Banks focus on security after recent hacks
This business runs on trust. If institutions lose it, they lose customers.
The attackers flooded the websites with millions of requests to load pages, forcing the banks' infrastructures to process more information than they were designed to handle. As a result, the systems turned nonresponsive and customers could not access the websites and hence their own accounts.
And the timing of the attacks -- right at the end of the month -- made things worse for many customers as utility and services bills came due. While the source of this disruption continues to be investigated, one conclusion is obvious: The banks have to shore up their security.
Thankfully, the banks' systems were robust enough to thwart any attempts to access confidential customer data, including account details or access information. The temporary loss of connectivity seems to have been the only result.
Could this happen again? Unfortunately, yes, which is what has set the banks into action. Although the recent attack did not do much damage, it did expose some serious vulnerabilities in the banks' systems -- which might be exploited with more serious consequences if they are not addressed as the highest priority.
Banks spend millions of dollars each year in the upkeep of their IT infrastructure and boast of some of the most sophisticated computer defenses available. For example, Wells Fargo's IT expenses are likely around $1 to $2 billion a year, considering that equipment and staff costs about 2% to 4% of its total annual expenses. But the fact that the attack was successful in taking down the systems only means that more needs to be done.
What if a future attack compromises customers' confidential information? Banks fear that possibility more than their customers do, as banks are responsible for ensuring confidentiality besides safeguarding money. So if a bank's security is circumvented, the bank becomes liable to compensate customers for the breach. After all, the banking business runs on trust, and if a bank loses trust, it loses customers.
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Investors need to rethink that often-repeated belief, because times have definitely changed.
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