Secure payment information, demonstrate operational resilience, and maintain compliance with industry regulations.
The digital transformation of financial services has revolutionised how financial institutions operate, deliver services and interact with customers. From online banking and mobile apps, to the application of artificial intelligence and machine learning to fintech start-ups, no part of the financial services industry is immune from the digital evolution that’s taking place around us.
On the one hand, this delivers increased efficiency, accessibility, and innovation. On the other hand, it poses significant challenges, including cybersecurity risks and increasing regulatory compliance.
In this rapidly evolving landscape, digital innovation must seamlessly coexist with robust cybersecurity, risk management and compliance.
The financial services sector is one of the UK’s truly global industries, and the UK is home to some of the world’s largest and most successful financial services firms.
As reported in a 2023 annual review of the sector, the UK’s financial services industry represents a significant source of jobs and tax revenues. With 2.5 million people employed across the UK—over 1.1 million in financial services and more than 1.3 million in related professional services—the industry produced £278bn of economic output, 12% of the entire UK’s economic output and £100bn in tax revenue.
In this competitive landscape, where traditional banks, financial technology disruptors, and digital-native challenger banks strive for market share; delivering a seamless digital experience is crucial. However, institutions must not lose sight of potential vulnerabilities as they race to innovate. Embracing digital technologies is essential, but organisations must prioritise ensuring these technologies are safeguarded against ever-evolving threats.
Any organisation that holds financial data has a target painted on it. When it comes to cyber attacks, financial services firms have been hit hard.
UK financial services firms reported a more than threefold increase in the number of cybersecurity breaches to the Information Commissioner’s Office (ICO) in 2023 compared to the previous year. During the 12 months to June 2023, 640 cybersecurity breaches were reported to the ICO, up from 187 during the previous 12 months. The pensions sector saw the biggest rise in cybersecurity breaches, from six in 2021/22 to 246 in 2022/23.
According to the annual IBM Cost of a Data Breach Report 2023, the global average cost of a data breach in 2023 was $4.45 million, 15% more than in 2020. In response, 51% of organisations that participated in the report stated they plan to increase cybersecurity spending this year.
On average, finance firms lose approximately $5.9 million per data breach, 28% higher than the global average. In addition, evolving regulatory concerns play a role in how financial companies respond to cyber attacks and where they’re investing to reduce total risk.
The benefits of adopting advanced technology are compelling, with research by management consultancy McKinsey & Company revealing that revenue growth initiatives generate 41% of the value of a digital transformation in those businesses that go “all-in” on transforming themselves.
The sheer speed of digital innovation coupled with industry drivers means that the responsibility is on banks to address business models and respond to a new and changing marketplace.
However, navigating layers of legacy technologies, an opaque cyber threat surface, and an overwhelming number of cybersecurity tools, only makes the digital transformation journey tougher.
Increased regulatory demands and crucial risk management in this sector mean the mitigation of risks associated with digital transformation is non-negotiable.
Financial services, digital regulatory and compliance requirements exist for a reason. Firms in this space are among the most likely to be targeted by cybercriminals. These regulations are the foundation for ensuring organisations maintain a minimum standard of protection. The primary goal is to ensure that private and sensitive information is managed to protect customer and client data from data breaches.
There are a number of important financial services regulatory and compliance requirements that organisations should follow, including:
The General Data Protection Regulation (GDPR) governs how organisations collect, store and use personal data of individuals. Enforced by the Information Commissioner’s Office (ICO) in the United Kingdom, fines for non-compliance of GDPR can be significant – ranging up to 4% of an organisation’s worldwide turnover or £17.5m. Large banks and financial organisations have been subject to some of the toughest penalties for GDPR non-compliance, including one large Spanish bank for vague privacy policies and inconsistent data processing practices.
The global standard for data security as set out by the Payment Card Industry Security Standards Council. These data security standards have been adopted by all leading payment card issuers and govern how companies carrying out card payment transactions use and protect payment information. This covers how payment card data is collected, stored, transmitted and authenticated. The standards are regularly updated and all retailers accepting card payments must comply with the most recent standards.
The revised Payment Services Directive (PSD2) is the updated and enhanced set of rules originally set out by the EU in 2007 governing the security of retail payment transactions and the protection of consumer data. The directive includes a range of technical standards around customer authentication, and communication, as well as rules and guidelines on incident reporting and operational and security risk mitigation measures.
