Banks face an ongoing challenge against cyber attacks

International research from ServiceNow shows that banks face an ongoing challenge to protect their systems from sophisticated attacks. Simon Cox, Chief Transformation Officer at ServiceNow, walks through some of the report’s key findings.

The study, conducted worldwide among 750 C-level executives from banks with over $1 billion worth of assets, examined the frequency of cyber attacks over the past two years. The study found that as many as 68% of the banks surveyed had experienced at least one serious cyber attack.

What is even more alarming is that these attacks often came in the form of sophisticated and well-coordinated attacks. This underscores the increasing ability of cybercriminals to circumvent a bank's security and gain access to sensitive financial data.

In addition to data breaches, cyber attacks also have hefty financial consequences. The study shows that one cyber attack can cost banks up to $5 million in damages. These costs include direct financial losses due to stolen funds, the cost of recovery, reputational damage and possible penalties. This underscores the importance of continued investment in security measures.

Operational challenges and failures

Modern banking relies on complex technological infrastructures and systems to process financial transactions, manage customer data and ensure regulatory compliance. However, reliance on technology carries significant operational risks, particularly when legacy systems and processes are involved.

As a result, the study found that the banking industry regularly faces operational challenges and failures, with 60% of the banks surveyed reporting serious operational failures in the past year alone. This not only resulted in significant financial losses (up to $10 million per incident), but also affected customer satisfaction and the bank's image. After all, customers expect banking services to function seamlessly without interruptions.

Outdated systems are also often prone to failure, slow to respond to customer requests and difficult to maintain. Upgrading the technology infrastructure, investing in flexible and scalable systems, and adopting best practices for managing technology assets are needed to improve operational efficiency, according to the study.

In addition to modernising and upgrading, preventive maintenance and continuous monitoring also play a major role. Banks should take proactive measures to identify potential problems before they lead to major failures. The research suggests banks that implement proactive monitoring and maintenance can significantly reduce their risk of serious failures.

Data management, privacy and compliance

The study also found that 80% of banks struggle with data protection and privacy regulations. Additionally, the banking industry is under constant pressure from regulations and increasingly stringent requirements.

Increasing regulatory demands on data management and privacy also presents a complex challenge within the banking industry. The survey clearly illustrates that compliance with privacy laws such as the General Data Protection Regulation (AVG) in Europe, and customer data management are top priorities for banks.

Yet as many as 80% of banks struggle with data management and privacy compliance. This is an alarming finding given the financial risks and reputational damage associated with data breaches and privacy violations. A violation of the AVG can result in fines of up to 4% of a bank's global annual revenue.

These data challenges are further compounded by the increasing regulatory pressures facing the banking industry. Complying with complex regulations, which are constantly changing, is a growing concern for banks. Regulations such as the Basel III standards for capital requirements and the Dodd-Frank Wall Street Reform Act impose significant requirements on banks, with potentially high compliance and reporting costs. For some banks, this can be as high as 15% of their total operating costs.

A holistic approach

All the challenges highlighted in the study have one thing in common: they require innovation and a strategic approach. Banks that want to survive in the ongoing battle for technological security, modernisation and regulatory compliance cannot sit still. It is a challenging era of change, but also of opportunity for banks willing to innovate and invest in their future.

The question is not whether they can meet these challenges, but how they will do so and what opportunities they are willing to take into action.