Cyber Breaches in Banking: Key Risks for Financial Institutions

Financial institutions store highly valuable data, and cybercriminals constantly target them to disrupt services, steal sensitive information, or extort money. Because of this, information security in the financial industry has become a top priority.

A cybersecurity breach in banking occurs when an unauthorized party gains access to computer systems, networks, or data containing sensitive financial information. A cybercriminal may hack a bank’s website and steal valuable customer information (like personal details or account numbers) or hold systems hostage for ransom. Digitalization, advanced hacking techniques, and the high value of financial and personal data all make banks prime targets for cybercriminals.

According to Statista, the average cost of a financial industry data breach in the US in 2024 was $9.36 million. This blog post explores cybersecurity breaches in banking to help you know how to keep your systems and data safe.

Common Cybersecurity Breaches in Banking 

Malicious actors use different tactics to breach networks and wreak havoc from within your bank systems. Here are the top ones:

Malware and ransomware

Malware is any program built to disrupt, damage, or expose a computer system. It’s usually distributed through malicious emails, websites, and text messages. Malware’s popular attack methods include viruses, worms, and trojans. Ransomware, a popular type of malware, is often used by cybercriminals to steal data or even shut down operations. They use malicious software to lock users out of their own systems or data until a ransom is paid to restore access.

Phishing

In this type of attack, cybercriminals use fraudulent emails, websites, or text messages that look legitimate to trick customers or employees into revealing sensitive information like bank account numbers or passwords. Once they gain access, they may infiltrate a bank’s internal systems, steal money, or commit identity theft. In many cases, the target doesn’t realize they’ve been compromised, and the hacker may launch several attacks without anyone suspecting malicious activity.

Insider threats

Some cybersecurity breaches in banking come from within a bank. Insiders with access to critical data may intentionally or unintentionally give away information or provide an entry point for hackers. They may be disgruntled employees, contractors, business partners, or anyone with physical or remote access to a financial institution. Negligent employees can also give cybercriminals access by leaving devices unlocked or falling for a phishing scheme.

Third-party vendor vulnerabilities

Hackers love supply chain attacks as they provide high impact for low effort. They can compromise many targets by breaching one supplier or inserting malicious code into a software update. They also use threats like zero‑day exploits, dependency confusion, and typosquatting. According to a report by Cybersecurity Ventures, software supply chain attacks will cost businesses a massive $138 billion by 2031.

The image below shows the sequence of a third-party breach.

Payment card system breaches 

These cybersecurity breaches happen when malicious actors gain unauthorized access to systems storing sensitive payment card information, like credit card numbers and expiration dates. Hackers can steal and misuse this data, causing financial and reputational damage to a bank and its customers.

API exploits

Here, unauthorized entities exploit vulnerabilities in the API to gain access to a bank’s system or data. This can happen if an API’s security is compromised or insufficient. An API exploit can lead to unauthorized data access, data theft, or even system manipulation to control integral parts.

Major Real-World Bank Data Breaches 

Case 1: Capital One (2019) - cloud misconfiguration

A former software engineer for Amazon Web Services hacked a server storing Capital One's data and stole 100 million credit card applications. Data stolen included social security numbers, bank account numbers, and Canadian social insurance numbers. The data breach affected about 100 million people in the U.S. and over 6 million in Canada. 

Case 2: Flagstar Bank (2023) - third-party breach (MOVEit)

In 2023, cybercriminals breached Flagstar Bank's security and accessed the addresses, phone numbers, Social Security numbers, and tax records of 837,390 Flagstar customers. The cause was a third-party vendor, Fiserv, which experienced a breach via the MOVEit Transfer vulnerability. Hackers exploited vulnerabilities in the MOVEit transfer software and used stolen contractor login credentials to gain access.

Case 3: First Horizon (2021) - credentials compromise

In 2021, an unauthorized party obtained login credentials and exploited a vulnerability in third-party security software to access First Horizon customer accounts. The hackers accessed fewer than 200 online accounts, stole personal information, and withdrew under $1 million.

Federal government institution - US Treasury Department (2024)

In late 2024, the U.S. Treasury Department was the victim of a supply chain attack. The hackers compromised a third-party vendor, BeyondTrust, and exploited vulnerabilities in the remote support software, which the Treasury Department used for technical assistance. They stole a cryptographic key, accessed the Treasury's network, and compromised over 400 computers and thousands of unclassified documents. 

Lessons to learn from these incidents

The following lessons can be learned from these four breaches:

• It’s crucial to secure all cloud technology and all firewall configurations with attack surface monitoring software
• Third-party monitoring is vital in preventing breaches, as it helps organizations identify and address security vulnerabilities in their vendors' systems
• The importance of implementing multi-factor authentication (MFA) by default, using behavioral analytics for login monitoring, and adopting a zero-trust architecture

Why Banks Are Prime Targets for Cybersecurity Attacks

Banks are custodians of not only money, but also sensitive personal and financial information. Here’s why they are high targets for cybersecurity attacks.

They hold highly valuable data (Social Security numbers, account numbers)

Banks store confidential financial data, like customer account details and credit card information, and any attack on their systems can cripple operations. Cybercriminals often target the financial sector for monetary gain, and over 17.5 million credit card numbers were sold in the black market in 2022. Cybercriminals use this data for identity theft, unauthorised transactions, and financial fraud. 

Banks still use legacy systems and have digital transformation challenges

Legacy operating systems no longer receive security enhancements or patches from vendors. But despite their obsolescence, they remain in active use in some financial organizations because they support crucial hardware or applications that might be costly to replace or upgrade. Digital transformation challenges also increase banks’ attack surface. If new technologies like cloud computing are implemented faster than they can be secured, they can expose banks to cybersecurity breaches.

