The autofinance industry has become an attractive target for cybercriminals. Due to the vast amounts of personal and financial information involved in the process, it has witnessed a surge in fraudulent activity lately.
Cybersecurity Ventures reports global spending on cybersecurity exceeded $1 trillion from 2017 to 2021, and the expansion seems to last. Financial institutions must understand the scale of the issue and prevent threats. Let’s examine statistics and best practices of how to fight vulnerabilities and risks faced by auto lending companies.
Vulnerabilities in Digital Processes
The digitalization of auto lending brings numerous advantages. Faster loan approvals and seamless customer experiences make it worth investing in. However, these conveniences come with inherent vulnerabilities.
- The 2020 Data Breach Investigations Report by Verizon has shown the financial sector accounted for 448 data breaches, with 27 percent of them involving the theft of sensitive customer information.
- The Identity Theft Resource Center reported that in 2020, there were 1,108 data breaches in the financial sector, resulting in the exposure of over 117 million sensitive records.
- The Cost of a Data Breach Report 2020 by IBM found that the average cost of a data breach in the financial industry was approximately $5.86 million.
Weaknesses in online loan application systems, digital identity verification processes, and e-signature platforms can be exploited by cybercriminals to gain unauthorized access to sensitive customer data or manipulate loan terms.
Inadequate Data Protection
The sheer volume and sensitivity of customer data make them a prime target for data breaches. It’s crucial to ensure the safety of social security numbers, credit scores, and banking details processed by autofinance businesses. Unauthorized access to personally identifiable information (PII) leads to identity theft, financial fraud, and reputational damage.
- The General Data Protection Regulation (GDPR) in the European Union imposes significant obligations on organizations handling personal data. Potential fines of up to €20 million or 4 percent of global annual turnover for non-compliance.
- The California Consumer Privacy Act (CCPA) and the recently enacted California Privacy Rights Act (CPRA) introduce stringent data protection requirements. Consumers are allowed to sue businesses for data breaches resulting in potentially high financial penalties.
Third-Party Risks
Auto lenders often depend on third-party vendors and partners to handle various aspects of their operations. This exposes them to additional cybersecurity risks. One particular concern arises from the potential for inadequately secured connections or vulnerabilities in the systems of these external entities, as they can be exploited by cyber attackers as entry points.
It is crucial for auto lenders to thoroughly assess the reputation and security measures of third parties. Auto financials can take to evaluate the reputation of a vendor following these steps.
- Conduct thorough research on the partner in question. Look for information about their track record, experience, and reputation within the industry. Check online reviews, testimonials, and ratings from other customers for valuable insights.
- Ensure the vendor adheres to relevant regulations and industry standards. Ask about certifications or compliance frameworks, such as ISO 27001 for information security management.
- Request comprehensive security assessments. This may involve reviewing their security policies, procedures, and technical safeguards. Verify if they undergo regular security audits or penetration testing to identify and mitigate potential vulnerabilities.
- Inquire about the partner’s incident response plan and their ability to handle cybersecurity incidents. Evaluate their preparedness in terms of incident detection, response time, communication protocols, and data breach notification procedures.
- Ensure that the vendor’s contractual agreements address cybersecurity and data protection adequately. Look for clauses that outline the vendor’s responsibilities for safeguarding data, including breach notification requirements, liability provisions, and data handling practices.
Regulatory Compliance and Legal Implications
Autofinance lenders encounter considerable obstacles when it comes to compliance. Failing to comply can lead to harsh penalties, legal repercussions, and damage to their reputation. Some general strategies can help autofinance lenders tackle these challenges.
- Regularly monitor updates from regulatory bodies and industry associations
- Establish clear and comprehensive policies and procedures that outline compliance standards and protocols
- Perform periodic internal audits to assess compliance adherence and identify any gaps
- Provide regular training and education programs for employees
- Leverage technology solutions to streamline compliance processes
- Seek guidance from legal counsel or compliance experts
- Foster a culture of compliance throughout the organization
- Collaborate with industry partners and associations to share best practices
Must-Have Cybersecurity Technologies for Autofinance
Auto lending institutions must adopt a range of technologies that provide robust security measures and data protection.
Encryption
Lenders should employ strong encryption techniques to protect customer data both in transit and at rest. Encryption ensures that even if data is intercepted, it remains unintelligible to unauthorized parties, thereby reducing the risk of data breaches.
- The Ponemon Institute’s 2020 Cost of Data Breach Study found that organizations that extensively used encryption experienced an average cost of a data breach that was $360,000 lower compared to those that did not encrypt sensitive data.
Multi-factor authentication (MFA)
Implementing MFA adds an additional layer of security to the authentication process. Require users to provide multiple pieces of evidence, such as a password, a fingerprint scan, or a unique code from a mobile device. This will significantly reduce the risk of unauthorized access.
- According to Microsoft, enabling MFA can block over 99.9% of account compromise attacks.
- A study by Google revealed that simply adding a recovery phone number to an account reduced the likelihood of account hijacking by 66%.
Secure coding practices for auto lending software
Pick the auto loan software vendor, that follows secure coding practices to develop robust and resilient applications. Input validation, secure session management, and protection against common vulnerabilities like cross-site scripting and SQL injection can minimize the likelihood of successful cyber attacks.
- The National Institute of Standards and Technology (NIST) estimates that 70-90% of security vulnerabilities are caused by coding errors.
- The OWASP Top 10 list of web application vulnerabilities, which includes common coding mistakes, has been widely referenced by the industry as a guide to secure development practices.
Continuous monitoring and threat intelligence
Lenders are enabled to proactively detect and respond to cyber threats via advanced monitoring tools. Leveraging threat intelligence feeds allows for identifying suspicious activities or anomalies that may indicate a potential breach, enabling timely mitigation measures.
To sum up
Autofinance lenders can not only protect customer data and maintain regulatory compliance but also foster trust and loyalty among their clientele. The easiest way to safeguard your business from cyber-attacks is to adopt robust auto loan management software from a reliable provider. Investing in cybersecurity is an investment in the future of auto lending: it secures the foundation of the industry and enables its sustained growth in the digital era.
