Top 4 Things To Know About Cloud Security in Financial Services
Cloud security is growing quickly and becoming mainstream in the financial services industry. With an adoption rate of 17 percent, studies show that cloud solutions are attracting all industries, especially financial services. A cloud platform is an Internet-based data center and operating system. It allows software and hardware products to co-exist from one digital platform completely online. Cloud platforms usually offer more flexibility, storage, better analytics, and more security. Read on to find out the top four things to know about cloud security in the financial services industry.
Why cloud security?
Cloud platforms are still somewhat new, with the first cloud platform introduced in 1999. As cyberattacks increase and more financial services companies move data and applications to the cloud, IT professionals are skeptical about issues around compliance, security, and governance. According to the cloud content management provider, Box, "companies are worried that highly sensitive business information and intellectual property may be exposed through accidental leaks or du to increasingly sophisticated cyber threats."
Although this is a valid concern, the cloud also provides high-tech security measures to prevent data leaks and cyber attacks from happening. Just knowing about the cloud or using the cloud is no longer enough. Financial firms rely on cloud technology to store highly sensitive information. With cyberattacks on the rise especially within the finance industry, users must understand the value and necessity of cloud security so that businesses can safeguard their and their customers' resources.
4 Things to Consider About Cloud Security in Financial Services:
Cyber Threats and Cloud Security
A leading factor of why financial services are embracing the cloud is because of the impact of cyberattacks. As technology advances and companies find more creative solutions to combat fraud, fraudsters are also adapting to new technologies to obtain data in unauthorized ways. It is no longer possible to discuss cloud security without acknowledging the cyber threats that exist in the marketplace today. As cloud attacks are on the rise, financial firms have more to risk than ever before, particularly within the cloud space.
According to McKinsey, synthetic identity fraud is the fastest-growing form of financial crime and accounts for over 61 percent of losses at large US banks. Furthermore, other forms of cyberattacks like phishing, which has grown by 45 percent, wire fraud, and hacking increasingly cause significant distress on financial firms to ramp up on their security measures. Retail banks, wholesale financial markets, and retail investment firms are the biggest target for cyber attacks as they deal with the large transfer of capital.
Financial firms are attractive to cybercriminals because of the fact that they house valuable information, deal with large amounts of cash, and can be hacked into from behind a screen. Although security measures are often discussed at the higher levels of an organization, the average IT Security personnel at a local bank or small credit union most likely is not as well equipped to handle complex cyberattack incidents.
Since there are multiple ways the cloud can be deployed, financial services firms can address cyber security depending on the type of system they have in place. For example, financial services firms that have their own cloud can address cyber threats by educating their entire team about security, performing regular backups, strengthening encryption, and installing proven security products to integrate with existing workflows. However, this can take a lot of time and resources on financial firms.
That's why an increasing number of financial services firms are looking to third party cloud providers. Third party cloud providers already provide the security needed within their platforms, whether that be regular backups, encryption, and multi-factor authentication (MFA) security measures. Many financial services firms also choose to have a combination of in-house servers and cloud.
Compliance in Cloud Security
The financial services industry is one of the most heavily regulated industries. Regulations exist on what you can say, share, monetize, do, store, etc. These rules address a broad range of security concerns related to fraud prevention, data privacy, disclosure anti-terrorism, anti-money laundering, anti-discrimination, and more. While the list of regulations within financial services companies goes on, there are only two regulations within the context of cloud security.
1. Payment Card Industry Data Security Standards (PCI DSS). The PCI DSS is a set of security standards that ensure all companies that use financial information for transactions are maintaining data in a secure environment. This regulation ultimately protects consumer data. It was launched on September 7, 2006 to focus on improving payment account security throughout the transaction process and states that all businesses that accept, process, acquire, transmit, or store cardholder data must safeguard sensitive and private information. Firms must ensure that contracts are carefully written and identify any third-party relationships.
2. The Sarbanes-Oxley Act (SOX). This act was passed on July 30, 2020 by U.S. Congress to help protect investors from false financial reporting by corporations. Financial firms are held accountable for governance and reporting. It also ensures that if a firm is aware that any sensitive data has been compromised, it must be reported immediately. Therefore, businesses must implement controls to protect data, verify access, and develop responses based on incidents. The Sarbanes-Oxley Act of 2002 was created in response to financial scandals involving publicly traded companies such as. Enron, Tyco, and Worldcom.
Regulators are actively imposing fines on financial firms that experience service interruptions. They also want to eliminate any type of systematic risk in technology, which has placed increased emphasis on financial organizations to satisfy the regulatory compliance requirements. According to Google's Financial Services Compliance Overview, "financial institutions must be proactive to ensure IT operational resilience in an environment susceptible to technical failures, software glitches, cyber attack, human error, and natural disasters." Any of the above factors can cripple an enterprise, but the best way to avoid unexpected errors and downtime is to add redundancy.
Financial services firms should consider adding redundancy as it enables all databases and solutions to replicate if needed. Redundancy involves backing up all important databases and re-architect solutions. If there is an error or the existing framework goes down, redundancy will enable the financial services firm to replicate the same framework.
Mobile Funds and Cloud Security
The majority of financial services firms are now using third-party processors that have cooperative agreements with Visa and MasterCard to process financial transactions. Visa and MasterCard are vendors that both operate in the cloud. Independent or in-house debit, credit, and ATM transactions post greater risks and security burdens.
Third-party cloud vendors provide greater security and scalability for various reasons. First, these servers are usually located in warehouses that most employees do not have access to. Second, files stored on cloud servers are encrypted, making it harder for cybercriminals to breakthrough and access.
Additionally, employing a third-party cloud provider will release the burden off of the IT department in the financial services firm. There is more risk in trying to do everything in-house versus having a team of professionals that specialize in cloud security to help manage risk. Although the short-term costs may be more expensive, the long-benefits will provide more value in terms of avoiding potential cloud security disasters.
Financial services firms should consider investing in third party cloud vendors for the additional security measures. The long-term ramifications of potentially being exposed to a cyberattack or cloud security risk far outweighs the short-term costs.
Cloud Updates
Moving everything to the cloud is a big decision as it means putting your confidential data in the hands of a third-party provider. That's why it's important for financial services firms to consider how they're going to handle this new environment if they're planning to invest in cloud computing and partner with a cloud provider. These are the top four things financial services firms should consider when determining whether to implement cloud solutions.
Although the cloud provides a huge advantage, it can pose a risk if it is not handled properly. Working with a cloud provider will give financial services firms upgraded servers, better hardware, service and cloud updates, and continuous improvement. But that takes effort from the financial services organization to update their cloud service with the latest versions. Otherwise, they can end up with a cloud sprawl which occurs when an organization cannot manage and monitor their individual cloud servers properly.
To prevent a cloud sprawl, financial services organizations will want to communicate with their service provider and create a strategy that ensures the firm has constant access to the latest cloud updates.
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