Top 5 Cybersecurity Challenges Financial Institutions Will Face in 2025

The financial services sector has long been a primary target for cybercriminals and the year 2025 will be no exception. Due to the vast amounts of sensitive data and financial assets these institutions hold, new challenges will continue to stem from the increasing sophistication of cyberattacks, the complexity of current and new regulatory compliance, and the rapid adoption of digital technologies. There are five top cyber security challenges financial service institutions (FSIs) are likely to face in 2025, and we will explore the reasons behind these challenges and practical solutions to mitigate them.

Challenge #1: Advanced Persistent Threats (APTs)

Why It’s a Challenge

APTs are highly sophisticated attacks often orchestrated by nation-states or well-funded threat actors and continue to be a pressing challenge in the financial sector due to their stealthy, targeted, and long-term nature. Unliked opportunistic attacks, APTs are calculated and deliberate. These attackers remain undetected for extended periods, targeting FSIs to exfiltrate data, disrupt operations, and/or commit fraud.

In 2025, the integration of AI and automation into cyberattacks will make APTs even harder to detect, as adversaries can generate tailored attacks, evade traditional detection mechanisms, and quickly exploit vulnerabilities. FSIs serve as custodians of sensitive data, high-value transactions, and critical infrastructure, making them prime targets for APTs.

APTs often aim to:

• Exfiltrate data: Steal sensitive customer information, intellectual property, or financial data.
• Disrupt operations: Introduce financial instability or undermine trust in institutions.
• Commit fraud: Exploit stolen data or access for large-scale financial gain.

Why It’s Important to Security Leaders

For security leaders in the financial sector, APTs represent an existential threat. These attacks can lead to:

1. Significant financial losses through fraud or ransomware demands.
2. Regulatory penalties, particularly under stricter compliance requirements like NIS2, DORA, or SEC T+1 ruling.
3. Reputational damage, eroding customer trust in financial services.
4. Operational downtime, potentially disrupting critical financial markets.

With attackers staying undetected for months or even years, the implications of delayed detection can be very serious. Security leaders should adopt proactive, rather than reactive, security strategies to mitigate these risks.

Solutions

1. Unified Security Platforms

These modern platforms integrate proactive security technologies such as continuous pentesting and attack surface management, along with a common data model, to provide real-time insights into emerging threats while correlating test results across methodology and the attack surface. These platforms quickly aggregate data to provide actionable data enabling FSIs to anticipate and accelerate remediation of risks proactively.

How They Help:

• Aggregate test findings from multiple technologies and multiple sources (Network, applications, APIs, cloud, Dark Web, and more).
• Identify indicators of compromise (IOCs) associated with APT groups.
• Provide actionable intelligence tailored to the financial sector.

Examples: PTaaS, Attack Surface Management, automated penetration and red teaming.

Key Tip: A unified platform that integrates multiple technologies breaks down silos of individual security testing. A common data model aggregates and correlates findings for accelerated vulnerability prioritization and remediation. This trifecta approach – unified platform, technology integration, and common data model – reduces costs associated with time and resources as well as investments in multiple tools that often go unused or fail to prioritize vulnerabilities effectively.

2. Proactive Security Solutions

In addition to the above, security leaders can strengthen defenses against APTs with the following proactive security tools:

• Human-led and Automated Penetration Testing: Simulate APT-like attacks to identify and mitigate vulnerabilities before real attackers exploit them. This hybrid approach ensures that any nuances can be investigated by human experts. Automation allows for the continuous monitoring of the attack surface to ensure remediation efforts are effective and that any new vulnerabilities are assessed immediately.
• External Attack Surface Management (EASM): Automated attack surface discovery for external-facing assets is essential to identify and prioritize vulnerable assets and, including user exposure on the Dark Web or Shadow IT for unauthorized device usage and/or user access.

By adopting these layered solutions, FSIs can significantly reduce the likelihood of falling victim to APTs while minimizing the potential damage if attackers gain a foothold.

