Data Loss Prevention in the Financial Industry: Risks, Costs & Best Practices

If you’re in finance, losing data can mean more than downtime—it can cost millions, damage customer trust, and trigger strict regulatory fines. In 2025, breach costs remain among the highest of any industry, compliance frameworks like GDPR, DORA, and PCI DSS 4.0 are in force, and attackers are using AI to make intrusions harder to detect.

This article explains the main causes of data loss in the financial services industry, shares the latest 2025 breach statistics, outlines the key regulations financial institutions must follow, and gives you practical steps to protect sensitive financial data, stay compliant, and maintain customer trust.

The impact of data loss on financial institutions

IBM’s Cost of a Data Breach Report 2025 puts the average breach in financial services at USD 5.56 million. That’s lower than healthcare, which still tops the list at USD 7.42 million, but it keeps finance firmly among the most expensive industries for breaches. For context, the global average across all sectors is USD 4.44 million.

4.4M The global average cost of a data breach, in USD, a 9% decrease over last year—driven by faster identification and containment.

97% Share of organizations that reported an AI-related security incident and lacked proper AI access controls.

63% Share of organizations that lacked AI governance policies to manage AI or prevent the proliferation of shadow AI.

1.9M Cost savings, in USD, from extensive use of AI in security, compared to organizations that didn’t use these solutions.

Source: IBM  

Costs aren’t dropping in finance the way they are in other industries, and that’s telling. New threats, including AI-driven phishing and deepfakes, are pushing costs higher. Financial institutions are sitting on data that’s both valuable to criminals and tightly regulated by governments. That combination makes every incident more expensive to resolve.

And money isn’t the only hit. More than half of organizations report lasting reputational damage after a data breach. In financial services—where trust is the entire business model—that can be worse than the technical breach itself. A single high-profile incident can mean clients moving their accounts elsewhere, investors losing confidence, and regulators tightening oversight.

Operationally, the ripple effect is immediate:

• Staff productivity tanks while systems are restored. 
• Downtime drives up costs by the hour. 
• IT teams drop strategic work to focus on crisis management. 
• Customer service teams drown in complaints and account resets. 
• Regulators can—and often do—step in with fines. 

That’s why data security in finance isn’t just an IT concern—it’s a boardroom issue. The risks are immediate, the costs are rising, and the damage to trust can take years to undo.

Consider this scenario: An employee clicks a link in what looks like a routine supplier invoice. The email was AI-generated, so it’s convincing enough to slip past filters and fool even cautious staff. Within hours, attackers have malware inside your network and are moving laterally.

Now you’re not just dealing with technical cleanup—you’re looking at notifying customers, regulators, investors, and possibly law enforcement. On top of that, you’ll face the downtime costs, reputational fallout, and in some cases, mandatory disclosure under laws like GDPR or NIS2.

 

Reputation takes longer to rebuild than servers. Even when the lost data is restored, you’ll still be working to win back customers, reassure partners, and prove to regulators that you’ve got control of your systems.

The good news: most of these incidents can be prevented. If you understand the most common causes of data loss—and address them before they happen—you can avoid the majority of the pain altogether.

Main causes of data loss in the financial sector

Data loss in finance doesn’t have a single root cause. It can be as simple as an employee emailing the wrong file or as complex as a ransomware group using AI-generated phishing to break in. Some risks are inevitable—hardware failure, storms, or natural disasters. Others are entirely preventable with the right policies and controls.

Here are the leading culprits financial institutions face in 2025:

Cyber threats: phishing, ransomware, and device infection

Cyberattacks are the most expensive cause of data loss. The 2025 DBIR shows:

• Phishing and other social engineering attacks remain the most common initial access vector, involved in 16% of breaches. IBM’s 2025 report adds that 16% of data breaches involved attackers using AI tools, most often for phishing or deepfake impersonation attacks, with costs averaging nearly USD 4.8 million.  
• Ransomware was present in 44% of breaches globally. In finance, attackers are more likely to demand ransom but also to publicize stolen data if payment is refused, which raises costs further. 
• Credential abuse drives 22% of breaches. Attackers are “logging in” rather than “breaking in,” exploiting stolen or weak credentials to move undetected. 
• Exploited vulnerabilities are on the rise, now responsible for ~20% of breaches—up 34% year over year. Many incidents start with unpatched edge devices like VPNs or firewalls. 
• Supply chain compromises have doubled, now involved in nearly 30% of financial sector breaches, making vendor risk management a top priority.  

Insider threats

Employees and contractors can pose risks not only through mistakes but also through deliberate misuse of data. While less common than phishing or ransomware, these incidents are far more expensive: IBM’s 2025 report found malicious insider attacks cost an average of USD 4.92M.

Because insiders already have legitimate access, their actions are harder to spot until real damage is done. Here are 7 insider risk management strategies that can help reduce the risk.

 
Human error as a cause of data loss

The human element remains the most persistent weak point. Verizon’s 2025 DBIR found that 60% of breaches involve a human factor—whether it’s a misconfigured database, a wrong email recipient, or a lapse in judgment during a phishing attempt. In finance, even small mistakes can expose sensitive personal data or trigger mandatory regulatory reporting.

