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As an industry that trades in the intangible, from the exchange of long-term stock assets to enabling digital payments of consumer goods, the financial services industry may not seem directly associated with something tangible like the Internet of Things (IoT). However, the transformational impact and the intrinsic value of the IoT lies in the transmission of data.
In the financial services industry, IoT has a pivotal role in payment processing and security—where it can operate as a cybersecurity tool or mobile point of sale (POS) system that securely encrypts payment information. In fact, retail banking has relied on IoT for several years now—the most obvious example being Automated Teller Machines (ATMs). This common form of IoT for financial services supports real-time transactions and displays account balances without communicating to any human.
Other applications of IoT for financial services include:
- Assisting customers in real time
- Enabling the high volume of wireless payments and transactions
- Supporting wearable devices that replace traditional credit cards and smartphones
- Executing customer support ticketing options electronically
- Combining AI with Industrial IoT to test customer support performance
How is IoT changing the financial sector?
IoT has already positively impacted the financial sector and will only continue to in the future. The bank of things facilitates the billions of data transfers that take place every day. It enables insurance companies to collect and share data with customers about their insured goods in real time, allows consumers to make instant contactless payments and provides the framework for retail banks to collect information on each customer that enters one of their locations.
The most notable and well-documented example of investment in the IoT infrastructure has been by retail banks. To create a convenient consumer experience, they have invested growing amounts of revenue into “fintech” that makes payment transactions and transfers behind the seamless processes that we know and use today.
IoT has also transformed the financial services sector in a variety of ways:
- Real-time data. With IoT, data can be gathered in real-time. This gives banks a huge advantage since they can quickly make important financial decisions.
- Fraud detection. IoT has helped mitigate many risks associated with fraud and has helped detect and block hacked accounts. IoT can gather user data and analyze the activity, where it is then sent over to the cloud, where it matches the user’s typical behavioral patterns. If any unusual data has been detected, the user will be alerted, and the account will become temporarily disabled.
- Better investment decisions. Tracking the real-time state of the market can help improve investment decision-making. IoT has the ability and potential to make accurate business predictions and track company behaviors.
- Personalized customer experience. IoT personalizes the customer’s experience and provides real-time data to make more informed decisions, while providing a seamless experience.
Security challenges are looming
The susceptibility of fintech devices and networks to malfunctioning is a big concern. In June 2018, Visa payment systems crashed throughout Europe, preventing millions of customers from using POS devices to pay for goods. Although Visa reported there was no malicious attack involved in the failure, the incident demonstrated how dramatic, wide-ranging, and financially detrimental the structural collapse of an IoT infrastructure can be.
Another concern is that IoT devices are not protected by design. Although governments and institutions are taking many steps towards securing the manufacturing of these critical devices (e.g., the IoT Cybersecurity Act of 2020, and NIST SP 800-213), they are often shipped and distributed as hackable devices. Therefore, financial products that are used to transfer money and personal data are an attractive attack surface for cybercriminals. If criminals manage to breach the security, they have instant access to customer financial data.
Moreover, IoT devices can be exposed through their cloud or web application services. Lack of strong authentication to protect the wide array of distributed IoT devices leaves the door open to adversaries to penetrate the corporate network and literally wreak havoc.
How to protect IoT in the financial sector: machine identity
The power of IoT devices is boundless. These systems possess big volumes of highly sensitive and valuable consumer information that can reap significant rewards for attackers. More and more of this data will continue to be generated, and become increasingly accessible and desirable, as the number of connected devices, users and interactions grows at an exponential rate. Therefore, organizations must figure out a way to store, track and protect it, and quickly.
Perhaps the biggest challenge in securing IoT in financial services is knowing where the technology is being used and how. According to a recent Forrester survey, 36% of bankers reported that leveraging IoT to improve their operational efficiency is a “high or critical priority.” Most of the use cases for IoT in banking were in areas where the type and role of connected devices often has less visibility, such as supply chain, trade finance and capital goods.
We have seen organizations investing a lot of money and effort in mechanisms to protect their networks, perimeters, and endpoints. However, attackers will always try to locate the path of least resistance, such as the multitude of IoT connected devices.
What is needed is a defense that quickly and easily identifies, monitors and protects all the smart connected devices operating in and around your business. This is where machine identities come in handy. Machine identities not only allow you to identify and authenticate connected devices, but offer financial institutions additional benefits to include:
- Know what and where each IoT device is
- Have continuous visibility (24x7), not a onetime scan, update or patch
- Understand the risk level of each device to your network
- Mitigate as soon as a negative behavior is discovered
- Build a Zero Trust policy where trust can only be given when it is verified and authenticated
However, to reap the benefits of machine identities in the financial services sector, organizations need to deploy a modern machine identity management platform. Given the importance of machine identities across all industries, it is not surprising that Gartner has identified machine identity management as “critical.”
The Venafi Trust Protection Platform powers enterprise solutions that give you the visibility, intelligence, and automation to protect machine identities throughout your organization. To learn more how our platform can help financial services institutions protect their valuable machine identities, contact our experts.