In today’s age of cybercrime, it is not a question of whether your organization will be targeted but when. Attacks are becoming more common, sophisticated, and dangerous every day. For example, Trend Micro reported that the banking industry experienced a 1,318% increase in ransomware attacks in 2021. In addition, the cost of a data breach also continues to rise every year. According to IBM’s Cost of a Data Breach Report 2021, the average cost of a single data breach increased from USD 3.86 million to USD 4.24 million, the highest in 17 years.
Therefore, it is no surprise that all types of organizations now invest significantly in bank-grade security. They employ security experts, implement anti-fraud programs, and encrypt data to boost their cyber security.
But, what does bank-grade security actually mean? Is it really robust and reliable enough to beat all cybercrime and cyberattacks in this day and age, or is it just hot air?
Understanding Bank-grade Security
Bank-grade security is a term used to describe technologies that meet or exceed specific cybersecurity requirements set by banks worldwide. To put it simply, it is adhering to the same security standards as your bank.
These requirements are designed to protect customer data from being compromised even if there is a breach within the organization’s network infrastructure or systems.
Bank-grade security is concerned with current data security standards in the industry. For example, to be compliant and interoperable, certain industries must follow certain security procedures codified in various laws and subsidiary legislation. The best example is the Federal Deposit Insurance Corporation (FDIC) Laws, Regulations, and Related Acts that regulate the U.S. banking industry.
Another essential requirement is user data protection. Organizations that use bank-grade security comply with common global privacy laws and regulations such as:
- The U.S. Privacy Act of 1974
- The U.S. Federal Trade Commission Act 15
- Europe’s General Data Protection Regulation (GDPR)
- The Canadian Personal Information Protection and Electronic Documents Act (PIPEDA)
- Australian Privacy Principles (APP)
Achieving Bank-grade Security
There are several interpretations of what “bank-grade security” means, but it usually entails:
- Encrypting network traffic by using protocols like Transport Layer Security (TLS)
- Utilizing strong customer authentication (SCA)
- Other technical, administrative, and physical safeguards that depend on the particular industry
End-to-end data protection encrypts all traffic between servers to prevent interlopers from snooping on user information. When users sign up for online services, they will need their bank card number and an email address/username and password combination to access their account via mobile devices or desktop computers. There must be a high level of identification verification.
There are also developing standards, such as the Financial Grade API (FAPI) standard, which appears to be gaining some ground but is built on user authentication principles. FAPI is a bank-to-bank interface that aims to let financial institutions communicate securely with their trading partners.
Is Bank-grade Security the Best Solution?
The bank-grade security concept has been around for some time now. However, despite all bank-grade security solutions being developed over the last ten years, cybersecurity breaches are still rising worldwide. For example, according to the Timeline of Cyber Incidents Involving Financial Institutions by the Carnegie Endowment for International Peace, there were 11 major cyber security incidents involving banks and financial institutions (including FinTechs) between January and November 2021 in North America. The methods employed included Man-in-the-Middle (MitM) attacks, phishing, credential stuffing, token skimming, and social engineering.
So why are companies spending more money on bank-grade security? Why do they think it will make them more secure when recent events show otherwise? Unfortunately, claiming to have bank-grade security is insufficient, and many organizations use this term as part of marketing to ease their customers’ concerns.
Security specialists, IT managers, and CTOs should not feel secure about the firms that handle their critical data stating they use bank-grade security. Cloud providers, SaaS companies, and other IT service providers must clarify what bank-grade security measures they use, prove it, and earn trust with consumers.
Furthermore, when most people use mobile phones to access internet services in today’s environment, IT service companies must go above and beyond by employing mobile app authentication and certificate pinning.
The most common implementation for mobile app authentication is to use a two-factor authentication method. One way is via one-time passwords where the user’s device pairs with an external security key or smart card, which contains a secret value that changes every 30 seconds. A second type of authentication involves using your phone as a bank-grade security layer that requires the user to authenticate their identity through an extra step when they log in to their service on their phone.
Certificate pinning protects against unauthorized access by only allowing devices with the correct digital certificates access.
It’s critical not just from a security standpoint but also as a matter of trust-building between IT service providers—and other organizations working in sectors where privacy is an issue—and customers/users who use these apps daily.
How Can You Tell If an IT Service Provider Uses Bank-grade Security?
When thinking about bank-grade security, users should ask IT service providers questions around three specific areas:
Transparency tells you a lot about an organization. How open is an IT service provider with potential clients about how your data and clients’ will be handled? The policies and principles of data governance and trust should be clearly stated, including the purpose and goals of data processing, the kind of data being processed, and how it’s stored and safeguarded.
A lack of transparency in this area is an immediate red flag. If bank-grade security concepts are being used, transparency should be bank-grade, too. In addition, does the organization have a public policy regarding third-party audits or assessments? Failure to have regular internal audits will increase the risk of a breach.
Evaluate your service provider on common data privacy principles, such as lawfulness, fairness, transparency, purpose limitation, data minimization, accuracy, storage limitation, integrity, and confidentiality. It is also essential to consider opt-out options, the right to be forgotten, and notification requirements in the event of a breach.
In addition, evaluate service providers on how they meet regulatory requirements for bank-grade security. The service provider must hold cybersecurity certifications frameworks such as ISO27001, 27017, 27018, 27701, PCI DSS, CSA STAR, WebTrust, SysTrust, NIST (National Institute of Standards and Technology), COBIT (Control Objectives for Information and Related Technologies), or other industry-specific best practice standards. In addition, they must comply with data privacy laws in your jurisdiction.
Any concerns in any of the above areas should be a red flag and a sign that bank-grade security isn’t being prioritized.