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Cyber Crimes Costly to Consumers, Banks

by . (Posted in: Fraud / Personal Finance News)

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Late last week, a new report was released that tells the tale about just how expensive cyber crime has become in our society. In the past three years, the number of cyber crimes have doubled and the cost of handling these crimes has climbed 40%. That’s extraordinary considering this is just the tip of the financial iceberg.

With last year’s denial of service attacks on the nation’s biggest banks and whispers of a massive threat this spring, security analysts are nervous. No one knows if bank accounts will be affected, credit card accounts will be stolen or worse – entire banking systems will be hijacked. Remember, the group that managed to overtake these massive banking systems have yet to be identified. Not only that, but they went so far as to give security analysts a heads up on which banks they’d strike for any given week – and the security groups were still not able to prevent the attacks.

Remember, too, they ceased these attacks because they wanted to – not because they were on the verge of being caught. Once a controversial video was taken down, the group announced it would no longer target banks and credit card networks such as Capital One, Bank of America, Wells Fargo and even the massive Dow network.

Denial of Service Attacks

To date, most cyber crime has been focused on those denial of service attacks, dangerous codes, hijacked devices (yes, our smartphones) and even employees who serve as insiders for crime rings. These crimes account for 80% of all cyber thieves’ methods. For those banks and credit card companies that are unable to find solutions, it becomes more expensive each day. On average, according to the “2012 Cost of Cyber Crime”, it takes 50 days to resolve a cyber attack – that includes identifying the vulnerability up to and including reimbursing customers whose identity or assets were stolen. Two years ago, it only took 23 days. On average, it costs nearly $600,000 for banks and other financial entities to rectify, compared to the $400,000 price tag from two years ago.

Ah, but being the consumer doesn’t absolve you from having to shoulder some of the burden. Another report, released simultaneously, tells that tale. The Norton Crime Report focused on the costs of cyber crime to the American consumer. Did you know 71 million Americans were victimized due to cyber crime? The cost of these crimes meant we paid out a whopping $20.7 in direct financial losses. And it gets worse.

The Numbers

Because there is a huge movement beginning to occur in how we pay for goods and services, there are also a host of new problems as a result of the new technology. Within two years – yes – twenty four months – we will be shopping not with a plastic credit card but via our smartphones. That means not only are we going to look to our credit card companies, such as Visa and MasterCard, along with our banks, to be part of the solution in terms of keeping us save, but we’re going to be looking to our mobile carrier as well. And because nearly 90% of all American adult consumers own cell phones, it’s a massive movement.

Remember – the timeframe for these numbers is two years – but currently, only 12 percent of us use our mobile payment platforms for shopping. That means for these numbers to come full circle, there’s going to have to be an explosion of consumer behavioral shifts. You can be sure the cyber crime rings will be watching closely, ready to pounce on any vulnerability that’s common in these types of societal changes.

Unfortunately, and despite the numbers, there are still entirely too many companies that are part of the financial sector or directly linked to it that fall woefully short in their cyber security efforts. What’s surprising is that for those companies that put into place definitive efforts in their security intelligence, they were the ones who were able to detect those attacks early, thus risking long term damage to themselves or their customers. It can be costly, but there are cost-effective efforts that could easily be incorporated by companies that are simply not being done.

Bringing the Risks

It could be that many businesses recognize these shifts into mobile platforms and are biding their time. The problem with that is if they bring their security weaknesses into the new technology, they’re also bringing the risks along with them, which of course, benefits no one and jeopardizes their own companies. Still others simply aren’t taking cyber security seriously. They will often bring on board recent college graduates to define an IT team, and often, there’s no emphasis on security from a cyber-financial standpoint. Most are simply not trained in security beyond basic practices.

Ultimately, these companies either fall to the wayside or they find themselves spending millions more in rectifying the problems instead of spending far less to prevent those problems. Even a few carefully chosen efforts provide better protection. Things like event attendance to keep companies on the cutting edge of both what cyber threats look like today as well as how to identify them can make a huge difference.

Mainstream Banking

Because smartphones are quickly becoming “mainstream banking channels”, it’s believed it will soon replace online banking. In fact, last year, consumers spent 81 minutes a day on their mobile apps versus only 74 minutes on their traditional computers. It’s believed services, goods, money transfers, financial management and person to person banking will total $670 billion over the next two years. PayPal is expected to process more than $3 billion this year alone, with its competitor, Square, to come in a close second. The fact that it’s global adds to the attraction.

You can be sure, though, that these two companies are moving mountains in terms of ensuring their customers are safe. They have to – to ignore it is as irresponsible as one can be in the financial sector.

Contactless technology promises big changes in how we handle our money, credit cards and eventually, even our retirement and college funds, but unless security is a living, breathing entity, it can and will become a huge burden – as we learned from the denial of service attacks from a few months ago.

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