Unmanaged devices / Remote work

Verizon’s 2025 report found that 30–46% of compromised systems with corporate logins were non-managed devices. These are laptops, smartphones, or personal computers employees use for work but that aren’t enrolled in company security controls. Without monitoring or enforced updates, they create blind spots that attackers can easily exploit—strict device management and BYOD policies are important for any company that allow employees to work from their own devices.

Hardware failure and system outages

Not all incidents are caused by hackers. Hardware failures—server crashes, power surges, or aging equipment—still cause outages every week. In hybrid setups, a failed on-premise system can cascade into cloud environments if disaster recovery plans aren’t in place.

Data migration errors and corruption

Moving data between systems, or from on-premises servers to the cloud, is another common failure point. During financial sector mergers and acquisitions, rushed data migrations often lead to corruption, accidental exposure, or compliance violations. With more workloads in the cloud, misconfigurations during migration have become a leading cause of breaches.

Natural disasters and physical risks to data

Floods, fires, and severe storms are still a threat to physical infrastructure. With climate risks increasing, regulators now expect financial institutions to maintain geo-redundant backups so a single event doesn’t knock out your entire operation. 

Some of these risks are unavoidable. But the majority—especially phishing, ransomware, credential abuse, and shadow IT—are preventable with the right combination of governance, employee training, and technology. That’s where prevention strategies make the difference between a minor disruption and a multi-million-dollar breach. 

 

Data loss prevention strategies for finance

In 2025, backups are still essential, but they’re not enough on their own. Financial institutions also need clear processes, well-trained staff, and security tools that can keep up with today’s realities— like AI-written phishing emails or employees working on personal laptops.

 

1. Strong identity and access controls

Attackers are increasingly logging in with stolen credentials rather than hacking their way in. That makes identity protection your front line. 

• Enforce multi-factor authentication (MFA) everywhere, ideally phishing-resistant methods like passkeys. 
• Apply least-privilege access so staff only see the data they need. 
• Rotate credentials regularly, including those for bots and AI agents.

 

2. Employee training to prevent data loss

Phishing remains the top way attackers get in. Annual training isn’t enough anymore. Employees need ongoing refreshers and simulations—especially now that AI makes phishing attempts harder to spot. 

• Teach staff how to recognize and report phishing. 
• Run drills using realistic, AI-generated emails or calls. 
• Make it clear that fast reporting is always better than staying silent. 

Tip: Share these five practical tips to help employees work safely as part of ongoing awareness programs.

 

3. Secure remote work and devices

Verizon’s 2025 report found that nearly half of compromised accounts came from unmanaged devices. To reduce the risk: 

• Use endpoint management to enforce policies. 
• Restrict or block BYOD for sensitive tasks. 
• Require VPNs and encryption for remote access. 

Further reading: Here’s how data encryption works and why your business needs it.

 

4. Keep software and systems up to date

Unpatched vulnerabilities caused about 20% of breaches in 2025 (Verizon). For financial institutions, patching isn’t optional housekeeping—it’s a compliance issue. Automate updates where you can, and make sure edge devices like VPNs, firewalls, and collaboration tools are covered. 

 

5. Limit data exposure

Not every employee needs access to customer PII or financial transaction records. Use role-based access controls and audit them regularly. The fewer doors are open, the fewer mistakes can happen. 

 

6. Backups and redundancy

Keep multiple, geo-redundant copies of your data. Cloud storage is still the easiest and most resilient option, but regulators now expect a hybrid setup. Keep at least one copy offline or on physical media so you have a clean fallback if ransomware locks your systems or your cloud provider goes down.  

 

7. AI and automation for defense

AI cuts both ways. Attackers use it to scale phishing and impersonation attacks. But defenders who use AI-driven tools save time and money.  

IBM found that extensive use of AI and automation lowered breach costs by USD 1.9 million on average and sped up detection and containment by 80 days. For financial institutions, that’s the difference between meeting the 72-hour regulator deadline—or not. 

New AI-related risks to financial data security

AI is now part of daily operations in most financial institutions—from chatbots and fraud detection to risk modeling. But AI has also opened new security gaps. Attackers are already exploiting them, and many organizations are unprepared. 

IBM’s 2025 report found that 16% of breaches involved attackers using AI, most often for AI-generated phishing (37%) and deepfake impersonation attacks (35%). On top of that, shadow AI—employees using unapproved AI tools—added an average of USD 670,000 to breach costs. 

What makes this especially dangerous is governance. IBM found that 63% of breached organizations lacked AI governance policies, and 97% of AI-related breaches happened in systems without proper access controls. 

Even with the best prevention—whether for traditional threats or new AI risks—breaches can still happen. That’s why every financial institution needs a tested response plan to act quickly when defenses are breached. 

