Data breaches are intensifying, and banks need a better game plan

Data breaches have long been a concern for financial services professionals, but recent trends suggest the threat is intensifying. TransUnion analyses of data breaches in 2024 showed while the number of data breaches didn’t rise, those that occurred became more severe.

A higher percentage of breaches last year exposed eight or more pieces of sensitive personal information. The exposure of credit and debit card details has also grown significantly. The greater severity of breaches underscores the critical need for financial institutions to offer consumers proactive strategies and solutions to help mitigate risks and respond effectively when their data is exposed.

Doing so not only better ensures consumers are protected but also helps the organization earn their trust and loyalty.

While overall breaches in 2024 didn’t increase, incidents in the financial services sector remain alarmingly high when compared to other industries. Part of this is the role third-party breaches play within the financial services ecosystem.

As with a growing number of businesses, financial institutions rely on a network of vendors, service providers and partners for everything from payment processing to cloud storage. A breach at any of those third-party entities can ripple across the sector. Even when a financial institution’s own security measures are robust, vulnerabilities within external partners become potential entry points for attackers to steal sensitive financial data.

Unfortunately, data shows the number of third-party breaches increased in 2024, as did the number of credentials exposed. The escalation of sensitive material exposed with each breach poses a heightened risk for both institutions and consumers. The more information is exposed, the greater the potential for identity theft and financial crimes.

A growing concern is the rise in breaches that expose credit and debit card information. TransUnion’s H2 2024 Omnichannel Fraud report showed a marked rise in payment card industry, or PCI, data stolen from financial services organizations: Exposure of credit or debit card numbers increased 69%, expiration dates were up 136%, security codes increased 79% and cardholder name rose 85%. When third-party vendors managing payment platforms or processing systems are breached, stolen card information can be sold or used by criminals for unauthorized transactions, leaving financial institutions to absorb the costs.

Beyond direct financial losses, the reputational damage that follows can be profound — and when customers lose confidence in their financial institutions, trust is hard to restore.

Offering consumers greater transparency and insight into their data risks is vital. Most of them don’t understand the threats posed by data breaches and lack the information and tools to counter potential risks. Until recently, personalized risk intelligence hasn’t been possible.

Now, artificial intelligence can analyze thousands of data points to synthesize an individual’s exposed data and calculate their unique risk exposures. Even more importantly, it can offer specific actions to improve their safety. Personalized intelligence draws a clear line between risks and action steps — which has been largely missing in identity security. Most people take little or no protective action after learning their personal information has been compromised. While apathy might appear to be the cause, the reality is they just don’t know what exactly should be done.

Financial institutions have a unique opportunity to empower their customers with actionable insights into their risk exposure. Institutions can build confidence, trust and financial wellness among consumers by adding personalized identity risk assessments to their existing credit monitoring, fraud control and educational resources.

Even if a financial institution has the best prevention mechanisms in place, it cannot entirely eliminate the risk of cyber incidents due to the potential vulnerabilities of third-party vendors and increased sophistication of cyberattacks. The key is how financial institutions respond, and this makes having a hearty response strategy essential.

A detailed incident response plan enables the financial institution to act proactively, cohesively and effectively in high-stress situations. Data breaches — from any cause — have the potential to cause reputational damage, so every incident response strategy should include a communication plan to notify affected customers quickly and in accordance with applicable laws and regulations.

Consumers want to know their financial institutions are taking potential data exposure seriously and working to mitigate impacts. Offering meaningful support to affected customers is critical — and having personalized risk intelligence, identity theft protection services, credit monitoring, and assistance with fraud resolution already in place helps the financial institution quickly direct customers to valuable resources — thereby standing out among other providers.

It often happens that customers’ data security risks are considered only after a cyber incident transpires. But as data breaches that expose sensitive personal information continue to flow through the financial services sector, institutions must consider proactive and reactive strategies that prioritize the impacts on customers. This means thinking beyond the institution’s security perimeter to incorporate customer-centric strategies that proactively introduce more risk insights and robust tools.

Preparing for cyber incidents in a way that marries robust risk management with customer experience and well-being not only mitigates the immediate impacts of breaches but better positions institutions for the future. A key but often overlooked element of building cyber resilience can come down to fostering a sense of safety and cultivating loyalty in an uncertain digital world.