The 3 Reasons Why Banks Block VPNs (Facts to Know)

The technological era has brought about many new challenges for financial institutions. Many banks have had to adapt their procedures to align with the virtual world. For banks and online banking users, this poses a greater risk to keeping personal information secure. 

Banks block VPNs to prevent cybercriminals from accessing your information and using that information to commit fraud. Banks also have laws to abide by, privacy policies, and the responsibility to protect the personal information of online banking users.

According to a study conducted in 2021 by the American Bankers Association, 73% of Americans bank online. Banks need to maintain stringent security measures to counteract the risks associated with banking online. Although VPNs provide anonymity and secure browsing, they also work against financial institutions and their ability to prevent cyber-attacks.

why banks block vpn

Banks Need To Know Your Identity

Financial institutions need to know your identity to open an account and use their services. Banks require your identity to avoid identity theft, money laundering and to create a risk profile that complies with KYC laws. 

Financial institutions also cross-sell different products to the same customer. Banks use cookies and collect other site data from their users. This data is often used with third parties for researching how users interact with the website.

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Most banks block using VPNs as a security measure to protect their consumers’ banking information. Banks may need access to your IP address for security reasons, and a VPN prevents this. If you have an account and you’re suddenly trying to log into your bank from an unrecognized IP address, your bank may flag this and block your connection in an attempt to prevent fraud.

Banks rely on various security measures, including data encryption, firewalls, and fraud monitoring. Enabling the use of a VPN poses a risk to security measures set out by the bank to keep your credentials protected.

Although VPNs provide additional security for their users when banking online, banks often block VPNs because they aren’t able to determine if the user is attempting to be fraudulent or not. It’s just easier for banks to block VPNs and keep their customer’s data secure than to allow VPNs and risk having sensitive information leaked.

Many banks in the US also have rigid geo-blocks in place to prohibit fraud. If using your VPN while banking online and your location is unknown, it makes it impossible for your bank to determine which country you are in and blocks you from entering their site.

Prevent Cyber Attacks And Hacking

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One in three cyber-attacks on financial institutions are successful. You can then understand why allowing a VPN is a very high risk for banks. Hackers target financial institutions primarily for the account and financial data. This information is either sold on the Cyber black market or used to target individuals whose data has been compromised directly.

Financial institutions in the US are at the top of the list when it comes to being the target of cyber-attacks. It’s understandable that these institutions have alarming concerns over fraudulent activity and being vulnerable to attacks.

New research claims that since the onset of the pandemic, there has been a 238% surge in cyberattacks against financial institutions. Banks are naturally pressured to tighten security measures and block any suspicious activity.

Identity theft and bank fraud remain a concern among consumers when banking online. Many consumers prefer using a VPN to bank safely. Financial institutions remain responsible for keeping a secure connection when you bank online and may not have the capacity to monitor online activity through a VPN.

It can seem contradictory for banks to block VPNs as the purpose of using a VPN is to prevent hackers and third-party sources from obtaining your personal information. Banks, however, may see it as an opportunistic means for hackers to access their information. 

VPN’s Can Leave Users Vulnerable Unreliable 

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If you’ve used a free VPN, you may or may not know of the risks associated with this sketchy service. Free VPNs are well known for collecting and selling data. Many online banking users prefer using their online banking app; they often download a free VPN from the mobile marketplaces. 

This information can easily be stolen, shared, and passed on to the highest bidder. Banks are concerned that the convenience of mobile banking has brought about greater security risks, including app-based banking Trojans and fake banking apps.

The unreliability of some VPN providers forces banking institutions to block any VPN connections that may pose a risk to their consumers’ information. An unreliable VPN provider may keep logs, use weak protocols, and leak information. 

Banks are generally suspicious of VPNs, but free or unreliable VPNs pose a higher risk. They offer a low amount of protection and could use your data to access your bank account. Banks maintain a secure connection between the online banking user and the bank. Banks can’t guarantee that the information won’t be compromised; blocking VPNs are necessary to keep security measures tight. 

When using a VPN to do online banking, a bank may also block your connection due to blacklisted IP addresses. A VPN service provider uses multiple IP addresses. If the one you are connecting with comes from a list of IP addresses flagged, your connection will automatically be blocked.

Banks must remain cautious at possible threats to their systems. The disadvantages of allowing VPNs pose a significant risk to financial institutions. 

Conclusion

Financial institutions cannot determine which connections are trustworthy and could pose a fraud risk. It’s comprehensible for banks to block any suspicious activity, including your connection via your VPN. Some VPNs allow you to navigate these restrictions, while many other banks disallow your connection.

There will always be risks associated with online banking. The rise in cyber-attacks can leave many consumers wary of banking online. As banks expand security features by adding two-factor authentication and biometrics, consumers may have diminished concerns over their banking information and use their VPN for streaming instead.

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