Challenge #2: Ransomware-as-a- Service (RaaS)

Why It’s A Challenge

Ransomware-as-a-Service (RaaS) has transformed ransomware attacks from a niche activity into a thriving underground economy. This business model allows cybercriminals, even those with minimal technical expertise, to purchase or rent pre-built ransomware kits from experienced developers.

For FSIs, the challenges of RaaS are particularly severe:

• Targeted Attacks: RaaS affiliates often tailor attacks to exploit industry-specific weaknesses, such as third-party vendors or outdated software for APIs in financial systems.
• Critical Operations: FSIs handle time-sensitive transactions, making downtime extremely costly and pressuring victims to pay ransoms.
• Supply Chain Vulnerabilities: With interconnected ecosystems of vendors, APIs are used to exchange data and make transactions to/from third-party services, whereby attackers exploit weak links to breach larger targets.
• APIs: Application Programming Interfaces (APIs) are protocols that allow different software applications to communicate with each other, providing a pathway to access information and services from one application to another. Broken authentication, excessive data exposure, or injection attacks, allow attackers to access sensitive financial data or manipulate transactions.

In 2025, advancements in AI will make RaaS campaigns even more dangerous enabling attackers to conduct highly targeted and automated attacks.

Why It’s Important to Security Leaders

For security teams, RaaS is more than just a technical issue – it’s a business risk with far-reaching consequences:

• Operational Disruption: A successful ransomware attack can halt critical services, including common daily financial transactions, undermining trust in financial systems and a loss of loyal customers.
• Financial Loss: Ransom payments and recovery costs have and can reach millions, if not hundreds of millions of dollars.
• Regulatory Non-Compliance: Data breaches and service disruptions may lead to severe fines under frameworks like DORA, NIS2, and PCI DSS.

Proactively addressing RaaS threats is critical to maintaining business continuity and compliance while protecting customer trust.

Solutions

1. Backup Solutions

Regular and reliable backups are the cornerstone of ransomware resilience.

How They Help:

• Enables rapid recovery of encrypted or deleted files without succumbing to ransom demands.
• Offline or air-gapped backups are immune to ransomware that spreads across connected systems.
• Reduces downtime by restoring systems and services quickly.

Best Practices:

• Follow the 3-2-1 rule: Keep three copies of data, on two different types of media, with one copy stored offline.
• Introduce continuous automated security testing in real-time to identify vulnerabilities on an ongoing basis for quick mitigation.

Example Tools: Robust backup recovery capabilities, continuous penetration testing and scanning.

Key Tip: Incorporate immutable backups to protect against ransomware strains designed to target backup systems.

2. Network Segmentation

Network segmentation limits ransomware’s ability to spread laterally, protecting critical systems.

How It Helps:

• Creates isolated zones within the network, ensuring that an infection in one area cannot propagate to others.
• Protects sensitive systems, such as payment gateways or customer data repositories, by restricting access.
• Provides greater visibility into traffic patterns, making it easier to detect anomalies.

Implementation Strategies:

• Use VLANs (Virtual LANs) to separate different types of traffic.
• Employ micro-segmentation tools for granular access control.
• Implement strict access control policies and limit privileges to reduce exposure.

Key Tip: Combine segmentation with Zero Trust principles to ensure continuous verification of users and devices across zones.

Enhancing the Solutions:

To bolster resilience against RaaS, security leaders can also consider Red Teaming exercises to update and enhance incident response playbooks, and proactive automated security tools that provide protection continuously by identifying threats before an attacker does.

Challenge #3: Third-Party and Supply Chain Risks

Why It’s A Challenge

Financial institutions increasingly depend on third-party vendors for critical operations, cloud services, software, and infrastructure. This reliance creates a vast and complex attack surface, as vulnerabilities in even one vendor can provide attackers with a foothold into the institution’s network.

Supply chain attacks, such as the third-party software breaches of Finastra and Patelco Credit Union in 2024, have demonstrated the potential for widespread disruption, financial losses, and reputational damage. In these attacks, adversaries compromise a trusted third-party provider to inject malicious code or exploit access privileges, propagating the threat across multiple organizations.

