Despite COVID-19, the future of fintech looks stronger than ever. According to Pulse of Fintech H2 2021, global fintech investment reached $210 billion which is staggering. This is double from the year prior demonstrating the industry is thriving through the COVID-19 pandemic.
If your business falls within peer-to-peer lending, personal investment, or even payment processing, financial technology plays a critical role in ensuring your operations run smoothly and efficiently. Technology provides greater flexibility and delivery of traditional financial offerings to new and old clients alike.
But What Does this Have to Do with Cybersecurity?
You’re under constant pressure to rapidly deploy applications to provide a unique experience for your customers. But keeping up with the speed of business makes it difficult to manage the security of your technology. Vulnerabilities can arise anywhere, from the initial app development to the ongoing dev testing processes, and even in third-party integration.
How Can Fintech Firms Achieve Compliance?
Seemingly overnight, fintech went from being the face of disruption to facing disruption. Originally praised for being the technology that disrupts traditional banking, many fintech firms began venturing into the realm of their institutional competitors.
Not only did this newfound success attract malevolent parties, but it also caught the eye of authorities looking to increase regulatory scrutiny. This left many fintech firms with a big problem –– how to find the balance between innovation and compliance costs?
In this post, we’re looking at common fintech security issues firms are faced with, and how to choose compliance and innovation.
[Related Reading: Financial Services Compliance Requirements: An Overview]
Top Fintech Security Concerns Your Company Needs to Address
Fintech security concerns are real, and it’s essential for businesses to fully understand the security and compliance challenges associated with fintech. The need to protect your customer data is greater than ever. Exposing your customer base to potential threats won’t just hurt your business –– it will affect the overall adoption rate of future fintech solutions within the industry.
Following are some fintech security issues to look out for.
Combatting the “first-to-market” urge
As the fintech market continues to expand, companies are pushing to get products to the market as quickly as possible. Unfortunately, many of these businesses disregard fintech security standards or overlook compliance regulations while doing so.
Security must be built into the framework and policies, without inhibiting the engineering process. And to do this, companies must stop racing to get their products on the market as fast as possible and spend more time addressing fintech security concerns.
Growth discrepancy between technology and regulation
Fintech innovation moves at a faster pace than regulatory changes. Because of this, many companies see fintech compliance regulations as a hindrance that makes it harder to meet core objectives and deliverable dates. Often, this hindrance is due to poor communication with regulators, not the regulatory framework itself.
One way you can minimize these fintech security issues is by keeping an open channel of communication with regulators. An open dialogue demonstrates an effort to better integrate within the financial space, while allowing you to finely tune your business goals to meet new and existing fintech security requirements.
Interfacing with banks without proper protection
According to a recent report on cybersecurity trends, the financial sector experienced a 185% increase in high-risk vulnerabilities. These may be exploited by threat actors to carry out malicious actions such as installing ransomware.
With many fintech companies interconnected within the banking ecosystem, more financial institutions are passing the security burden down to fintech providers. This often leaves providers constantly battling to keep up with enterprise banking and fintech security standards, while operating with limited staff and resources.
Overwhelmed fintech providers have a harder time identifying and addressing fintech security concerns before they turn into security problems. This leaves customers vulnerable to attacks, especially newly banked entrants who aren’t adequately educated on their application’s security.
Understanding consumer data sensitivity
The consequences of mishandling consumer data are severe. Customers’ personal and financial data represents individual retirement funds, investment plans, and bank accounts. The financial industry is typically among the most targeted verticals for cyber criminals and last year was no different. According to IBM’s 2023 Cost of a Data Breach Report, the average cost of a breach for financial services is $5.9M USD which is second only to the healthcare industry.
For fintech firms, a data breach or information leak could put the company in jeopardy. Cyberattacks could also jeopardize the fintech landscape as a whole, by leading to stricter fintech compliance regulations. That’s why it’s essential for all business-critical applications to adopt a fintech security approach that’s proactive and security-centric.
Maintain a Culture that Prioritizes Fintech Security
Now that we’ve covered some common fintech security concerns and compliance challenges, here’s how you can maintain a proactive security approach going forward.
Adopt a security-centric approach
Before jumping straight into development, take some time to consider the best fintech security practices for your IT infrastructure. When developing innovative technology in the financial sector, having a strategy that addresses key fintech security concerns can prevent a lot of future problems. A well-planned security strategy can help you avoid roadblocks in the future that could affect your customers’ risk levels.
Understand compliance mandates within the finance industry
Fintech compliance regulations can feel like a gray area from time to time. It might seem like your business doesn’t have to adhere to the same fixed mandates as traditional banks do, but this isn’t the case.
An ImmuniWeb study found that 64% of fintech firms failed to meet GDPR compliance, and software vulnerability was the biggest compliance-related issue. Similarly, 62% of firms failed at Payment Card Industry standard (PCI DSS) compliance. The major cause for that failure was due to deploying outdated software.
This is why open communication with industry regulators is important. Doing so can ensure you understand the necessary fintech compliance regulations your firm must follow, prior to any development.
Gain visibility into the entire infrastructure stack
Providing effective fintech cybersecurity requires complete visibility of your IT environment. This visibility starts by prioritizing assets, based on company value and the value potential attackers see.
You should also assess your environment for misconfigurations and vulnerabilities. This will help you better understand which channels are susceptible to attacks.
If third-party integration is a core component of your business, you should investigate their vulnerabilities also. The goal of a proactive fintech security approach is to understand:
- What you’re securing
- Which areas require the most attention
Complete visibility gives you the awareness to identify any potential threat vectors before malicious parties do.
Leverage technology and expertise to achieve fintech security
The need to safeguard your applications is greater than ever. The increasing rate of “new bankers” in the industry continues to draw attackers eager to take advantage of those ignorant to fintech security concerns. As your company continues to grow, having a comprehensive security solution will help your business save time and money.
Fortra’s Alert Logic offers one of the top fintech security solutions in the industry. It’s backed by security experts who have the knowledge and expertise to identify real threats and prevent attacks.
You want to pay for outcomes, not tools. Integrating fintech security with around-the-clock protection from security experts will strengthen your security posture, keeping you better protected against incidents that can cause damage to your business.
Ready to get started? Talk to an Alert Logic specialist today and see why we offer one of the best fintech security solutions on the market.