Counteracting Cyber Complacency: 6 Security Blind Spots for Credit Unions

Blind Spot 2 | Low Cybersecurity Investment Relative to Exposure

Penny wise, pound foolish.

According to IBM’s Cost of a Data Breach 2024 report, the average cost of a breach for financial institutions has climbed to $6.08 million — 22% higher than the global average of $4.88 million, which itself marks the largest year-over-year increase since the pandemic.

The assumption that smaller institutions are less attractive targets is misplaced. Attackers increasingly pursue organizations with weaker defenses, not necessarily greater assets. Limited budgets and lean IT teams often leave critical systems exposed or poorly monitored.

According to Brianda Rojas-Levering, Compliance and Risk Consultant with TruStageTM — which provides insurance, investment, and technology solutions to the credit union market — credit unions’ vulnerability may arise from institutional size or inadequate review of third-party vendors.

Organizations that lack staffing and tools to keep pace with evolving threats may face greater challenges in defending against cyber threats.

In its most recent report to Congress, the National Credit Union Administration echoed this concern, warning that the system’s heavy reliance on third-party vendors — combined with the NCUA’s lack of direct oversight authority over those vendors — leaves credit unions especially vulnerable to cyber threats affecting critical service providers.

Addressing these risks begins with prioritization. Institutions should concentrate their limited resources on high-impact controls such as multi-factor authentication, privileged access management, system patching, and incident response planning. Some protections — like standardized backup protocols and regular phishing simulations — depend more on process discipline than budget. Shared services and industry consortiums can also help smaller institutions scale their defenses without increasing headcount.

Budget limitations, however, are only part of the challenge. Without current assessments and clear internal ownership, even well-meaning investments can leave critical gaps unaddressed.

Blind Spot 3 | Underestimating 3rd- and 4th-Party Risk

Help me help you help me.

Organizations that conduct only basic vendor vetting lack visibility into the cybersecurity practices of their vendors’ subcontractors. This creates gaps in oversight that attackers can exploit to gain access to an institution’s data. Third-party providers often have direct access to critical systems, making them an attractive target. When they’re compromised, the consequences quickly extend to the credit unions they serve.

A notable example occurred in November 2023 when a managed service provider experienced a ransomware attack that disrupted operations at dozens of credit unions. The incident demonstrated how a single vendor compromise can cascade through an entire ecosystem. Credit unions affected by the outage were forced to suspend services while the provider recovered its systems.

To mitigate third- and fourth-party risk, credit unions should extend their risk mitigation procedures beyond the onboarding phase. That includes maintaining up-to-date vendor inventories, requiring evidence of cybersecurity controls, and conducting periodic reviews based on risk level. Contracts should include provisions for breach notification, right-to-audit clauses, and clarity on the use of subcontractors. Mission-critical vendors should undergo more intensive review.

“The key is to apply consistent scrutiny to each vendor, in line with the institution’s vendor management requirements and the complexity of the relationship, for as long as that relationship exists,” TruStage’s Rojas-Levering says.

But the complexity of vendor networks creates practical challenges. Many providers resist sharing details about their subcontractors, making fourth-party risk difficult to assess. Credit unions may not realize when vendors introduce new downstream partners, leaving those risks untracked. Without clear procedures for reviewing and escalating vendor-related incidents, institutions may miss early warning signs or fail to respond quickly when an incident occurs.

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Blind Spot 4 | Employee Vulnerability to Social Engineering

Phish gotta swim.

Cybercriminals continue to exploit employee behavior as a primary entry point into financial institutions. Social engineering tactics — such as phishing, vishing (voice phishing), and impersonation — bypass technical safeguards by manipulating people. These attacks rely on trust, familiarity, or urgency to provoke an action that grants the attacker access to credentials, systems, or internal data.

Consider a credit union employee who receives a call from someone claiming to be a vendor-employed technician who needs urgent system access. The caller may know the employee’s name, department, and even recent project details, gathered from social media or professional platforms. As Rojas-Levering notes, attackers use social media and publicly available professional profiles to tailor these scripts and impersonate real individuals. These efforts are often repeated across departments until one person complies.

This type of attack can succeed regardless of an employee’s technical knowledge. It targets human assumptions and inclinations — responding quickly to requests, trusting familiar terminology, avoiding conflict. Credit unions with limited staff coverage or high turnover may be especially vulnerable, as role familiarity and institutional memory are key defenses.

The key point is that one successful attempt can lead to system-wide compromise, especially if the attacker gains administrative access or escalates privileges. Institutions must treat employee-facing threats as a primary cyber risk.

Blind Spot 5 | Lack of Consistent, Role-Based Cyber Education

Hey, kid, stay in school.

Many credit unions deliver cybersecurity training on an annual schedule or only during onboarding. These programs often lack depth, fail to differentiate between job functions, and lose effectiveness over time. When training is overly broad or infrequent, staff and leadership alike may be unprepared to recognize or respond to threats. The risk is heightened when the threats are evolving faster than the curriculum.

TruStage advises tailoring cyber education to the institution’s structure and risk profile. Frontline staff who manage member accounts face different risks than board members or vendors. Yet in many institutions, everyone receives the same training. Executives, in particular, are frequent targets of spear-phishing attacks and may not receive education and training on digital risk.

To address these gaps, institutions should implement training programs that vary by role, include recurring updates, and combine formats: policy briefings, interactive simulations, and practical decision-making scenarios. Testing should be embedded into the program. “That constant repetitive education and testing helps build muscle memory so that you stop and think before you click,” Rojas-Levering says.

Execution remains a challenge. Training may be outsourced without customization, or offered in formats that staff ignore or forget. A strong program requires institutional buy-in, regular review, and internal accountability. Without a plan to sustain and evolve education over time, even well-designed content will fail to change behavior.

A common pitfall is assuming that awareness alone is sufficient. Even well-trained employees can fall for urgent or cleverly designed schemes if they lack a clear reporting process. Credit unions should ensure that every employee knows not only how to recognize a threat but what to do next — whether that means reporting to IT, alerting a manager, or isolating a device.