Key risks include:

• Indirect Access: Cybercriminals exploit weak vendor security controls to access financial institutions’ systems.
• Limited Visibility: Many FSIs lack insight into the security practices and vulnerabilities of their vendors.
• Regulatory Pressures: Frameworks like NIS2 and DORA now require financial institutions to manage third-party risks comprehensively, adding to existing compliance challenges.
• Increased Frequency: The growing complexity of financial ecosystems, coupled with advancements in supply chain attack methods, will likely lead to a surge in such breaches in 2025.

Why It’s Important to Security Leaders

For security teams in the financial sector, third-party and supply chain risks pose significant challenges:

• Data Exposure: Compromised vendors can expose sensitive customer data or transaction details.
• Vendor Disruption: An attack on a critical vendor can halt essential services, affecting customers and financial stability.
• Cascading Effects: A single vendor breach can impact multiple institutions, amplifying the scope and impact of the attack.
• Compliance Requirements: Regulatory mandates demand rigorous vendor risk assessments, audits, and incident response plans, increasing the burden on security teams.

Proactively addressing supply chain risks is essential to maintain operational resilience and regulatory compliance while safeguarding the institution and customer data.

Solutions

1. Vendor Risk Management Programs

These types of vendor risk programs streamline the security testing, assessment, and monitoring of third-party security practices.

How They Help:

• Automate the collection and analysis of vendor security data, including compliance with frameworks like ISO 27001 and SOC 2.
• Identify vulnerabilities, misconfigurations, or non-compliance issues in third-party systems.

Provide evidence-based security testing, proof of concepts, and risk scores to prioritize high-risk vendors for additional scrutiny or mitigation.

Examples: A unified data-driven analytics platform that consolidates technologies, employs a common data model, and analyzes real-time vulnerability risks to maintain an updated inventory of third-party risks and relationships.

Key Tip: Unified platforms that integrate technologies that provide governance, risk and compliance tools for holistic risk management.

2. Continuous Security Testing & Monitoring

Automated penetration testing and scanning can provide continuous, real-time visibility into the attack surface and security posture of third-party vendors.

How It Helps

• Detects anomalous behavior in vendor activities, such as unexpected data access or system modifications.
• Identifies breaches or vulnerabilities in third-party systems before they impact the financial institution.
• Provides actionable intelligences to prioritize and remediate risks effectively.

Implementation Strategies:

• Conduct automated pentesting and scans of vendor systems to identify vulnerabilities or unauthorized changes.
• Use tools to monitor traffic and vendor interactions.

Key Tip: Extend automation and monitoring to fourth-party relationships (vendors’ vendors) for a more comprehensive approach.

3. Contractual Obligations

Strong contracts are critical for enforcing vendor compliance with cybersecurity standards and ensuring accountability.

How It Helps

• Mandates adherence to security best practices, such as encryption, access controls, and regular vulnerability assessments.
• Provides legal recourse and recovery mechanisms in the event of a breach.
• Facilitates regular security audits and assessments to validate vendor compliance.

Best Practices:

• Include clauses requiring vendors to notify you promptly of security incidents.
• Specify requirements for data protection, including regular penetration testing and vulnerability scans, encryption, and security storage.
• Establish clear procedures for breach remediation and liability.

Key Tip: Leverage legal counsel and cybersecurity experts when drafting vendor contracts to ensure comprehensive coverage and compliance of security requirements. Be explicit in the type of regular security testing they must conduct and reporting expectations.

Challenge #4: API Security Vulnerabilities

Why It’s A Challenge

APIs are the backbone of financial institutions’ digital services, enabling integrations with third-party applications, seamless customer experience, and innovative fintech solutions. However, their ubiquity and complexity create significant security challenges, making APIs a prime target for attackers.

