FinTech has reached out to the common people in every sector, including Personal finance, Daily transactions, transportation, healthcare, grocery, banking, shopping, insurance and education. With the advancement of technology and increase of user adaption had created the revolution in the sector of Finance business and Fintech Startups industry.
Technology transforms FinTech by opening new opportunities for the financial world. Its importance has increased during the COVID-19 pandemic because more business is conducted online.
Digital wallets and contactless payments are becoming an inseparable part of our day-to-day life. FinTech has the potential to transform the economy of any nation by allowing national and international business payments quickly. It is leading the financial institutions from the front.
Why is cybersecurity in fintech important?
Fintech startup companies offer more flexible products and services in a more simpler than banks due to modest legal regulations.
However, regular update of applications means that fintech companies often simplify their products or skip certain features. As a result, fintech companies often secure their solutions only partially, excluding some security measures.
Fintech startups may also give importance to non-functional data security requirements because of the false assumption that fully secured products aren’t flexible enough from the business perspective.
This often leads to creating functional, but poorly secured products, which are likely to generate substantial costs when the product starts scaling and expanding its services to a larger audience. Overall, the chance of a security breach occurring on the part of a fintech company may be higher than in a strictly regulated bank, but the impact can be similar — in the end, both process the same kind of data.
According to a survey, there are around 12000 fintech startups worldwide. Another survey shows that 76 % cyber attacks are financially motivated, meaning that there is a 76 percent chance of a fintech company being in danger than most sectors
Fintech is designed to help users to handle their financial tasks in everyday life efficiently and within less time. Since 2008 it can now handle payments, investment, asset management, insurance and beyond. Because of the amount people using use financial technologies nowadays, the amount of people at risk of data breaches of sensitive information is a high risk.
This is why it is essential and important to make sure that fintech companies follow and maintain security best practices.
Top cybersecurity threats in the fintech sector
Banks, financial institutions, and fintech companies are always vulnerable to security risks. Fintech startups are particularly attractive to cybercriminals who know that fintech companies rarely invest as much money and effort in security measures as banks. Mistakes such as keeping unencrypted data or giving unsecured third-party services are only increasing the risk. Most common security breaches in this sector include:
- Identity theft, which may lead to social engineering attacks or phishing
- Money theft and laundering
- Application breaches ,user data compromise and data breaches
- Malware attacks
Developing a FinTech solution is not an easy task . Here are just some of the FinTech security challenges faced by organizations worldwide.
Seamless data sharing is a key attribute of FinTech. Financial organizations accumulate tons of data, which creates data ownership and digital identity management.
But there are some concerns which often trouble users and clients.
What happens with the client’s info after they cancel the subscription?
What if someone steals the data you didn’t erase?
Your company may face compliance issues if you don’t implement data deletion mechanisms.
- Data security in FinTech is the top concern for 70% of banks consulted during the Sixth Annual Bank Survey.
- According to the Ponemon Institute 2019 Study, capital market firms and banks spend approximately $18.5 million every year to combat cybercrime.
- The annual cost of hacker attacks is up to $18.3 million per financial services provider. These providers collect high volumes of personally identifiable information, including financial, contact, and health data about customers, visitors, and employees.
- Hackers can exploit system weaknesses to access this information and use it for financial fraud and data theft. Most companies don’t know about the attacks until it’s too late.
- According to Bitdefender’s survey, around 64% of companies aren’t aware of data breaches in their systems.
Regional FinTech security requirements
Financial technology applications must follow KYC (Know Your Customer) practices and regional data protection regulations.
Building a secure FinTech application requires practical tools and familiarity with local regulations. Otherwise, you risk isolating yourself from specific markets.
Cybersecurity requirements for FinTech applications vary based on your company’s location and targeted markets.
Let’s look at the most common regulations for data protection across different geographical locations in the financial services industry:
- GDPR: A set of rules for protecting privacy in FinTech applications that process information about the European Union’s residents.
- PSD2 : The revised Payment Services Directive regulates electronic payment services activities in the EU to help banking services secure their tech.
- eIDAS : Electronic Identification and Trust Services is another EU regulation for cross-border electronic transactions. It aims to provide a common legal framework for secure transactions between FinTech organizations, businesses, governmental entities, and end-users.
