Why the Financial Services Industry Faces Heightened Cyber Security Risks
The UK financial sector has long been an attractive target for cyber criminals, but recent data suggests the threat landscape is intensifying at an alarming rate. As we progress through 2025, financial institutions face unprecedented challenges in protecting their systems, data, and ultimately, their customers. This blog examines why UK financial services are particularly vulnerable to cyber breaches and explores the evolving threat landscape confronting this critical sector.
The Escalating Threat Landscape
Recent statistics paint a concerning picture of the cyber threat facing UK financial institutions. According to Orange Cyberdefense, over half (58%) of large UK financial services firms suffered at least one third-party supply chain attack in 2024, with nearly a quarter (23%) being hit three or more times by such attacks. This represents a significant vulnerability that extends beyond the organisations’ direct control.
The financial services industry continues to be disproportionately targeted compared to other sectors. Research reveals that over a quarter of cyber-attacks in the UK in 2022 were aimed specifically at the financial services and insurance industry. This targeting is not coincidental but stems from the lucrative nature of financial data and the critical role these institutions play in maintaining economic stability.
A survey conducted by the Bank of England in 2023 found that an overwhelming 80% of participants—which included banks, insurers, and asset managers—cited cyber-attacks as one of the top five risks to UK financial systems. This concern ranked significantly higher than other major threats such as geopolitical tensions (66%) or inflation (57%). The consensus among financial leaders is clear: cyber security now represents their most pressing operational risk.
Why Financial Services Are Uniquely Vulnerable
Several factors contribute to the financial sector’s heightened vulnerability to cyber-attacks. As one of the UK’s 13 designated national infrastructure sectors, finance is essential to keeping day-to-day life operating smoothly for all citizens. This critical status makes it an appealing target for threat actors seeking maximum impact.
The industry faces particular challenges due to its structure and operations. Financial firms handle enormous amounts of money and sensitive data, making them attractive targets for cyber attackers, especially those deploying ransomware. The nature of their business means that even brief periods of downtime can have widespread economic consequences.
Open Banking reforms have introduced additional vulnerabilities. The significant increase in APIs throughout the financial services industry has created risks from “shadow APIs” – untracked interfaces that remain unmonitored and vulnerable to exploitation. Cybercriminals can potentially manipulate these to access private accounts, sensitive information, alter user data, or change credentials. The scale of unmonitored API traffic is substantially higher in financial services than in other industries, suggesting that Open Banking standards may have inadvertently created an industry-wide security threat.
Perhaps most concerning is the industry’s approach to third-party risk management. Despite the clear dangers, close to half (44%) of UK financial institutions admitted they only assess third-party risk during the initial supplier onboarding stage. A similar proportion (41%) perform periodic risk assessments, while just 14% continuously assess risk and use dedicated third-party risk management tools. This inadequate oversight creates significant blind spots in security postures.
The Financial Impact of Cyber Breaches
When cyber-attacks do occur, the financial consequences are severe. The average cost of a data breach for a UK business in financial services was 5.3 million pounds, significantly higher than the cross-industry average of 3.4 million pounds. This disparity highlights the particularly damaging nature of breaches in this sector.
Looking at the broader picture, cybercrime cost UK businesses an average of £4,200 in 2022, with the total cost to the UK economy estimated at £27 billion per year. As we move through 2025, these figures are projected to increase. According to Cybersecurity Ventures, global cybercrime costs will rise by 15% annually over the next five years.
The British Library’s recent experience illustrates the prolonged impact cyber-attacks can have on operations. Following a cyber-attack in October 2023, the institution reported directly attributable additional costs of £600,000 by March 2024, with recovery efforts still ongoing a year later. For financial institutions, where operational continuity is paramount, such extended recovery periods would prove catastrophic.
Evolving Threat Types and Vectors
Ransomware remains one of the most significant threats facing the UK financial sector. Between September 2023 and August 2024, the National Cyber Security Centre (NCSC) managed 430 cyber incidents, of which 13 were ransomware attacks deemed to be nationally significant, posing serious threats to essential services and the wider economy.
AI-driven cyber-attacks represent an emerging and particularly concerning development. While financial institutions use AI for threat detection, cybercriminals have leveraged machine learning to outmanoeuvre traditional security measures. Checkpoint Research predicts a surge in AI-driven cyberattacks by 2025, with these attacks expected to be more sophisticated, personalised, and more complex to detect.
The skills gap in cyber security represents another vulnerability. Across UK central government, one in three cyber security roles was either vacant or filled by temporary staff in 2023-24, with several departments’ cyber security teams experiencing vacancy rates exceeding 50%. This human resource shortfall is likely mirrored in the financial sector, creating additional exposure to threats.
Regulatory Response and Industry Adaptation
In response to these escalating threats, both regulators and financial institutions are taking action. The UK government launched industry-leading proposals in January 2025 to protect against cybercriminals and ransomware. These include proposed legislation to counter ransomware and protect critical national infrastructure, with specific measures such as a targeted ban on ransomware payments for public sector bodies and operators of critical national infrastructure.
