A Pennsylvania credit union is suing financial industry technology giant Fiserv, alleging that “baffling” security vulnerabilities in the company’s software are “wreaking havoc” on its customers. The credit union said the investigation that fueled the lawsuit was prompted by a 2018 KrebsOnSecurity report about glaring security weaknesses in a Fiserv platform that exposed personal and financial details of customers across hundreds of bank Web sites.

Brookfield, Wisc.-based Fiserv [NASDAQ:FISV] is a Fortune 500 company with 24,000 employees and $5.8 billion in earnings last year. Its account and transaction processing systems power the Web sites for hundreds of financial institutions — mostly small community banks and credit unions.

In August 2018, in response to inquiries by KrebsOnSecurity, Fiserv fixed a pervasive security and privacy hole in its online banking platform. The authentication weakness allowed bank customers to view account data for other customers, including account number, balance, phone numbers and email addresses.

In late April 2019, Fiserv was sued by Bessemer System Federal Credit Union, a comparatively tiny financial institution with just $38 million in assets. Bessemer said it was moved by that story to launch its own investigation into Fiserv’s systems, and it found a startlingly simple flaw: Firsev’s platform would let anyone reset the online banking password for a customer just by knowing their account number and the last four digits of their Social Security number.

Recall that in my Aug 2018 report, Fiserv’s own systems were exposing online banking account numbers for its customers. Thus, an attacker would only need to know the last four digits of a target’s SSN to reset that customer’s password, according to Bessemer. And that information is for sale in multiple places online and in the cybercrime underground for a few bucks per person.

Bessemer further alleges Fiserv’s systems had no checks in place to prevent automated attacks that might let thieves rapidly guess the last four digits of the customer’s SSN — such as limiting the number of times a user can submit a login request, or imposing a waiting period after a certain number of failed login attempts.

The lawsuit says the fix Fiserv scrambled to put in place after Bessemer complained was “pitifully deficient and ineffective:”

“Fiserv attempted to fortify Bessemer’s online banking website by requiring users registering for an account to supply a member’s house number. This was ineffective because residential street addresses can be readily found on the internet and through other public sources. Moreover, this information can be guessed through a trial-and-error process. Most alarmingly, this security control was purely illusory. Because some servers were not enforcing this security check, it could be readily bypassed.”

Bessemer says instead of fixing these security problems and providing the requested assurances that information was being adequately safeguarded, Fiserv issued it a “notice of claims,” alleging the credit union’s security review of its own online banking system gave rise to civil and criminal claims.

The credit union says Fiserv demanded it not disclose information relating to the security review to any third parties, “including Fiserv’s other clients (who presumably were affected with the same security problems at their financial institutions) as well as media sources.”

Fiserv did not immediately respond to requests for comment. But Fiserv spokesperson Ann Cave was quoted in several publications saying, “We believe the allegations have no merit and will respond to the claims as part of the legal process.”

Charles Nerko, the attorney representing Bessemer in the lawsuit, said to protect the credit union’s members, the credit union is replacing its core processing vendor, although Nerko would not specify where the credit union might be taking its business.

According to FedFis.com, Fiserv is by far the top bank core processor, with more than 37 percent market share. And it’s poised to soon get much bigger.

In January 2019, Fiserv announced it was acquiring payment processing giant First Data in a $22 billion all-stock deal. The deal is expected to close in the second half of 2019, pending an antitrust review by the U.S. Justice Department.

That merger, should it go through, may not bode well for Fiserv’s customers, argues Paul Schaus of American Banker.

“Banks should take this trend as a warning sign,” Schaus wrote. “Rather than delivering new innovations that banks and their customers crave, legacy vendors are looking to remain relevant by acquiring existing products and services that expand their portfolios into new areas of financial services. As emerging technologies grow more critical to everyday business, these legacy vendors, which banks have deep longstanding relationships with, likely won’t be on the leading edge in every product or channel. Instead, financial institutions will need to seek out newer vendors that have deeper commitments and focus in cutting-edge technologies that will drive industry change.”

Tags: American Banker, Ann Cave, Bessemer System Federal Credit Union, Charles Nerko, fiserv, Paul Schaus