Did you know that the global FinTech market was valued at nearly $294.74 billion in 2023 and is projected to reach $1,152.06 billion by 2032?
Impressive, right? Undoubtedly, FinTech is the fastest-growing industry in the world today. Powered by cutting-edge technologies like blockchain, artificial intelligence (AI), and cloud computing, this industry delivers unmatched speed, convenience, and innovation in financial services.
However, the colossal FinTech expansion presents opportunities and threats. To address these challenges, cybersecurity has become not just an option but an operational necessity. In this blog, we explore the best practices that FinTech companies can adopt to secure their systems and protect user data.
Why Is FinTech Cybersecurity Important?
The risks of cyber threats are greater than ever, especially for the FinTech industry, and these threats can lead to millions of dollars in losses overnight. These are not merely hypothetical warnings; history has left us with costly lessons.
Take Equifax, for example. It is a reputed multinational consumer credit reporting company in America. In 2017, it faced one of the biggest data breaches of the century, losing more than $4 billion in just a few days. Hackers spotted vulnerabilities in their systems and exploited user data of over 147 million people.
Paying a deadly cost for the lesson, Equifax spent around $1.4 billion to enhance FinTech cybersecurity and regain customers’ trust in the market, proving how important cybersecurity was in the first place!
This isn’t something that happened only to Equifax. The FinTech industry is littered with examples of similar catastrophic breaches:
- In 2014, JP Morgan Chase faced a massive cyber attack that leaked data of over 76 million households, which cost them millions for recovery.
- In 2019, First American Financial Corp.’s vulnerability in their system exposed 885 million sensitive records, leading to significant reputational damage and financial loss.
Where each data breach currently costs $5.9 million on average to the financial sector, these instances are expected to rise in the future, making it critical to consider FinTech cybersecurity seriously.
What Drives Cybersecurity Vulnerabilities in FinTech?
Till now, FinTech Cybersecurity threats are quite common, but what are the reasons that make FinTech more prone to Cybersecurity Threats? Let’s discuss them one by one:
Data Security and Privacy
FinTech companies handle the sensitive information of users, including financial and personal data that further compromise their bank details, transaction histories, unique identifiers, and more. Thus, it becomes challenging to handle so much data, making them more susceptible to breaches and unauthorized access.
Regulatory Pressure and Compliance Gaps
Many national and international regulations become important for review when providing financial services globally. Thus, FinTech companies are obliged to adhere to these security and compliance standards. Any failure to miss any of the regulations can create exploitable gaps in the FinTech infrastructure.
Integration With Third-Party Services
FinTech software relies on third-party vendors for services and integrates APIs for data storage, payment processing, and more. Although these alliances are quite vital for effective operations, they also expose the platform to potential risks.
Cloud-Based Infrastructure
Fintech service providers run their software on cloud solutions to run their software and manage data. Although these cloud platforms provide scalability and flexibility, any improper configuration or unauthorized access leads to data breaches.
Insider threats
FinTech businesses often employ a consistent number of individuals who have direct access to sensitive financial data and critical systems. While this access is necessary for operational efficiency, it also introduces risks that can compromise cybersecurity and lead to data theft. Sometimes even causes unintentional actions that expose data to external threats.
Proven Practices To Ensure FinTech Cybersecurity
To protect their systems and data, fintech companies should adhere to the following practices:
Secure Coding
Ensuring security at every stage is essential to providing secure FinTech Development services. For that, the development team should carry out secure coding methods, as even a minor exposure could put the whole business at risk. They should consider crucial aspects like proper logging, input validation, authentication, password management, cryptography practices, and more on the final deployment. Training on OWASP Top 10 and SANS Top 25 can help developers avoid common coding flaws and ensure their applications are resilient against potential threats.
Regular Vulnerability Assessments
Companies should carry out regular testing to identify vulnerabilities and maintain the security of their platforms. Most commonly employed penetration testing mimics the cyberattacks to point out the threats and fix them before real attacks.
Other than that, many automated tools are available that can identify misconfigurations, weak ends, and even outdated software. In this way, companies can update their software and systems with the latest security patches and rectify these vulnerabilities.
Third-Party Risk Management
As previously mentioned, third-party partnerships are crucial for many reasons, like:
- Cloud hosting and storage
- Computing platforms
- Financial service APIs
- Banking integrations
- Data analytics and ML algorithms
- Marketing automation
- and more
Any exposure to cyber threats in third-party services can halt the FinTech company from building a secure and resilient digital financial ecosystem. However, to avoid risk from these third-party compliances, FinTech companies should verify and even monitor their cybersecurity protocols. They can carry out independent audits and assess for new vulnerabilities.
Implement Data Encryption And Two-Factor Authentication
Businesses should build FinTech applications with strong security measures such as biometric identification, two-factor authentication, data encryption, and more.
Biometric technology allows users to access their accounts using unique biometric data, such as fingerprints or facial recognition. It effectively prevents unauthorized access by unknown parties.
Through multi-factor authentication, users must provide at least two forms of identification, such as an email address and a mobile number. This adds multiple layers of security and ensures legitimate access by verifying identities through valid One-Time Passwords (OTPs).
A strong data encryption feature secures the financial information shared on the platform by encrypting the data both in transmission and at rest. Companies can leverage advanced encryption algorithms like AES-256 and implement end-to-end encryption for user communications.
Comply with Industry Standards and Regulations
In order to protect user data, companies should first be aware of industry standards and adhere to these regulations to maintain fundamental security levels. Some of these basic regulations include PSD2 (Payment Services Directive 2), KYC (Know Your Customer), AML (Anti-Money Laundering), and more.
Conclusion
In the FinTech sector, data security is crucial for defending against cyberattacks and protecting private financial data. As companies embrace technological advancements, they must not hesitate to adopt robust cybersecurity practices to stay strong against evolving threats.
At Webcom Systems, we provide fintech cybersecurity solutions tailored to safeguard your platforms, protect sensitive data, and ensure compliance with industry standards. Partner with us to strengthen your fintech operations and gain customer trust with unparalleled security measures.
Recommended Read: How Blockchain Is Revolutionizing the Fintech Industry?