The Digital Operation Resilience Act (DORA) is a landmark piece of financial services legislation driven by EU policymakers that significantly extends duties on financial services firms to manage and maintain all aspects of operational resilience. It extends far beyond business continuity and disaster recovery. Specifically focusing on IT-risk management, DORA places duties on financial services firms around the protection, detection, containment, incident reporting, operational resilience testing and third-party risk monitoring. The legislation continues and extends rules and requirements for UK firms set out by the UK Financial Conduct Authority (FCA), Bank of England and Prudential Regulation Authority (PRA).
Developed by the Bank of England and now implemented into the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) supervisory strategies, CBEST assesses cyber resilience for financial services firms. Using an intelligence-led penetration testing approach to identify and rectify weaknesses and vulnerabilities in critical business services, the framework focuses on threat intelligence and detection capabilities, improving firms’ overall resilience and cyber posture. The latest CBEST Implementation Guide refines roles, responsibilities and regulatory expectations, and aligns an organisation’s risk mitigation activities with its role in the wider economy and associated credible threats. For those organisations that form part of the Critical National Infrastructure (CNI), liaison with the National Cybersecurity Centre (NCSC) may also be required.
A CREST-approved framework for providing threat intelligence-led simulated attacks against financial institutions in the UK, overseen by the Bank of England and Prudential Regulation Authority (PRA). STAR-FS has less regulatory oversight in comparison to CBEST, and is conducted upon more organisations.
The General Data Protection Regulation (GDPR) governs how organisations collect, store and use personal data of individuals. Enforced by the Information Commissioner’s Office (ICO) in the United Kingdom, fines for non-compliance of GDPR can be significant – ranging up to 4% of an organisation’s worldwide turnover or £17.5m. Large banks and financial organisations have been subject to some of the toughest penalties for GDPR non-compliance, including one large Spanish bank for vague privacy policies and inconsistent data processing practices.
The global standard for data security as set out by the Payment Card Industry Security Standards Council. These data security standards have been adopted by all leading payment card issuers and govern how companies carrying out card payment transactions use and protect payment information. This covers how payment card data is collected, stored, transmitted and authenticated. The standards are regularly updated and all retailers accepting card payments must comply with the most recent standards.
The revised Payment Services Directive (PSD2) is the updated and enhanced set of rules originally set out by the EU in 2007 governing the security of retail payment transactions and the protection of consumer data. The directive includes a range of technical standards around customer authentication, and communication, as well as rules and guidelines on incident reporting and operational and security risk mitigation measures.
The Digital Operation Resilience Act (DORA) is a landmark piece of financial services legislation driven by EU policymakers that significantly extends duties on financial services firms to manage and maintain all aspects of operational resilience. It extends far beyond business continuity and disaster recovery. Specifically focusing on IT-risk management, DORA places duties on financial services firms around the protection, detection, containment, incident reporting, operational resilience testing and third-party risk monitoring. The legislation continues and extends rules and requirements for UK firms set out by the UK Financial Conduct Authority (FCA), Bank of England and Prudential Regulation Authority (PRA).
Developed by the Bank of England and now implemented into the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) supervisory strategies, CBEST assesses cyber resilience for financial services firms. Using an intelligence-led penetration testing approach to identify and rectify weaknesses and vulnerabilities in critical business services, the framework focuses on threat intelligence and detection capabilities, improving firms’ overall resilience and cyber posture. The latest CBEST Implementation Guide refines roles, responsibilities and regulatory expectations, and aligns an organisation’s risk mitigation activities with its role in the wider economy and associated credible threats. For those organisations that form part of the Critical National Infrastructure (CNI), liaison with the National Cybersecurity Centre (NCSC) may also be required.
A CREST-approved framework for providing threat intelligence-led simulated attacks against financial institutions in the UK, overseen by the Bank of England and Prudential Regulation Authority (PRA). STAR-FS has less regulatory oversight in comparison to CBEST, and is conducted upon more organisations.
There’s no doubt to win and maintain customer loyalty and remain competitive in a rapidly changing market, financial services firms must take advantage of emerging technological advances.
Using BlueFort’s standards-based framework of Continuous Discovery, Validation, and Control, we are able to help financial services organisations navigate the regulatory minefield with simplicity and confidence.
As your trusted cybersecurity partner, BlueFort provides the assurance and expertise to strike a harmonious balance between seemingly conflicting imperatives. We enable you to fortify your defences and foster continual innovation, all while maintaining the essential competitive edge that stems from steadfast security and compliance. Your security, your innovation and your advantage—we’ve got you covered.
The banking sector is complex, competitive, and highly regulated. Non-compliance is not an option.
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