CYBER SECURITY CHALLENGES IN UGANDA’S BANKING SECTOR: AN INVESTIGATION INTO THE CAUSES OF CYBER ATTACKS

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Cyber attacks have caused a lot of loses to countries and individuals in different measures according to IMF’s Global Financial Stability Report (Adelmann et al., 2020), In the past two decades, nearly one-fifth of reported cyber incidents have affected the global financial sector, causing $12 billion in direct losses to financial firms, and from 2020 to 20224 direct losses amounted to an estimated $2.5 billion (Egerson et al., 2024).

Cyber attacks are currently one of the biggest challenges facing developing countries specifically Africa , though there has been a projected growth for African cyber security market , nations across the continent are loosing billions each year due to the increased cyber attacks, collectively African countries loose 4 billion Us dollars annually due to cyber attacks with specific countries like; Nigeria, Kenya, south Africa and Egypt lose more than $3.5b per annum as a result of digital attacks, Like many developing nations, Uganda has witnessed rapid adoption of digital technologies in recent years. While this digital transformation brings numerous benefits, it exposes the country to new risks of cyber-attacks. Cybercriminals capitalize on weaknesses in cyber security infrastructure, exploiting individuals, businesses, and government entities for financial gains or other purposes and as of 2022 Uganda lost 19.2 billion to cybercriminals and in 2023, over 245 cases were reported to police countywide, bringing a 5 billion loss.

1.2 Problem statement

The banks globally face a multitude of loses as a result of cyber criminals the size of these losses has more than quadrupled since 2017 to $2.5 billion (Natalucci, Qureshi,  & Suntheim, 2024). Africa and Uganda in particular are no exception, and as of  2022 Uganda lost  UGX19.2 billion to cybercriminals and in 2023, over 245 cases were reported to police countywide, bringing a UGX 5 billion loss (Daily monitor, Friday, April 05, 2024), in the banking industry direct and indirect loses like reputational damage or security upgrades are substantially higher, it is against this background that this study intends to investigate into cyber security challenges in Uganda’s banking sector: an investigation into the causes of cyber attacks.

1.3 Objectives of the study

1. To examine the influence of external cyber threats on the vulnerability of the banking sector
2. To investigate the influence of internal cyber threats on the vulnerability of the banking sector

• To determine the relationship between user technical awareness on vulnerability of the banking sector

1.4 Research Questions

1. What is the influence of external cyber threats on the vulnerability of the banking sector?
2. What is the influence of internal cyber threats on the vulnerability of the banking sector?

• What is the relationship between user technical awareness on vulnerability of the banking sector?

1.5 Scope of the study

This section will include the content, time and geographical scope;

1.5.1 Content scope

The contents of the study will include;  external cyber threats on the vulnerability of the banking sector,  internal cyber threats on the vulnerability of the banking sector and  user technical awareness on vulnerability of the banking sector.

1.5.2 Geographical scope

The study will investigate the banking sector specifically the banks centenary bank, stanbic bank and pride microfinance bank.

Conceptual Frame Work

Cybersecurity Challenges (I.V)                    Vulnerabilities in the banking sector (DV)

Mediating variables

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This section presents the study inline with other researcher inline with study objectives.

2.1 External cyber threats in the banking sector

The rise on the use of information technology in banking industry has exposed the financial institutions to different levels of cyber attacks, (Gulyas,  & Kiss, 2023). New technologies, such as cloud computing or mobile banking, face expansive attack attempts from different agents on many levels (Hasan, & Al-Ramadan, 2021). The attackers target vulnerabilities that can be exploited to steal customer data, (Berdyugin, & Revenkov, P2019).

Since the introduction of Automatic teller cards (ATM) there are many online credit card frauds which are  made when a customer use their credit card or debit card for any online payment , during these transactions normally hackers get information from the ATM cards (Omotosho et al., 2023).

Cyber attacks like phishing attacks are a social engineering technique that cyber criminals employ to influence a customer of a financial institution to reveal personal information, such as an email address, username, password, or financial information after this information is then used by the attacker to the disadvantage of the victim (Alabdan, 2020).

2.2 Internal cyber threats on the vulnerability of the banking sector

Banking industry mainly in developing countries are  prone to high risks orchestrated by use sometimes  of outdated software that is vulnerable to hackers, (Alzoubi et al., 2022). The hackers and other cyber criminals can exploit the gaps in the software when not for example, Bangladesh’s central bank succumbed to SWIFT hackers in 2016 and lost US$81 million (Gladstone, 2016).

Use of out-dated computer hardware’s , which can be easily compromised , more to that these old hardware’s are not  compatible with the new existing software’s that could have the ability to prevent hacking (Alhayani, Abbas, Khutar, & Mohammed, 2021).

Lack of a well comprehensive policies regarding online transactions by the bank, Cybersecurity risk occurs because banks and other financial institutions are often unable to ensure an appropriate set of tools, technologies, training, and best practices to protect networks (Putrevu, & Mertzanis, 2024).

The use of software that have do not have strong verification capabilities exposes banks to cyber criminals , software which are vulnerable to viruses like a ransomware attack , this exposes the financial institution to cyber criminals for example.

2.3 User  technical awareness on vulnerability of the banking sector

Some times employees in the organization with no technical skills may cause data breaches something that could expose the financial institution at risk of cyber attacks , like for examples a former employee of wells and fargo on December 31, 2021, e-mailed files containing private information from Well’s Fargo’s servers, this kind of practice exposes the financial institution on to cyber criminals who after accessing a customer sensitive data are able to access their bank accounts (Ibrahimnur, 2023).

The data breaches in the financial industry are extremely according to Verizon’s data breach investigation report (DBIR) places the financial industry in the top five for the number of security incidents in 2021. Access to valuable data that can be used in fraud and other cyberattacks makes the financial industry a target for expensive and damaging data breaches (Sipayung, Yanti, & Setya, 2022 ).

Banks whether in developed or developing country are all under constant threat by ransomware infections, phishing schemes, and account takeover attacks. These threats can result in data breaches, interruption to operations, and costly remediation (Hassan et al., 2023).

Technical knowledge among employees is essential since in the modern error Knowledge has become one of the most highly valued commodities in the modern economy, the knowledge of employees in managing the sensitive information and also in using the computer systems very well are important in protecting the bank from cyber criminals (Oloko, 2024).