With growing digital technology landscape, fintech needs to address increasing data privacy risks.
Since technology has transformed every industry across the world, it opens a path where companies can innovate and drive innovation into their businesses. In the same line, Fintech (Financial technology) industry has experienced prodigious growth and represents the next level of the evolution of financial services. That assists technology and tech-driven startups and new market entrants to innovate products and services currently offered by the traditional financial services industry.
Fintech industry also refers to technological innovation in the financial sector and consists of both back-end and consumer-facing services, such as cryptocurrencies like Bitcoin to peer-to-peer lending sites. The growth in fintech has given new opportunities and alternatives in areas that only a decade ago were controlled by traditional banks and lenders.
Fintech has disrupted all facets of the industry, including banking and capital markets, asset and wealth management, insurance, and funds transfer and payments. It hasn’t only led to the growth of startup but also started disrupting the way traditional banks offer services to customers.
Since fintech has grown abruptly and provides an array of advantages like a significant reduction in costs, enhanced customer retention and discrepancy of financial institutions from the competition, it also presents threats and uncertainties. Security and privacy are top threats to the rise of fintech, doesn’t matter what the size of businesses, no financial institution is immune to the threat of cybercrime.
The Rising Threats of Data Security and Data Privacy in Fintech Companies
The financial services sector levers susceptible information about individuals and enterprises. And now, with the rise of financial technology, more data is now available in digital formats that make it easier to assess and make insights but also makes the data more vulnerable to security breaches.
According to the reports, in 2018, UK financial services firms reported the number of breaches to the FCA increased by 480 percent compared with 2017 and making the industry second only to retail in terms of the most affected sectors by cybercrime.
As more services accessible online, data ubiquity, and consequently data security, are creating a way to be a major challenge for fintech. Additionally, the integration of new technology with legacy systems will raise concerns pertaining to data collection and data privacy. As more penetration of online and phone banking services increases, enterprises are capable of reaping huge amounts of data about customers and visitors.
That data collected is typically stored and scrutinized to produce insights into customer purchasing patterns, marketing, sales, and acquisition and retention strategies. Some of this data might also contain personally identifiable information and financial and health information. And this ultimately led to malicious actors exploiting the issues by contacting customers and posing as bank staff with the intention of stealing significant amounts of money.
Securing this data and offering it to customers and third parties in a secure manner and when required is a great challenge for the industry. It doesn’t mean companies lack aware of cybersecurity. Several fintech firms realize the significance of cybersecurity, given that the uptake of this new technology relies heavily on customers’ trust in these firms to secure their data.
Easing Challenges to the Financial Services Industry
As financial institutions are heavily relying on digital technologies, security concerns and data breach incidents can lead to ever-present threat.
With augmented regulatory scrutiny and cybersecurity tools and techniques which is developing at a rapid pace, several organizations also are striving to deploy an apt defense strategy in-house.
Organizations can take small strides to quickly detect, isolate and resolve data privacy and security issues, and lowering business impact. Training is an indispensable component for in-house security teams to keep adapting with current and emerging threats and data protection issues.
Organizations can also access a devoted team with knowledge and skills to deliver a germane and risk-appropriate cybersecurity strategy through cyber security-as-a-service (CSaaS) approach. The approach can also implement to people and processes, as a company’s workforce is the main heart and weakest point of an organization, and always remains vulnerable and on target by attackers.
For instance, employees often could forget passwords, fail to detect malware or open phishing emails that can lead to attacks. Thus, there is a blended method of technology, procedures, and shared behavior is required that fortifies the need for staff awareness and education of the risks, in order to effectively address the threat.
Today, awareness of cyber risks is increased across countries and many authorities have their own frameworks to mitigate the risks and protect financial systems. To conquer the cybercrime and data breaches incidents, financial institutes must be comprehending the significance of effective cybersecurity defenses and processes. They have to be fostered this at every level of the organization.
Governments also must standardize their policies and guidelines to guarantee an adequate level of cybersecurity and data privacy while encouraging innovation. In an organization, if any employee can be a weak link, firms must prioritize their defense strategy and remain acquiescent with increased regulatory requirements, because potential risks could lead the company’s financial and reputational damage.