Why SOC 2 Compliance is Important for the Financial Services Industry
Cybersecurity threats are at an all-time high, and financial institutions are among the most significant targets. In 2023 alone, more than 3 billion individuals were affected by data breaches. The stakes for banks and credit unions are extremely high, with the average cost of a data breach at about $9.3 million per incident. With sensitive account holder data on the line, maintaining airtight security is imperative. That’s where SOC 2 compliance makes a difference.
What is SOC 2 Compliance and What are the Benefits?
SOC 2 (System and Organization Controls 2) is a cybersecurity framework that ensures businesses handle customer data with security, confidentiality, and integrity. The framework rests on five key principles:
- Security: Protecting systems against unauthorized access.
- Availability: Ensuring systems remain operational and reliable.
- Processing Integrity: Maintaining accuracy and consistency in data processing.
- Confidentiality: Restricting access to sensitive information.
- Privacy: Managing personal data responsibly and securely.
For financial institutions, SOC 2 compliance is about more than just meeting a standard. It’s about demonstrating a commitment to trust and security.
Why SOC 2 Compliance Matters for Financial Institutions
Banks and credit unions work with third-party vendors for everything from cloud services to transaction processing. Vendors that are not SOC 2 compliant may be more open to vulnerabilities that could put your institution and its account holders at risk. A single weak link in your vendor network could ultimately result in fraud, data breaches, or regulatory fines.
By choosing SOC 2 compliant vendors, financial institutions gain:
Stronger security: SOC 2 ensures that third-party providers follow strict security measures to prevent data breaches.
Regulatory confidence: While SOC 2 is not legally required like the laws that establish GDPR or HIPAA, it has become an industry standard that regulators and auditors expect.
Account holder trust: With cybersecurity threats rising, financial services consumers want to know their financial data is safe. SOC 2 compliance promotes trust and signals that your institution is serious about security.
Operational efficiency: SOC 2-compliant vendors are held to high performance standards, reducing risks and increasing system reliability.
The Risk of Working with Non-Compliant Vendors
Many financial institutions rely on outside partners for cloud storage, IT support, transaction processing, and more. If those vendors aren’t SOC 2 compliant, they might not follow the same security and data privacy standards as the institution. That compliance inconsistency could mean increased risk of:
- Data leaks: Sensitive financial data could be exposed due to poor security measures.
- System vulnerabilities: A non-compliant vendor could be an entry point for malicious actors.
- Compliance gaps: If vendors don’t meet SOC 2 standards, your institution may fail internal or external audits.
Protect Your Institution with SOC 2 Compliance
Cybersecurity threats are an ongoing reality of the financial services industry, so compliance standards are critical. Whether you’re selecting a core processor, cloud service provider, IT support team, or other technology partners, working with SOC 2 compliant vendors like Edge One is essential to maintaining security, trust, and compliance.
There’s no room for shortcuts when it comes to protecting financial data. Partnering with SOC 2-compliant vendors ensures your institution is trusted, secure, and prepared for the future.