Gaps in vendor and endpoint security

Banks today are increasingly reliant on third parties to help them run their operations, but these introduce new security risks, such as unpatched servers and software, and unprotected web assets. Remote work has also introduced distributed endpoints, giving cybercriminals the opportunity to focus their attacks on endpoint devices. 

Best Practices for Prevention and Risk Management 

While comprehensive security solutions can help financial organizations defend themselves against cybersecurity breaches, implementing best practices is equally important for long-term security. 

Here are some top strategies: 

Employee training and phishing simulations

Employees are often the first line of defense against cyber threats. Conduct proper training, and include phishing simulations to provide a realistic environment for employees to practice identifying and responding to phishing attacks. 

Advanced threat detection and endpoint monitoring (EDR/XDR)

Advanced threat detection tools use AI, ML, and behavioural analytics to spot possible threats and suspicious activities. They perform real-time monitoring to detect anomalies that security teams can investigate. Threat intelligence integration also makes bank security teams aware of attack trends and newly exploited weaknesses.

Endpoint monitoring focuses on protecting individual devices that connect to a network, like laptops, smartphones, and IoT devices. These devices are prime targets for cybercriminals as they are gateways to corporate systems. Banks must secure every endpoint, ensuring each device can detect and block cyber threats before they cause serious problems.

Implementing Zero Trust architecture and performing regular security audits

Zero Trust architecture operates on the principle of "Never trust, always verify." Users and devices undergo strict identity verification before being granted access to resources. This is contrary to the traditional security model that trusts everything within a defined network perimeter.

Regular security audits are also crucial in preventing cybersecurity breaches in banking, as they help your institution identify vulnerabilities in systems and processes and address them before attackers exploit them. Audits also help banks to ensure compliance with industry regulations.

Regular third-party security assessments

Third parties supply the resources your bank needs to run smoothly, but if their security is compromised, they can cause your organization to suffer a data breach. To stay a step ahead of third-party breaches, be vigilant during vendor selection. Perform cyber risk assessments on prospective vendors to quantify the level of risk. Continuous monitoring of vendor environments can also help your bank detect risky activity before it fully impacts the institution.

A good TPRM solution can help your organization to proactively identify, assess, and mitigate risks posed by vendors and partners. 

Role of AI, ML, Automation, and Tech in Breach Prevention 

AI and ML are used for anomaly detection and real-time response

As new threat variants escalate and mutate, it becomes harder for financial institutions to detect the latest security breaches. AI tools have powerful analytical and computing capabilities. They use machine learning to identify unusual patterns in financial data within minutes and detect a wide range of issues, from fraud to cyberattacks.

Banking systems that use AI can also perform real-time incident response automatically, like separating threats from other data, isolating compromised machines, and alerting security teams. They analyze data and make decisions instantaneously, which is critical in the banking industry where delays can have serious consequences.

Blockchain streamlines audit trails and supports predictive threat intelligence

Blockchain records each transaction as a "block" of data, cryptographically linking it to the previous block to form an unbreakable chain. Recorded transactions can’t be altered or deleted, and any change is instantly visible as it breaks the cryptographic link in the chain.

Blockchain streamlines audits by providing a transparent and tamper-resistant ledger. There’s no need for complex reconciliation processes as all transactions are securely recorded in real time.

Blockchain also provides a highly reliable and secure data source for AI and machine learning, enabling more reliable threat detection and faster response times. AI and ML models can analyze the secure blockchain data to identify patterns and anomalies that indicate a potential threat. 

Atlas Systems automates breach monitoring and enhances vendor risk visibility

Atlas Systems’ breach monitoring system uses AI to provide continuous surveillance of your network. It quickly detects and eliminates potential threats. The automated system instantly flags suspicious activity, allowing our dedicated Security Operations Center (SOC) team to respond fast.

ComplyScore®, our AI-powered third-party risk management (TPRM) platform, helps your bank to manage the security risks posed by its third-party partners. It provides real-time monitoring of your vendor ecosystem, flagging vendor-related risks and uncovering potential vulnerabilities you might miss.

Prevent Cybersecurity Breaches in Your Financial Institution with Atlas Systems

Proactive risk assessments and strong governance practices go a long way toward helping prevent cybersecurity breaches. Third-party monitoring is also vital, as vendors are a major source of breaches. Tools like ComplyScore® by Atlas Systems make it easier to audit vendors and uncover hidden vulnerabilities before they become headlines. Staying ahead of cyber threats means acting now.

Don’t wait for a breach - Get a demo today..

Frequently Asked Questions

1. What is the biggest cybersecurity breach in banking history?

The biggest cybersecurity breach was the First American Financial Corp data breach, which exposed more than 885 million financial and personal records linked to real estate transactions.

2. How do banks prevent cyberattacks?

Banks prevent cyberattacks by enforcing the use of secure access controls (like multi-factor authentication), encrypting data, implementing logging and monitoring, and installing firewalls. 

3. What are examples of data breaches in banks?

Examples of data breaches in banks include malware attacks, phishing and social engineering attacks, third-party and supply chain attacks, and cloud infrastructure attacks.

4. How do fintech breaches differ from cyberattacks on traditional banks?

Fintech breaches exploit newer, rapidly deployed technologies like APIs and cloud services, as well as third-party integrations. Attacks on traditional banks, on the other hand, usually target legacy systems and outdated infrastructure.