How do banks protect customer data

[chushpan]

Banks use a multi-layered security system to prevent data leaks, fraud, and unauthorized access. The main methods include encryption, two-factor authentication (2FA), monitoring, and other technologies. Let's take a closer look at them.

1. Data encryption​

Encryption is the process of converting data into an indecipherable format that can only be deciphered using a special key. Banks use encryption at all levels of interaction with customer data.

Where is encryption used?​

• Data transfer:
  • Data transmitted between the client and the bank (for example, via Internet banking) is encrypted using TLS/SSL protocols.
  • This ensures that attackers cannot intercept data during transmission.
• Data storage:
  • Sensitive information (e.g. card numbers, passwords, PIN codes) is stored in encrypted form in databases.
  • Encryption algorithms such as AES (Advanced Encryption Standard) or RSA are used.
• Cryptographic tokens:
  • Instead of real data (such as card numbers), encrypted tokens are used, which have no direct value for attackers.

Example of use:​

• When you enter card details on a bank's website, they are encrypted using TLS/SSL before being sent to the server.
• On the server, data is stored in encrypted form to protect it from theft in the event of a database hack.

2. Two-factor authentication (2FA)​

Two-Factor Authentication (2FA) adds an extra layer of security when logging into your account or making transactions.

How does 2FA work?​

1. The first factor:
   • Something the user knows (such as a password).
2. Second factor:
   • Something the user has (e.g. a one-time code from an SMS, a mobile app for generating codes, or a hardware token).

Methods of implementing 2FA:​

• SMS codes:
  • The code is sent to the client's phone.
• Mobile applications:
  • For example, Google Authenticator, Microsoft Authenticator or banking apps.
• Push notifications:
  • A notification is sent to your smartphone to confirm login.
• Hardware tokens:
  • A physical device that generates one-time passwords.

Example of use:​

• When you log into online banking, the system asks for a password and sends a one-time code to your phone.
• Without the second factor, login is impossible, even if the attacker knows your password.

3. Monitoring and analysis of transactions​

Banks use monitoring systems to detect suspicious activity in real time.

How does it work?​

• Customer behavior analysis:
  • The systems track typical customer activities (e.g. transaction amounts, frequency of transactions, region of use).
  • If an anomaly is detected (for example, a large transfer from a new IP address), the system blocks the transaction and notifies the client.
• Fraud Detection Systems:
  • These systems use machine learning to analyze data and identify fraudulent patterns.

Example of use:​

• If someone tries to transfer money from your account using an IP address in another country, the system may request additional confirmation or block the transaction.

4. Password protection​

• Password Hashing:
  • Client passwords are stored as hashes (e.g. using SHA-256 or bcrypt). Even if the database is compromised, the attacker will not be able to obtain the original passwords.
• Password complexity policy:
  • Banks require passwords to contain letters, numbers and special characters.
• Limit login attempts:
  • After several unsuccessful login attempts, the account is temporarily blocked.

5. Protecting physical devices​

• EMV Chips:
  • Modern bank cards are equipped with chips that use cryptography to protect data.
• POS terminal protection:
  • Payment terminals are protected from data interception by encryption and certification.
• ATM Security:
  • ATMs are equipped with anti-skimming technologies (for example, encryption of card data).

6. Client training​

Banks are running campaigns to educate customers on the basics of cybersecurity:

• How to recognize phishing emails.
• Why it is important not to click on suspicious links.
• How to use 2FA and password managers correctly.

7. Compliance with standards​

Banks are required to adhere to strict security standards, such as:

• PCI DSS (Payment Card Industry Data Security Standard):
  • Requirements for the protection of cardholder data.
• GDPR (General Data Protection Regulation):
  • Protecting customer personal data in Europe.
• ISO/IEC 27001:
  • International standard for information security.

8. Example of comprehensive protection​

Scenario: Authorization in Internet banking​

1. The user enters login and password.
2. The system checks the password and sends a push notification to the phone for confirmation.
3. Data is transmitted over an encrypted connection (TLS/SSL).
4. After logging in, the system analyzes the user's activity:
   • If suspicious behavior is detected (for example, logging in from a new device), the system asks for additional confirmation.
5. All data is stored in encrypted form.

Conclusion​

Banks use a combination of technologies and methods to protect customer data. Encryption, two-factor authentication, monitoring and user training are just some of the tools that help prevent cyberattacks and fraud. However, security also depends on the customers themselves: it is important to follow cyber hygiene rules and be careful with your data.

If you have any additional questions about bank data protection methods, ask them!

 

[Man]

How banks protect customer data: encryption, 2FA and other technologies​

Modern banks use a multi-level data protection system to prevent leaks, fraud and cyber attacks. Here are the key methods:

1. Data encryption​

1.1. TLS/SSL (protection of transmitted data)​

• All connections to the bank (website, mobile application) use TLS 1.2/1.3 .
• Data is encrypted using AES-256 or ChaCha20 algorithms.
• How to check? The browser address bar should have an icon and https://.

1.2. Server-side encryption​

• Password storage: Hashed (bcrypt, PBKDF2) + salt.
• Databases: Encrypted (e.g. Transparent Data Encryption in SQL Server).
• Card data: Tokenization (PAN is replaced with a random token).

1.3. Encryption on the client device​

• Mobile applications use Secure Enclave (iPhone) or Android Keystore.
• Biometric data (fingerprints, Face ID) are not stored in clear text.

2. Two-factor authentication (2FA)​

2.1. Types of 2FA in banks​

Method	How it works	Example
SMS codes	The code is sent to the phone (less secure).	"Your code: 123456".
TOTP (Google Authenticator)	Generate code in the application.	6-digit code, updated every 30 sec.
Push notifications	Confirmation of login via banking application.	"Are you signing in? Yes/No."
Hardware tokens	Physical devices (eg RSA SecurID).	Code on the token screen.

2.2 Why SMS is not the best choice?​

• SIM swapping (fraudsters intercept the number).
• SMS can be intercepted through SS7 attacks.

Recommendation: Use TOTP or Push if your bank supports it.

3. Additional security measures​

3.1. Monitoring systems​

• Antifraud (behavior analysis):
  • If you usually log in from London and then try from Nigeria, you'll get blocked.
  • Suspicious transactions (for example, transfer to a new account in another region).
• SIEM systems (Splunk, IBM QRadar) for real-time threat analysis.

3.2. Phishing protection​

• DMARC/DKIM/SPF - email authentication.
• Customer Education: Banks Send Out Warnings About New Fraud Schemes

3.3. Backup and Disaster Recovery​

• Data is stored in geo-distributed data centers.
• Regular penetration tests (Pentest).

4. What can the client do to protect themselves?​

1. Enable 2FA (TOTP is better than SMS).
2. Do not follow links from emails/SMS - enter the bank URL manually.
3. Use virtual cards for online payments.
4. Check connected devices in your account settings.

Conclusion​

1. Encryption (TLS, tokenization) protects data during transmission and storage.
2. 2FA makes it harder to hack, even if the password is stolen.
3. Banks are constantly updating their protection, but the client must also be vigilant.