- FCA : The Financial Conduct Authority supervises financial services in the United Kingdom. This regulation focuses on secure protection for consumers and market integrity
- GPG13 :The Good Practice Guide affects service providers and outsourcing companies involved with the UK’s governmental system. This compliance guide is a part of the official Security Policy Framework that focuses on cybersecurity, events logging, and intrusion detection systems.
- APPI : The Act on the Protection of Personal Information applies to financial technology vendors that handle Japanese residents’ private data
- PIPA : The Personal Information Protection Act regulates private data security measures for private and governmental organizations in South Korea
- PCI DSS : Payment Card Industry Data Security Standard applies to entities that gather, process, and use credit card information
- ISO/IEC 27001 : A set of FinTech security standards for information security. It contains policies and frameworks that can help organizations worldwide establish and maintain protected data management systems. Its policies include Cryptography, Access Control, Clear Screen, and Informational Security.
Companies that care about their reputation and financial well-being must leverage and implement the latest techniques and approaches to data security.
Let’s take a look at some of the best practices for building secure FinTech solutions.
Encryption and tokenization are incredibly effective financial security solutions. You can protect critical data with complex encryption algorithms, such as RSA, Two-Fish, 3DES, SHA.
- RSA. A highly secure asymmetric algorithm with public encryption and private encryption key.
- Two-fish. A freeware algorithm that encrypts data into 128-bit blocks.
- 3DES. The preferred encryption method for encrypting credit card PINs. Triple DES divides data into 64-bit blocks and ciphers each one three times.
Tokenization is the process of replacing sensitive data with a generated number (token).
Secure application logic
A strict password policy is imperative for FinTech security. Additionally, You should implement precise authentication technologies, such as:
- One-Time Password (OTP) system. Dynamic PINs work as extra layers of protection. How do they work? The application automatically generates an additional limited-time password each time a user wants to log into the account or complete a transaction.
- Mandatory password change. Over 80% of data leakages and breach incidents in 2019 were a result of password compromise. FinTech organizations can significantly reduce security risks by forcing a regular password change for customers and employees. For example, many online banking applications enforce resetting of users’ account passwords every three or six months.
- Security Monitoring. With a tracking system, you can analyze suspicious activity (such as failed log-ins) to detect instances of unauthorized access. Furthermore, this solution can prevent data breaches by blocking an account after several suspicious transactions.
- Short delay log-in sessions. Reduced session time is handy for the protection of financial data. Why? Because even if a hacker gains access to the account, he’ll have limited time to capture important data.
- Adaptive authentication. Multi-factor authentication is no silver bullet. In fact, it can even amplify data breach risks (for example, if a hacker manages to clone your smartphone). But with adaptive authentication, your system **will analyze users’ behavior to detect suspicious activity. As a result, your platform will gain extra protection of financial data and personal information.
Cybersecurity is not a solution. It’s an ongoing process you should integrate into the core of the SDLC (Software Development Life Cycle).
Internet security institutions register over 350,000 malicious and potentially harmful applications every day.
DevSecOps methodology makes cybersecurity an integral part of the production pipeline, including architecture design, coding, and testing phases.
In 2017, PwC conducted its “Global Fintech Report”, stating that 82% of financial institutions expect to partner with FinTech firms within the next five years. With this sort of meteoric growth, we should expect to see a similarly expansive growth in the need for cybersecurity in this sector.
Many FinTech companies, understanding the risk, already employ bank level security measures with their customers’ data. Within the industry, the standard is secure socket layer (SSL) encryption as well as Verified Site Certificates, in order to make sure data is not being intercepted and to reduce the likelihood of phishing or Man in the Middle attacks. Furthermore, firewalls are a necessity in order to defend from outside malware as well as DDoS attacks.
While the investments in cybersecurity seem costly, FinTech companies must consider the benefits.
Settlements for breaches can break the bank, and the loss in public trust after a breach could irreparably ruin a country. Insurance rates for data protection go through the roof after a breach, so make this much smaller investment upfront rather than deal with the cost later in the courts, legal and of public opinion.
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