Why enhanced security is critical to FinTech services
In recent years, there’s been a dramatic explosion of digital financial products and services. While the industry’s rush to disrupt and innovate is ongoing, several risks make security-critical to FinTech services.
The integration of existing financial solutions with modern FinTech services, for example, raises significant concerns over data security. When FinTechs make mistakes, it’s usually attributed to the volume of initiatives, technological innovation, and the complexities and multiplication of industry regulations.
Furthermore, although established financial services providers have robust frameworks, industry-driven initiatives, and standards for testing their security protocols and third-party service providers, it doesn’t always happen.
This is concerning when you consider that 98% of the planet’s top 100 FinTech startups are vulnerable to mobile and web application attacks. This scenario remains true even with extensive funding.
When it comes to security, privacy, and compliance issues, all of them were attributed to the abandonment of application program interfaces, forgotten subdomains, and web applications.
The study also found a similar level of vulnerability among leading banks, with 97 out of every 100 banks vulnerable to mobile and web attacks that lead to data breaches.
What are the key security challenges faced by FinTech firms?
Research suggests that financial services firms are an astounding 300 times more likely to be targeted by a cyberattack than other companies. To mitigate risks, FinTech firms need to identify critical challenges and respond to them effectively.
So what are the primary challenges and risks?
There are a whole host of issues to worry about, but the main ones are as follows:
- Application security risk
- Cloud security risks
- Cross-platform malware infection
- Data breaches
- Digital identity risks
- Evolving data privacy laws
- Heavy dependence on sensitive user data
- Inadequate threat intelligence
- Legacy banking systems
- Money laundering risk
- Ransomware attacks
- Sharing enormous amounts of data securely
If all of the above weren’t enough to contend with, FinTechs also have to deal with increasingly sophisticated cyber threats. This is the primary reason why even the largest technology companies with enormous cybersecurity budgets sometimes suffer a data breach.
What steps can FinTech companies take to boost privacy and security?
Right from the first discussion, FinTech firms must strive to make security the foundation of their offering. This means that security must remain at the forefront of decisions concerning hardware, software, the choice of programming languages, and more.
Financial services firms should also make ethical hacking and encryption a core part of their security philosophy. This approach will go a long way to help organizations stay a step ahead of threat actors (with the insurance of cryptography if the unthinkable happens).
Deploy a Hardware Security Module (HSM)
This is the first step in a FinTech startup's journey to optimize and build trust with customers. To comply with the European Payments Directive 2 (PSD2), FinTech services must leverage HSMs to complement all available authentication solutions.
In this scenario, enterprises are well-placed to use a certified-PCI and/or FIPS provided by HSM. The objective of PSD2 regulation is to enable enhanced protection with double or triple-factor authentication. This means both the customer and the entity must take steps to combat the risk of fraud, theft, and impersonation.
Engage in real-time monitoring
Whether it’s mobile or online, real-time monitoring is key to identifying suspicious behavior and quickly mitigating risk. When dealing with oceans of sensitive data, it’s also essential to leverage artificial intelligence to be alert to potential threats.
This approach also helps financial institutions fight against money laundering and other nefarious activities in real-time.
Deploy robust encryption tools and technologies
Encryption is like an insurance policy. In the unfortunate event of a data breach, you can rest assured that all stolen data is rendered meaningless without decryption keys.
If we take Canada's financial services app, Dave, for example, fell victim to a data breach that exposed 7.5 million customers' sensitive information. The security event was the result of a cyberattack against its former third-party service provider, WayDev.
In this scenario, the hacker could access sensitive user data like names, passwords, birthdates, emails and physical addresses, phone numbers, and more. This security event could have turned out differently if the databases were encrypted correctly.
The right encryption technologies for FinTech firms depend on their strategy. These tools and technologies are also categorized and based on where they are implemented in your technology stack.
As performance is critical to enhanced user experiences, FinTechs must strive to find the right balance between security and performance. Threat actors actively look for encryption keys, so the deployment of secure management protocols is imperative.
You can read all about encryption in our previous post HERE.
Employ an ethical hacking company to identify vulnerabilities
Like anything in the world, there are good people and bad people. The same is true when it comes to hackers. Whitehat or ethical hackers are now vital to fortifying FinTech infrastructure because they think like blackhat hackers and secure systems before they are beached.
In this scenario, ethical hackers will engage in penetration testing and more to breach your system. This approach helps financial services providers evolve with the threat and mitigate risk by identifying holes in the infrastructure missed by in-house security teams.
However, it's critical to partner with an established and reputable ethical hacking services provider to secure your FinTech services.
To learn more about securing your IT infrastructure with military-grade encryption and ethical hacking services, schedule a commitment-free consultation now.