML algorithms analyze many factors in real-time to make context-aware access decisions,” the report states.
“Evaluating user behavior, device security posture, network conditions, and other pertinent data, these technologies dynamically adjust access permissions, ensuring that users have appropriate access levels at the correct times, in harmony with zero trust principles,” Pilotcore adds.
It is also important to note that today’s cloud-driven environment requires a security approach that prioritizes continuous verification and secures access at the granular level of individual requests as it lacks inherent perimeters, according to a report by security policy company tufin, adding that zero trust security keeps sensitive data encrypted even during a breach.
Stricter data privacy regulations, such as the European Union’s General Data Protection Regulation (GDPR) and the revised Payments Services Directive (PSD2), also mean that zero trust boosts compliance by enforcing secure access to data across decentralized environments such as mobile apps, cloud platforms, and third-party APIs.
For banks, the security framework prevents unauthorized access and ensures the seamless protection of customer data as they introduce new digital services. By implementing zero trust, banks can strengthen customer confidence in the safety of their digital transactions and mitigate the risk of reputational damage due to data breaches.
What challenges do banks face when implementing zero trust security?
Integrating zero trust security into legacy banking systems can be time-consuming and costly as it requires numerous modifications and upgrades to ensure a seamless user experience and regulatory compliance. Implementing it is inherently more complex than a regular model, requiring a careful approach to avoid creating security gaps in the infrastructure.
The tufin report recommends a detailed plan to upgrade legacy systems, adopt industry-standard protocols like APIs, and utilize encryption, VPNs, and secure tunneling protocols to establish secure communication channels within the hybrid network.
Various challenges also arise in terms of digital banking. These include the complexity of integration, such as updating protocols and redesigning access management, and scalability issues that will require continuously verifying the vast number of users, devices, and applications interacting with digital banking platforms.
To tackle these challenges, adopting a carefully planned and phased strategy that involves infrastructure upgrades, implementation of continuous monitoring systems, and close collaboration between security teams, compliance officers, and business leaders is essential.
The future development of zero trust security will involve enhancing the security model with AI to make contextual access decisions, identifying potential security issues through risk assessment and anomaly detection, and proactively preventing security breaches using predictive analytics.
In the meantime, zero trust offers a more secure approach to managing user access, allowing banks to concentrate on their core business of delivering exceptional banking products to users with agility and security. This enables them to protect their brand identity and data while swiftly bringing new offerings to the market and securely providing exclusive partner-based content and products.
How SBS can help
The SBP Digital Banking Suite is an advanced open platform that provides modular features for seamless omnichannel customer experiences, covering all banking services from onboarding to daily operations. It integrates with various core processors and supports flexible deployments through an API-first micrsoservices architecture.
A key highlight is our native zero trust security framework, which continuously verifies user identities and access requests, significantly reducing the risk of data breaches. This robust security model not only safeguards sensitive customer information but also helps banks comply with regulations, including GDPR and PSD2, allowing them to innovate confidently and deliver secure digital services.
Partner with us to enhance your bank’s security and mitigate the stress of cyber threats. Together, we can ensure a secure banking environment that protects your systems and customers with the SBP Digital Banking Suite.
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