Key risks include:

• Data Exposure: Misconfigured or improperly secured APIs can inadvertently expose sensitive financial data such as customer information, transaction details, or payment credentials.
• Account Takeovers and Fraud: Weak authentication mechanisms in APIs can allow attackers to exploit session tokens, hijack accounts, and commit fraud.
• Injection Attacks: Poor input validation in APIs leaves them vulnerable to injection attacks, such as SQL or command injection, leading to data exfiltration or unauthorized system access.
• Increased Complexity: The rapid adoption of microservices and the proliferation of APIs across financial ecosystems increase the attack surface exponentially.
• API Regulations: Frameworks like PSD2 and NIS2 require FSIs to secure their APIs to avoid non-compliance fines and protect customer trust.

With continued growing reliance on APIs, attackers are likely to target API vulnerabilities at scale in 2025, leveraging AI to identify and exploit weak points faster than ever.

Why It’s Important to Security Leaders

API vulnerabilities represent a significant risk for financial institutions:

• Revenue Impact: Exploited APIs can lead to service downtime or interruptions, directly impacting operations and revenue streams.
• Investor Loss: Publicized API breaches tarnish an institution’s reputation leading to potential financial loss of investors, notwithstanding customer loss.
• Regulatory Scrutiny: Security lapses in APIs can result in non-compliance with data protection regulations, attracting hefty fines and legal consequences.
• Customer Trust: Data breaches resulting from insecure APIs erode customer confidence in the institution’s ability to protect their financial assets.

Addressing API security proactively is crucial to maintaining operational integrity, compliance, and data safety.

Solutions

1. API Security Platforms

Modern unified platforms that integrate security tools that address API endpoint weaknesses will provide end-to-end visibility and protection of APIs by identifying vulnerabilities in real-time for accelerated mitigation.

How They Help

• Detect anomalous API usage patterns, such as credential stuffing or unusually high request volumes, indicative of attacks.
• Prevent data exfiltration by identifying and blocking/mitigating unauthorized access attempts.
• Provide visibility into shadow APIs (undocumented or forgotten APIs), which pose significant risks if no mitigation action is taken.

Examples: There are limited security providers that truly specialize in API discovery and vulnerability identification, ensuring comprehensive coverage across the API lifecycle.

Key Tip: Integrate unified platforms that enable API security testing for a centralized approach to your API security strategy.

2. API Penetration Testing

Automated continuous penetration testing ensures that APIs are robust against evolving threats.

How It Helps

• Identifies vulnerabilities such as insecure API endpoints, improper input validation, or broken access controls.
• Simulates real-world attack scenarios to test the API’s resilience against exploitation.
• Ensures compliance with regulatory requirements for secure API development and deployment.

Key Tip: Use OWASP API Security Top 10 as a framework to guide API penetration testing efforts and prioritize remediation.

3. Authentication Mechanisms

Robust authentication is critical to securing API endpoints against unauthorized access.

How It Helps

• Ensures that only authorized users and systems can interact with APIs, reducing the risk of account takeovers.
• Provides granular control over API permissions, minimizing the potential damage from a compromised account.
• Prevents interception of API communications through encryption and secure token handling.

Best Practices

• Implement OAuth 2.0 for secure, delegated access, ensuring that credentials are never exposed.
• Use mutual TLS (mTLS) to authenticate both the client and server, providing an additional layer of security.
• Employ JWT (JSON Web Tokens) for stateless and secure user authentication in API interactions.

Key Tip: Rotate API keys and access tokens regularly to minimize the risk of exposure and misuse.

Challenge #5: Regulatory Compliance

Why It’s A Challenge

The financial sector operates under intense regulatory scrutiny due to its critical role in global economies and its possession of sensitive data. Governments and regulatory bodies worldwide are beginning to share frameworks and mandate regulations worldwide as they continue to introduce new cybersecurity standards like they did in 2024 with the NIS2 Directive, SEC T+1 Ruling, and DORA.