The Financial Conduct Authority (FCA) published a consultation paper in December 2024 on operational incident and third-party reporting, which aims to reduce reporting complexities for firms while aligning with international frameworks such as the EU’s Digital Operational Resilience Act. These regulatory developments signal an increased focus on standardising and strengthening the sector’s cyber resilience.
Financial institutions themselves are substantially increasing investment in cyber security. According to Gartner, financial institutions are expected to increase cybersecurity spending by $212 billion by 2025 in response to stricter regulatory requirements and growing threats. UK organisations are anticipating even more aggressive budget growth, with research from Infosecurity Europe projecting an average cybersecurity budget increase of 31% in 2025, significantly exceeding the global forecast of 15%.
Conclusion
The UK financial services sector finds itself at a critical juncture. As cyber threats continue to evolve in sophistication and frequency, financial institutions must strengthen their defences while addressing fundamental vulnerabilities in their systems and processes. The sector’s status as critical national infrastructure, combined with the wealth of sensitive data it manages, makes it an irresistible target for cyber criminals.
The statistics are unambiguous: financial services organisations face disproportionate targeting, suffer higher costs when breached, and must navigate unique vulnerabilities such as those created by Open Banking and third-party dependencies. With 74% of UK financial executives identifying cyber-attacks as their greatest risk factor, the industry clearly recognises the scale of the challenge.
As we progress through 2025, the financial sector’s response to these challenges will determine not only its own resilience but also the stability of the broader UK economy. The combination of regulatory evolution, increased investment, and improved risk management practices offers a pathway forward—but the race between defenders and attackers shows no sign of slowing.
If you would like to discuss any of the topics covered in the above article please get in touch with our experienced team – info@somniacsecurity.com
Sources:
https://www.cliffordchance.com/briefings/2023/11/on-the-cyber-attack-how-are-the-fca-and-pra-regulating-cyber-risk.html
https://cfotech.co.uk/story/uk-cybersecurity-budgets-to-rise-by-over-30-in-2025
https://thesecuritycompany.com/uploads/images/TSC-Cyber-security-in-the-UK-financial-industry.pdf
https://aag-it.com/the-latest-cyber-crime-statistics/
https://www.infosecurity-magazine.com/news/third-party-risk-failures-uk/
https://www.howdengroup.com/uk-en/cyber-security-gap-report-2025
https://www.kelacyber.com/resources/research/2021-2022-uk-financial-sector-threat-landscape/
https://www.nao.org.uk/wp-content/uploads/2025/01/government-cyber-resilience-summary.pdf
https://texaport.co.uk/blog/the-cost-of-data-breaches-financial-sector
https://www.fintechfutures.com/2024/11/will-2025-be-the-turning-point-for-cybersecurity-in-finance/
https://www.nao.org.uk/press-releases/cyber-threat-to-uk-government-is-severe-and-advancing-quickly-spending-watchdog-finds/
https://www.twenty-four.it/services/cyber-security-services/cyber-crime-prevention/cybercrime-statistics-uk/
https://tenintel.com/ransomware-attacks-uk-government-action/
https://www.osborneclarke.com/insights/Regulatory-Outlook-February-2025-cyber-security
https://www.bankofengland.co.uk/financial-stability/operational-resilience-of-the-financial-sector/2024-cbest-thematic
https://professional.ft.com/en-gb/blog/cyber-security-especially-data-breaches-dominate-businesses-risk-outlook/
https://www.ncsc.gov.uk/section/keep-up-to-date/threat-reports?q=&defaultTypes=report&sort=date%2Bdesc
https://perspectives.bclplaw.com/emerging-themes/creating-connections/technology/cybersecurity-risks-for-financial-services-firms/
https://www.cobalt.io/blog/top-cybersecurity-statistics-2025
https://www.ukfinance.org.uk/news-and-insight/blog/stay-secure-in-2024
https://www.fca.org.uk/publication/documents/cyber-security-infographic.pdf
https://securitybrief.co.uk/story/uk-technology-heads-prioritise-cybersecurity-in-2025
https://www.ncsc.gov.uk/files/NCSC_Annual_Review_2024.pdf
https://www.gov.uk/government/statistics/cyber-security-breaches-survey-2024/cyber-security-breaches-survey-2024
https://datamatters.sidley.com/2025/01/27/data-privacy-and-cybersecurity-outlook-for-2025-what-financial-services-firms-need-to-know/
https://www.gov.uk/government/statistics/announcements/cyber-security-breaches-survey-2025
https://www.gov.uk/government/publications/cyber-security-breaches-survey
https://www.upguard.com/blog/biggest-data-breaches-uk
https://ico.org.uk/action-weve-taken/data-security-incident-trends/
