cybercrime iStock_000034000002SmallWhether hacktivists or criminals, cyber attacks against banks are on the rise. Financial executives surveyed by PwC said data breaches nearly tripled to 4,628 in 2013. What does this mean for US banks?  More protection costs and losses due to trading disruptions. Given that most of banks’ earning growth come from cost-cutting these days, rising online warfare is bad news.

The Financial Times reports that the overall cost of internet-related attacks against financial institutions is hard to pin down, as many avoid disclosing breaches. But a report by the Centre for Strategic and International Studies and McAfee estimates that overall (for all industries) the cost of cybercrimes is between $375bn and $575bn, annually. Given that more than 50 per cent of attacks are financially (rather than politically) motivated, according to Verizon, big banks handling trillions of dollars daily are prime targets. Some notable victims of a 2012 attack include Wells FargoJPMorgan and Bank of America.

Ideology too has been a driver of cyber attacks in the aftermath of the financial crisis. Verizon’s report shows that internet-focused activists carried out two-thirds of overall web app attacks against financial groups. Card skimmers, which steal customers’ payment data, are the other big offenders, representing a fifth of attacks against banks.  When US retailer Target admitted last year that credit card details of at least 40m customers had been stolen, US banks lost about $200m, according to CSIS-McAfee. Banks are usually forced to reimburse their clients when cash is unlawfully withdrawn from their accounts.

Regulators are worried about escalating cyber attacks. This means more data protection obligations. Banks don’t like spending the resources. Yet early adaptors will reap the rewards as customers love nothing more than a safe home for their money

Source: Financial Times