Key risks include:

• Complexity of Regulations: Financial institutions must navigate overlapping regulations like EU’s NIS2, DORA, and the SEC’s updated cybersecurity rules, each with distinct requirements for reporting risk management, and incident response.
• Evolving Standards: Compliance requirements evolve rapidly in response to emerging threats, forcing FSIs to continuously update policies, processes, and technologies.
• Heavy Penalties for Non-Compliance: Regulatory bodies impose significant fines and penalties for non-compliance, which can result in financial losses, for customers, investors, and the institution.
• Resource Intensive: Achieving and maintaining compliance demands dedicated resources, including skilled personnel, proactive security tools, and a robust governance framework.
• Cross-Border Challenges: Global FSIs must address varying regulatory requirements across jurisdictions, complicating compliance efforts.

In 2025, as regulators focus on improving resilience and incident reporting, financial institutions will face increasing pressure to demonstrate robust cybersecurity practices.

Why It’s Important to Security Leaders

For security leaders in the financial sector, regulatory compliance is a critical priority because:

1. Profitability Losses: Fines and sanctions for non-compliance are real and we have seen hefty fines levied against both small and large financial institutions. These fines can amount to millions or even hundreds of millions of dollars, directly affecting profitability and investors.
2. Critical Operations: Operational continuity ensures compliance and resilience against cyber threats and reduces the likelihood of disruptions to critical operations.
3. Data Security: Demonstrating compliance reassures customers that their data is secure and the FSI operates ethically.
4. Regulator Relationships: Proactive security testing and compliance fosters positive relationships with regulators, reducing scrutiny and easing audit processes.

Solutions

1. Governance, Risk, and Compliance (GRC) Tools

GRC tools that conduct ongoing security testing, and a unified platform can provide centralized management of regulatory compliance efforts, ensuring alignment with evolving standards.

How They Help

• Automate the tracking of regulatory changes and maps them to existing policies and controls.
• Unified platforms provide dashboard analytics of testing finds and reporting to monitor and gauge compliance gaps, or potential system weaknesses, and prioritize remediation efforts.
• Centralize risk management, audit tracking, and incident reporting, improving operational efficiency.

Examples: Unified platforms have a wide array of proactive security technologies as well as integrations that support and enable FSIs to streamline compliance processes and maintain up-to-date records for audits.

Key Tip: Choose a unified platform with integrations to security tools like SIEMs and SOARs for compliance visibility, remediation, and monitoring.

2. Automated Reporting

Automated reporting tools simplify the process of generating compliance documentation for auditors and regulators.

How They Help

• Reduce manual effort in preparing detailed compliance reports, saving time and resources.
• Unified platforms that consolidate different security testing findings can report on prioritization and remediation across the entire attack surface.
• Ensures accuracy and consistency in reporting by pulling high-fidelity data (especially if a common data model is used) from security tools and systems.
• Facilitates real-time reporting to regulators in case of incidents, as mandated by frameworks like NIS2 and SEC rules.

Best Practices:

• Modern unified platform that integrate reporting tools to ensure compliance data is always up to date.
• Use technologies like Red Team exercises to help generate incident response reports that align with regulatory requirements.
• Regulatory mapping creates detailed mapping of applicable requirements to internal controls, identifying overlaps to reduce redundancies.
• Develop incident readiness plans and regularly test these plans aligned with regulatory requirements for notification timelines and reporting formats.

Key Tip: Automate the tracking of compliance metrics through a unified data-driven platform to include risk assessments, and incident response times to meet audit expectations seamlessly.

By leveraging proactive security testing and technologies, financial institutions can address regulatory challenges in advance not after an audit fails to ensure adherence to cybersecurity standards.

Conclusion

As financial institutions adapt to new regulatory requirements and a fast-evolving digital landscape in 2025, cybersecurity will remain a critical priority. Challenges such as APTs, RaaS, and supply chain risks require proactive security strategies and tools to mitigate risks. By leveraging cutting-edge technologies and modern unified platforms that integrate these technologies, FSIs can safeguard their assets, data, and reputation against persistent threats. Remining vigilant and adaptive will be key to thriving in this ever-changing environment.