How can financial institutions defend against cybercrime and fraud in 2026?
- Financial institution executives take cybersecurity seriously, but many may not know how to respond to a fast-evolving threat environment that includes a spike in system intrusion attacks, AI-related data exposure and new risks from data shared with third-party vendors like fintech companies.
- Financial institutions are also grappling with compliance gaps brought on by the sunset of the old FFIEC CAT standard and the mandated shift to newer frameworks such as NIST CSF 2.0.
- Most institutions will benefit from working with a cybersecurity advisory firm with financial services experience to assess their risks, implement stronger security and data governance policies and maintain compliance with an FFIEC-approved cybersecurity standard.
Leaders at financial institutions are worried about cybersecurity and fraud. In recent industry surveys, 56% of credit union executives and 52% of bank executives shared that cybersecurity and fraud were their top concerns, with most survey respondents reporting at least one cyber incident over the past 12 months.
But what does an effective cybersecurity strategy look like for financial institutions in 2026? Keep reading to learn more about the security challenges institutions face and how to take action to strengthen your defenses.
What are the major cybersecurity and fraud challenges for financial institutions?
Financial institutions face a broad range of cybersecurity and fraud challenges in 2026. These include data security and governance issues with AI, security leaks in vendor or partner relationships, fraud and a rise in system intrusion attacks, along with compliance challenges stemming from last year’s sunset of the FFIEC CAT cybersecurity standard.
Here’s a rundown of key challenges:
- Data exposed to AI: As institutions integrate AI tools into their workflows, they face significant risks around data security and governance. This includes sharing secure customer/member data with public AI models like ChatGPT or Gemini (the risk of which goes up considerably for institutions that don’t have clear AI policies in place).
- Vendor or partner security gaps: As a regulated industry, financial institutions are required to have robust cybersecurity defenses around all account holder data. However, while that data is well-protected inside an institution’s own core systems, institutions should not assume that their partners — like vendors or fintech companies — provide the same level of data protection. Institutions should conduct appropriate risk assessments and other due diligence before giving partners access to customer or member data.
- Rising system intrusion attacks: Complex system intrusion attacks involving active hacking or ransomware are now the most common type of cyberattack, making up roughly 40% of all incidents and 50% of breaches in 2025.
- Fraud: Employee fraud remains a risk to watch for, with common schemes including fictitious vendors and fake credit card or consumer loan accounts. But financial institutions are also finding themselves dealing with angry customers/members who were tricked into making a fraudulent payment — and then blame their financial institution when the payment goes through.
- Financial damages: Cyberattacks can lead to financial damages for both your institutions and your customers/members. This can include the direct financial consequences of a successful breach, including harm to your business operations, but also secondary fallout like an uptick in fraud due to exposed data, fines from regulators and litigation.
- Reputational harm: The reputational damage stemming from a breach can be as or more costly than any direct financial losses.
FFIEC cybersecurity rules now require financial institutions to use a framework like NIST CSF 2.0
In addition to cybersecurity threats, financial institutions are also navigating a major regulatory shift in this arena. The longtime FFIEC CAT cybersecurity standard was sunset in 2025, which means that financial institutions are now required to use a more contemporary cybersecurity framework like NIST CSF 2.0.
Fully implementing NIST CSF or another modern framework will strengthen institutions’ overall cybersecurity posture and is an overdue update to the aging FFIEC CAT guidelines. However, as institutions work to implement a new framework, they will also need to navigate compliance gaps and other transition challenges that could draw unwanted scrutiny from regulators or auditors.
How can financial institutions strengthen their cybersecurity and fraud protections?
CEOs, CFOs and other leaders at financial institutions are well aware that effective cybersecurity is essential. But the threat environment is always evolving, and successfully transitioning to a new cybersecurity framework like NIST CSF also introduces an additional wrinkle for businesses to overcome.
Here are four action steps for financial institutions to take to bolster their cybersecurity in 2026:
1. Collaborate with a cybersecurity advisor
Because the current security landscape is both evolving and complex, most financial institutions will benefit from supplementing their internal cybersecurity capabilities with advisory support. You don’t know what you don’t know, but your advisor will.
Look for an advisory firm that combines deep cybersecurity experience with an in-depth understanding of the financial services sector and the specific security needs of financial institutions.
2. Assess your threat environment
Work with your advisor to conduct regular cybersecurity and fraud risk assessments. This will help you learn your vulnerabilities so you can take corrective action.
During a risk assessment, you’ll need to look at how your business actually operates (including your relationships with your vendor and technology partners). What are you doing and how are you doing it? Who are you working with, where is your information stored and what are the dangers here?
Do a structured evaluation of the threats you face, plus the impact and consequences that an incident, breach or fraud event could have on your organization. Be sure to include AI usage in your analysis, as some organizations are not yet considering, say, ChatGPT use by employees from a cybersecurity perspective.
3. Mitigate your risks
No system is foolproof, so effective cybersecurity is about mitigating risk, not eliminating it entirely. Here, you can not only make your systems and processes less vulnerable to attack but also improve your capability to detect and respond to an attack more quickly so you can limit the damage.
These solutions may involve tech upgrades. But governance and security policies also play an important role here. More effective policies can significantly reduce risks around AI use or phishing scams, for example.
Communicate with your third-party vendor here as well. If you’ve partnered with a fintech company to offer their services to your customers/members or integrate with their platform, work with them to address any gaps that could harm your customers/members or data through a breach in their systems.
4. Fully implement NIST CSF 2.0 or another contemporary cybersecurity framework
FFIEC regulators will be assessing your financial institution’s compliance with a modern cybersecurity framework like NIST CSF 2.0. So make sure that you’ve fully implemented one of the FFIEC’s approved cybersecurity standards to avoid compliance issues or further scrutiny.
While full compliance may involve significant effort on your part, remember that the benefits don’t just include happy regulators, but reduced exposure to cyberthreats and financial consequences that could affect both your institution and your customers/members.
Learn more about how financial institution executives are solving top industry challenges
How are industry leaders tackling today’s top challenges? To find out, Wipfli surveyed 345 CEOs, CFOs and other leaders at financial institutions to learn more about their problems, growth strategies and tech solutions.
Read the full 2026 banking and credit union industry reports:
2026 credit union industry report
How Wipfli can help
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