The security of our banking system is an important question, given our increasing use of digital banking and the growing sophistication of cyber attacks. Recent incidents, like the CrowdStrike outage and various hacks, are raising concerns and starting discussions about our banks’ networks—how secure are they, really?

Cybersecurity: critical to banking protection

Our financial systems are a prime target for cybercriminals because they hold so much sensitive financial data. As digital banking becomes more prevalent, ensuring the security of banking systems against cyber threats has never been more critical. Financial institutions invest heavily in cybersecurity measures to protect their infrastructure, data, and customers from potential breaches and attacks. But they can still be breached. And even an innocent software bug can wreak havoc.

The CrowdStrike outage: A wake-up call

CrowdStrike, a major cybersecurity firm, had a massive outage in July of 2024, which affected the services of many companies that rely on its platform for threat detection and response. While CrowdStrike quickly addressed the issue (a problem with the coding in a software update), the incident brought to light some questions and concerns about cybersecurity in banking and other sectors.

1. Reliance on third-party services

Many banks and financial institutions depend on third-party cybersecurity firms like CrowdStrike for protection of the banking system against cyber threats. This reliance underscores the importance of robust service-level agreements (SLAs) and contingency planning to mitigate the impact of potential outages or service disruptions.

2. Resilience and redundancy

The CrowdStrike outage demonstrated the need for resilience and redundancy in cybersecurity infrastructure. Financial institutions must ensure they have backup systems and alternative security measures in place to maintain protection and continuity of operations during outages or failures of primary services.

3. Incident response and recovery

The speed and effectiveness of CrowdStrike’s response to the outage provided a valuable lesson in incident response and recovery. Financial institutions have to have well-defined incident response plans that include communication strategies, rapid remediation, and recovery protocols to minimize the impact of security incidents.

Current security measures in banking

Banks and financial institutions use a range of security measures to protect their systems and data. Some of the key pieces include:

1. Advanced threat detection and prevention: Banks use sophisticated tools and technologies to identify and neutralize threats before they can cause harm.

2. Encryption and data protection: Strong encryption protocols are used to secure data. This ensures that sensitive financial information remains protected even if it’s somehow intercepted by hackers. It’s kind of like stealing a safe, but not being able to open it.

3. Multi-factor authentication (MFA): To enhance security, banks implement multi-factor authentication—just like some of us use for our work and personal accounts. MFA requires users to verify who they are via a text message, an email, or using an authentication app, reducing the risk of unauthorized access.

4. Regular security audits and vulnerability testing: Financial institutions conduct regular security audits and testing to identify weak spots in their systems. These assessments help to proactively address potential security gaps.

5. Cybersecurity training and awareness: Employees and customers are usually the weakest link in cybersecurity. Banks have ongoing training and awareness programs to educate employees and customers about security and how to recognize phishing attempts and other schemes.

Challenges and future risks

Even with substantial security measures in place, the banking sector continues to face significant security challenges:

1. Evolving threat landscape: Cyber threats are constantly evolving, with cybercriminals developing new ways to bypass security measures. Banks have to try to stay ahead of these threats by continuing to update and enhance their security protocols.

2. Integration of emerging technologies: The adoption of emerging technologies like artificial intelligence (AI), machine learning (ML), and blockchain presents both opportunities and challenges for banking security. They can enhance security but they also introduce new vulnerabilities.

3. Regulatory compliance: Banks have to navigate a complex landscape of regulatory requirements around cybersecurity and data protection. Staying in compliance while still maintaining strong security can be challenging.

4. Supply chain security: As the CrowdStrike outage highlighted, banks are part of a much bigger ecosystem that includes third-party vendors and service providers. Ensuring the security of the whole supply chain is essential for maintaining overall security to everyone in the banking system.