For financial institutions, identity protection is no longer just an option; it’s vital for building customer trust, ensuring regulatory compliance, and maintaining the institution's survival. According to IBM in 2023, the average cost of a data breach is around $4.45 million, and as such banks, insurers, and capital market firms must start viewing customer identity as a vital asset.
The good news is that there are practical, layered controls available that can be implemented today. This article identifies these controls, explains how they work together and provides realistic next steps for your organization.
Customer identities hold so much value because they provide access to accounts, and facilitate payments. This importance makes identity records and authentication systems prime targets for cybercriminals and fraudsters. Moreover, regulators across various jurisdictions expect businesses to demonstrate their commitment to protecting these identities, not just reacting after a breach has occurred.
For financial institutions, identity risk manifests in a variety of ways. These include:
Consequences of a data breach may include unauthorized transactions, regulatory penalties, and damage to brand reputation. This is why protecting identities must involve a multi-layered approach that is consistently enforced.
Identity Access Management (IAM) determines who can access specific resources, when they can do so, and under what conditions. Essentially, IAM serves as both the gatekeeper and record-keeper for all activities related to identity within an organization’s systems.
IAM contains several key components that serve very important functions for financial institutions. One of them is Multi-Factor Authentication (MFA), which enhances security by requiring users to verify their identities with at least two different factors. This may include something they know, like a password, as well as something they have, like a smartphone. Implementing MFA helps organizations reduce the likelihood of unauthorized access, and that’s why many regulatory bodies now mandate or strongly encourage its use.
Other elements of IAM include biometric methods and behavioral checks, and they come in handy especially in high-risk situations. For example, fingerprint/facial recognition can provide an additional layer of security, while behavioral analytics (like tracking typing patterns, login times or changes in geolocation) can help to flag any anomalous activities that may indicate a security breach.
The growing IAM market reflects a widespread recognition among firms that effective identity control is one of the most direct ways to reduce the risks of fraud and identity theft. According to Business Wire, the IAM market is projected to grow up to $25.6 billion by 2027. As such, IAM implementation can maximize return on investments while leading to immediate reductions in risk.
Zero Trust represents a significant shift in security mindset: instead of assuming that anything within the network is secure, it treats every access request as untrusted until it is explicitly verified. This approach is particularly important for financial institutions, as attackers who breach an application or compromise a user account often attempt to move laterally (for example, from web servers to transaction systems) in search of high-value targets. Zero Trust mitigates this risk by enforcing continuous verification and granting strict, temporary access.
In practice, Zero Trust involves verifying both identity and device health at every stage. It applies the principle of least privilege, ensuring users receive only the access they need and only for the time they need it. Network segmentation is also another aspect of zero trust, as it ensures that breaches in a particular area don’t compromise the entire system.
Adoption of zero trust is on the rise, with 61% organizations already starting their journey. As such, using platforms that can correlate identity signals, device posture, and access requests will help simplify this task. For instance, Cybervergent’s TrustPulse can assist by mapping access policies to risk posture and generating the evidence auditors require to confirm that Zero Trust controls are being effectively enforced.
Layer 3: Encrypt and tokenise sensitive identity data
If Identity and Access Management (IAM) and Zero Trust principles control who can access data, then encryption and tokenization ensure that the data itself remains useless unless handled correctly. Encryption scrambles information so that, without a key, intercepted data cannot be read. Tokenization replaces sensitive values (like your credit card numbers or national Ids) with unique tokens that have no meaning outside the institution's systems.
Implementing these techniques makes stolen datasets much less valuable to criminals and reduces the scope of what needs to be disclosed or remediated after a security incident. What’s more, PCI DSS (Payment Card Industry Data Security Standard) mandates the use of encryption and tokenization for payment transactions, protecting millions of financial identities every day.
When combined with continuous posture monitoring, platforms like Cybervergent compliance posture management (CPM) can help ensure that encryption and tokenization settings remain properly configured across both cloud and on-premises systems.
Technical controls are essential, but protecting identities also requires compliance with legal and regulatory obligations. Financial institutions need to align their technical measures with the regulations they fall under, such as GDPR and PCI DSS, as well as international regulators like the EU’s DORA. DORA emphasizes operational resilience, requiring firms to manage ICT risks, promptly report incidents, and ensure that third parties processing identity data adhere to the same standards.
Cybervergent’s TrustPulse can assist in operationalizing this alignment by automating control mapping and gathering evidence to demonstrate compliance. The outcome is not only a stronger defense against identity theft but also smoother and faster interactions with auditors and regulators when proof is needed.
Data privacy laws establish the regulations for how customer identities and personal information must be collected, stored, processed, and shared. As such, compliance with these laws is essential. It influences everything from the design of account onboarding forms to the locations where data backups can be stored.
Some of these regulations include the EU’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and New Zealand’s Privacy Act of 2020. Similar laws, such as Nigeria’s National Data Protection Regulation (NDPR), share many of the same principles. Non-compliance can lead to severe penalties as well. GDPR fines can reach up to €20 million or 4% of global turnover and will also significantly damage customer trust.
For financial institutions, identity protection is more than just a compliance requirement; it's a competitive advantage. Customers choose banks they trust, regulators expect clear demonstration of controls, and the market rewards organizations that operate securely and reliably.
If you’d like a practical next step, contact us to request a 15-minute identity posture assessment demo with one of our consultants. Cybervergent's ISPM and TrustPulse are designed to assist institutions in implementing many of the aforementioned strategies featuring continuous monitoring, AI-assisted detection, and automated evidence collection to help you protect your customers' identities more effectively.