Data breach response plan: 6 key steps for financial institutions 

When a breach happens, every hour counts. A clear, rehearsed response plan helps financial institutions contain the damage, meet regulatory deadlines, and restore operations with minimal disruption. 

Step 1: Contain the data breach immediately 

• Isolate affected systems. Cut off infected devices or compromised accounts from the network to stop the spread. 
• Revoke or reset credentials. Attackers increasingly “log in” with stolen credentials; rotate passwords and disable suspicious accounts right away. 
• Preserve forensic evidence. Don’t wipe systems too early—your IT or security team will need logs to understand what happened.  

 

Step 2: Assess the scope of the data loss 

Ask the essential questions fast: 

• What type of data was lost or accessed (PII, credentials, financial records, internal IP)? 
• Do we have a clean backup? 
• Which systems are still exposed? 
• Is this a single-device failure or a network-wide breach? 

IBM’s 2025 report showed that breaches contained in under 200 days cost USD 3.87 million on average, compared to USD 5.01 million when containment took longer. Every day counts. 

 

Step 3: Involve IT, legal, and cybersecurity experts 

• Internal security teams should lead the first response, but most financial institutions also involve external specialists. 
• Cybersecurity professionals can investigate logs, identify the root cause, and help recover corrupted data. 
• Legal and compliance experts should be looped in early, since fines and regulatory obligations can escalate quickly. 

 

Step 4: Recover systems and restore business operations 

• Recover data from clean backups (ideally tested regularly). 
• Patch the vulnerabilities or misconfigurations that caused the breach. 
• Validate systems before bringing them back online—resuming operations too soon risks re-infection. 
• For ransomware: focus on recovery, not ransom payments. IBM notes that 63% of victims in 2025 refused to pay, and many attackers publish stolen data even when ransoms are paid. 

 

Step 5: Notify regulators, customers, and partners 

You’ll need to communicate with: 

• Regulators – GDPR and other regulations require notification within 72 hours if customer data is involved. 
• Customers and partners – Be clear about what happened, what you’re doing to fix it, and what actions they should take (e.g., changing passwords, monitoring accounts). 
• Internal teams – Staff need updated guidance and reassurance, especially if access rules or policies are changing. 

Trying to downplay or hide an incident almost always backfires. Transparency protects trust better than silence. 

 

Step 6: Learn from the breach and close the gaps 

A breach should never end with recovery alone. Dig into what went wrong and put concrete measures in place so it doesn’t happen again: 

• Was it human error, unpatched software, or weak access controls? 
• Do policies need updating (e.g., AI governance, BYOD restrictions)? 
• Where can AI and automation help speed up detection next time? 

Did you know? IBM found that organizations using AI-driven defenses extensively shortened breach lifecycles by 80 days and saved an average of USD 1.9 million per breach.  

Technology alone isn’t enough, though. Financial institutions also operate in one of the most heavily regulated environments, where failing to meet compliance obligations can be just as costly as the breach itself.  

Key data security regulations for financial institutions 

Beyond the direct costs of a breach, financial services institutions face some of the strictest data security regulations in the world. In 2025, these rules come with higher fines and tougher oversight: 

• GDPR (EU/EEA): Still one of the strictest frameworks, with fines up to €20M or 4% of global turnover for serious violations. 

• DORA (EU, effective January 2025): New rules requiring banks and financial institutions to strengthen ICT risk management, incident reporting, and vendor oversight. 

• PCI DSS 4.0 (global, live March 2025): Updated payment card security standard with stronger authentication and continuous monitoring requirements. 

• U.S. regulations: GLBA (with the updated FTC Safeguards Rule), NYDFS Cybersecurity Regulation, and state privacy laws (e.g., CCPA/CPRA) all now carry higher penalties and stricter reporting timelines. 

• SAMA Cybersecurity Framework (Saudi Arabia): Mandatory for banks and financial entities, focusing on governance, risk management, and third-party oversight. 

• UK Data Protection and Digital Information Bill: Expected to reshape the UK’s post-GDPR framework, with stronger obligations for financial firms handling personal data. 

These rules show that prevention isn’t optional—banks are expected to prove they can protect sensitive information.  

Safetica DLP: how it protects financial data 

Most financial institutions already back up data and patch systems, but what keeps financial leaders up at night are the everyday risks—like a staff member uploading files to an AI chatbot, saving client records to a personal laptop, or emailing statements to the wrong address. Safetica is built to prevent exactly these scenarios.  

Here’s what it brings to the table: 

• Visibility into sensitive data—know where regulated data lives, how it’s handled, and where it’s moving. 
• Policy enforcement across channels—control how data flows through email, cloud apps, USBs, and printers. 
• Real-time alerts and response—spot risky behavior immediately and take action before it becomes a breach. 
• Compliance support—map policies to GDPR, PCI DSS, HIPAA, and other frameworks so audits don’t become fire drills. 

Safetica works across endpoints, cloud services, and Microsoft 365, with quick deployment and straightforward integration into your existing stack. 

Explore how Safetica helps financial institutions reduce insider risk, avoid fines, and maintain customer trust → schedule a demo call