This era of digitalization and digitization, where every segment of businesses is using technology to provide services to customers, banking and financial industry has transformed their services by financial technology- FinTech.
Fin Tech were providing their services in the form of e-wallets, online and mobile payment systems (Paytm,PayPal, Apple Pay), virtual buying of stocks, etc. But the recent times did bring a bunch of new disruptors that will displace traditional e-commerce providers.Such new FinTechstart-ups are offering more efficient services, seamless customer’s experience, and free person-to-person payments.
FinTechs business can increase profitability and enhance a company’s performance while helping them improve customer service. FinTech also provide an opportunity for companies to expand their portfolio online while solving industry issues such as credit card processing, money transfers, or processing a loan.
But everything is not so smooth with Fintech business. There are few cyber security challenges and risk associated with Fintech business, which every FintechStatups shall be aware of.
What is Fin Tech?
Fin Tech is the abbreviation used for Financial Technology which aims to compete with traditional method of finance. There are many financial institutions consider this term as backend of their business and sometimes regular banking apps are included in this term.
Fintech business includes mobile payments, money transfers, loans, crowd funding, asset management and many other things.
In simple words-FinTechis the implementation of modern technology in traditional financial services and in the management of financial aspects in various companies and business. Anything from the financial mobile apps and new software installed, processing the money transactions and calculating business models.
Risk in Financial Sector:
Even, in general ,every individual and organisation , are worried about information and cyber security , conditions in financial sector is more critical and fin tech business take the issues more seriously. Some of the recent studies shows that banks are investing a large amount of their funds in designing and implementing security to safeguard themselves from cybercriminals
Few more areas of concern includes cloud based technologies, mobile updates and system upgrades. These findings show that cyber security is the most important risk which the Fin Tech companies are facing.
Cybercrime and Cyber security in FinTech Landscape
As FinTech start-ups and companies continue to disrupt the global financial landscape, a peculiar feature and perhaps their biggest advantage is that they are not held back or burdened by law, regulations, or existing systems. Also, they are more aggressive, more agile, and more willing to explore and make risky choices. But this total dependence on technology and adventurous attitude to aid financial services delivery may also be their greatest weaknesses.
Fintech firms are facing Cyber SecurityChallenges in following areas
FinTech firms mainly relies on applications that can access users’ financial profiles to perform a variety of real-time transactions. Applications are used by multiple persons and, are an increasingly common attack vector, and vulnerable code can be exploited as an entryway into financial networks.
FinTechfirms and Banking companies need to ensure that a secure application security strategy such as a virtual private network is in place to protect user data. This should include a web application firewall enabled with current threat intelligence to identify and mitigate known and unknown threats, as well as to detect and patch vulnerabilities
Network and Cloud Security
Like other organisations, manyFinTech firmsalso utilize cloud services to provide consistent, scalable performance with lower upfront costs, rather than the traditional network. However the cloud infrastructure shall be secured differently than a data centre or traditional network. Banks and FinTech firms must ensure that the same security standards they apply to their networks are applied in the cloud.
Along with detection and prevention, this security must also be dynamically scalable andadaptable to ensure that is can grow seamlessly alongside cloud use. Additionally, in order to secure financial data, FinTechfirms need to implement aloud access security, along with internal segmentation to improve data visibility while integrating industry security standards.
Inadequate Threat Intelligence
Threat Intelligence is another challenge for FinTechfirms, an integrated defence needs to be enabled with automated threat intelligence to become a holistic system. As FinTechfirms andbanks enter partnerships, it will be impossible for IT teams to gather and assess all of this threat intelligence promptly manually. Automation, artificial intelligence and Machine learning will be integral to this process.
Cybercriminals are already leveraging automation to make attacks more persistent and effective. Likewise, artificial intelligence, machine learning and automation integrated into network security tools enable the detection and prevention of attacks in real-time, allowing organizations to keep pace with cybercriminals.
Lack of Establishment of better Security Protocols
This is one of the most significant issues that FinTechstart-ups firms face is selecting best security mechanism, like securityprotocols to enhance encryption data. Inadequate security protocols, data is easily exposed, leaving companies vulnerable to attacks.
Tunnelling protocols used in VPNs are effective at encrypting FinTech data. Some of the best-known tunnelling protocols include:
- Point-to-Point Tunnelling Protocol.
- Layer Two Tunnelling Protocol.
- Internet Key Exchange version 2.
- Secure Socket Tunnelling Protocol.
These tunnelling protocols provide different levels of protection and provide security in different ways. FinTech should research and become more familiar with the different types of protocols and how to use them within a virtual private network – this is especially true in a financial environment where cyber threats are imminent and ongoing
Addressing Vulnerabilities in Information Technology Systems
Integration of multiple systems and technologies leads to multiple cyber vulnerabilities. When two systems that are not designed at the same time by the same developers often pose compatibility issues and challenges in security, given the limitations in technology. Technology Engineers face issues while integrating two different systems, sometimes engineers working on different systems doesn’t even know how the other system works and vice versa, which makes identification of vulnerabilities more difficult.
Cybercriminals like hackers exploit these vulnerabilities to gain access to the system.
Many cybercriminals gain access to applications and networks because of improper configuration during installation. There are other techniques that are often used like spear-phishing, where humans mistakenly open spam emails and download malicious attachments or enter confidential information into fake websites to which they are redirected. So this is important for all Fintech Statups to raise awareness of cybercriminal risks and educate the newly banked on digital and financial literacy to teach them best practices to ensure security when engaging in financial transactions online.
Lack of Compliance Regulations related to Cyber Security
Rapid growth in happening fast in FinTech firms. FinTechstart-ups are flexible enough to change and adapt to evolve alongside consumer demands, rapidly.They are flexible andquick partly because there are not the same regulatory rules as traditional financial services for them. However, there are no regulations are controlling the way start-ups conduct their business. This is making the FinTech firms vulnerable because, they can sacrifice cyber security in order to capture the market as fast as possible.
FinTech Companies are collecting and storing personal information, so they needs to safeguard customer data. Further the challenge of is the way they protect this data. Many of FinTech firms have adopted bank-level security measures and fine-tuned them for their digital platforms.
Use of secure applications , regular vulnerability assessments on networks and applications , patching the applications on time, using Secure socket Layer(SSL) encryption while transferring the data is the must for enhancing cyber security.Fintech can opt for ISO 27001:2013 (ISMS) for overall cybersecurity.
There is need of some strong regulation, which would inspire start-ups to invest some of that venture capital money into their security. As the FinTechindustry grows, so will their defence against breaches.