Despite the effects of the global pandemic, the future of fintech looks stronger than ever.
According to The Pulse of Fintech H1’20, global fintech investment reached $25.6 billion in the first half of 2020. While fintech investment was down from 2019, the industry remains robust despite setbacks caused by 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. 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.
What can fintech firms do to achieve compliance?
Fintech went from being the face of disruption to facing disruption seemingly overnight. 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, it also caught the eye of authorities looking to increase regulatory scrutiny. This left many fintech firms with a big problem –– how do they find the balance between innovation and compliance costs?
In this post, we’re going to look 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.
Below are some fintech security issues to look out for.
1. Combatting the “First to Market” urge
Overall, 2020 was a good year for the fintech market. Despite the COVID-19 pandemic, digital financial services grew in all areas except lending. In December, 2020, the World Bank published a global fintech report looking at the performance of 1,385 fintech firms around the world. They found that:
- 60% of firms launched new products within the first half of 2020
- Only 40% of firms have introduced (or they’re in the process of introducing) tighter security measures during the global pandemic
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 also 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.
2. Growth discrepancy between technology and regulation
Fintech innovation is moving 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. More often than not, 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.
3. Interfacing with banks without proper protection
According to a 2019 fintech cyber security study…
- 98% of the top 100 global fintech startups have vulnerabilities in their websites and mobile applications
- 100% of applications contain at least one medium-threat security risk
- 97% of applications have a high-risk vulnerability, or at least two medium-threat risks
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.
4. Understanding the sensitivity of consumer data
The consequences of mishandling consumer data are severe. Customers’ personal and financial data represents individual retirement funds, investment plans, and bank accounts.
According to a 2019 Accenture report, Cost of Cybercrime, the average cost of cybercrime is $16.7 million for banking companies. That cost is 28% higher than the average for other industries included in the report.
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.
How Do You 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 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 a 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 combat the constant flow of threats
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.
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.