As digitalisation accelerates across the globe, the financial services sector in the UK faces an increasing number of cybersecurity threats. The complex and highly interconnected nature of financial systems, coupled with the growing sophistication of cyberattacks, means that organisations in this sector (“FSOs”) must constantly evolve to safeguard themselves. Here, we explore the top 10 cybersecurity trends and challenges currently being faced by FSOs.
1. Increased ransomware attacks
Ransomware attacks have surged globally in recent years and the UK financial services sector is no exception. In these attacks, cybercriminals infiltrate networks, encrypt critical data and demand ransom payments to restore access. For obvious reasons, the financial industry is an attractive target.
In 2023, several high-profile ransomware incidents highlighted the vulnerabilities in the sector. FSOs often feel pressured to pay the ransom to avoid reputational damage and operational disruption. However, this further incentivises attackers and exacerbates the problem. Instead, FSOs should focus on early detection, regular backups and comprehensive incident response strategies to mitigate these risks.
2. Supply chain vulnerabilities
The financial services industry relies heavily on third-party vendors for technology services, cloud infrastructure, payment processing and other functions. This dependence increases the risk of supply chain attacks, where cybercriminals exploit weaknesses in third-party systems to gain access to sensitive data or disrupt operations.
The SolarWinds attack demonstrated how a single compromised vendor can lead to a cascading series of breaches across multiple organisations. FSOs are increasingly concerned about the cybersecurity practices of their vendors and partners, leading to more rigorous third-party risk management practices.
Ensuring rigorous third-party risk management practices are in place and conducting regular vendor assessments are crucial steps in reducing these vulnerabilities.
3. Evolving regulatory landscape
Cybersecurity regulations in the UK have become stricter in response to rising cyber threats. FSOs must comply with various frameworks, including the General Data Protection Regulation, the Financial Conduct Authority guidelines, and the Prudential Regulation Authority requirements. Non-compliance can lead to hefty fines and reputational damage.
The Digital Operational Resilience Act, introduced by the EU, also impacts UK-based financial firms that operate in European markets. This regulatory framework aims to enhance the operational resilience of financial institutions and ensure they can withstand, respond to and recover from disruptions, including cyber incidents.
Navigating these complex and evolving regulations requires continuous investment in compliance, monitoring and reporting tools.
4. Cloud security challenges
The adoption of cloud services has become a cornerstone of digital transformation in the financial sector. While cloud platforms offer scalability, flexibility and cost-efficiency, they also introduce new cybersecurity challenges. Misconfigurations, lack of visibility and shared security responsibility between cloud providers and financial institutions are common pitfalls.
FSOs must ensure that cloud deployments are secure by design, with proper encryption, access controls and monitoring in place.
5. Phishing and social engineering attacks
Phishing remains one of the most prevalent attack risks in the financial services industry. Attackers use phishing emails, fake websites and social engineering tactics to trick employees or customers into disclosing sensitive information or installing malware.
With the rise of remote working during the COVID-19 pandemic, phishing attacks have become more sophisticated and harder to detect. Attackers often impersonate legitimate organisations or individuals, making it difficult for even vigilant users to distinguish between genuine communications and malicious attempts.
FSOs are focusing on improving employee training programs, implementing multi-factor authentication and using advanced email filtering solutions to combat these threats.
6. Insider threats
While external threats dominate cybersecurity discussions, insider threats pose a significant risk to financial institutions. Insider threats can come from disgruntled staff or even accidental actions by well-meaning staff. Because insiders have legitimate access to critical systems and data, detecting malicious behaviour can be challenging.
The financial services industry is especially vulnerable due to the volume of sensitive data handled daily. FSOs are increasingly adopting user behaviour analytics and other tools to monitor for suspicious activity. Employee education and clear policies on access controls are also critical to mitigating insider threats.
7. Rise of AI-powered cyberattacks
Increasingly, artificial intelligence (AI) and machine learning are being leveraged by attackers to create more sophisticated threats. AI-powered cyberattacks can automate processes such as vulnerability scanning, phishing attacks and even malware development.
The growing concern is that AI can help cybercriminals craft more personalised and convincing phishing emails or enable them to evade detection by adapting their tactics in real-time. FSOs are responding by adopting AI-driven security solutions that can detect anomalies, predict attacks and respond faster than traditional methods.
8. Data privacy concerns
Data privacy is becoming an increasing concern for FSOs, especially with the introduction of stricter regulations and the public’s growing awareness of their rights. Data breaches that expose customer information can have serious financial, legal and reputational consequences.
Secure data handling, anonymisation techniques and strong access controls are essential to ensuring compliance and maintaining customer trust.
9. Cyber resilience and incident response
The concept of cyber resilience has gained prominence as financial institutions acknowledge that preventing every cyberattack is impossible. Instead, the focus has shifted to minimising the impact of an attack and recovering quickly.
Developing a robust incident response plan is critical. FSOs need to test their response capabilities regularly, ensuring that they can quickly detect, isolate and mitigate an attack before it causes significant harm. Building resilience also involves investing in technologies such as automated response systems and backup solutions to minimise downtime in case of a breach.
10. Talent shortage in cybersecurity
The global shortage of skilled cybersecurity professionals is a well-documented challenge. As cyber threats become more complex, the demand for skilled security professionals outpaces supply.
This talent shortage hampers the ability of FSOs to develop and maintain strong cybersecurity defences. FSOs are increasingly turning to automation and managed security services to fill gaps in their internal teams. However, addressing the talent shortage will require long-term strategies, such as investing in training, certification programs and fostering partnerships to help cultivate the next generation of cybersecurity experts.
Chris Perrin
Chris Perrin is Commercial, Technology, Outsourcing and Data Partner at Spencer West LLP.
