Why should Fintechs focus on adopting effective cybersecurity solutions?
Fintech companies are booming at a staggering rate. While traditional establishments are struggling to keep up with rising demands, evolving technologies and retain customers, Fintech startups have been proving a better alternate solution. This is because unlike conventional companies, they also have features like cryptocurrencies, online loans, and Robo-advisors. Besides, they provide more convenience, more advanced services, and improved user experience. It can enhance a company’s performance and increase profitability too. Fintech has successfully managed to attract market with companies based on banking and capital, asset and wealth management, insurance, and funds transfer and payments. Meanwhile, the payment and lending sector has already started moving to digital platforms. But irrespective of the type of company, or service, Fintech startups and traditional companies that are also exploring multiple digital channels to offer better customer experience face a common challenge: cybersecurity. And cybersecurity risks have increased a lot post the COVID-19 pandemic.
In a recent IBM Security study comprising of 2,000 US professionals, the company found that 80 percent of the subjects had never or rarely worked from home, and 50 percent stated of being worried about cyber threats. The even shocking insight was that 52 percent of professionals said they were using their personal laptop to work remotely, often with no added security software installed, and 45 percent informed that they did not have any prior training to work remotely securely. Similarly, the situation in Fintech industry is also grim. The increasing threats by cybercriminals can change the trajectory of this industry that is currently experiencing a massive uptick. In short, its future hinges on how secure is the cybersecurity architecture.
Sunil Seshadri, Chief Information Security Officer, Visa had once quoted, “Fintech innovations deliver tremendous economic and social benefits, connecting unbanked and underbanked populations to the digital economy. Thus, contributing to small business growth and empowering consumers in new and exciting ways.” So, any breach can lead to an immense loss in this sector, i.e., in terms of economy, market reputation and customers. Additionally, such unfortunate incidents can also compromise organizational and personal data of users on a substantial magnitude. According to the Global Risks Report released at Davos, released in the previous year, cyber-attacks as the fifth greatest threat faced by humans. Not only they are becoming increasingly common, but hackers are also using modern technologies like Artificial Intelligence to make them more sophisticated, advanced and harder to detect.
Integrating traditional based systems with modern technologies is a huge problem for Fintech. Hackers exploit these vulnerabilities to launch malware attacks. Simultaneously the mismatch between technology and regulations will grow. While circumventing regulation is part of a cost advantage, cybersecurity experts are worried about how relatively new and unknown companies will handle their personal banking information. Fintech-driven banks often use a cryptocurrency that is not formally regulated by any set of standards and global regulations. With no proper governing law, many financial institutes are sidestepping the security mandates while risking themselves to go bankrupt and personal data of their customers.
Another issue that is common is since the number of companies offering digital financial services is proliferating; they might not be compatible with the older ones. This is because, developers from either side do not have access to the entry points, workflow, of developers in another. As a result, the expansion of these systems creates the potential for weak points, where hackers and cybercriminals can infiltrate systems and access sensitive information. To protect these systems, interfaces between digital financial systems should be subject to rigorous scrutiny and testing during the product development process. Further, with the increasing no of mobile devices and online payment option provided by several Fintech, the traditional bank activities are now available to almost everyone.
According to a World Bank report, the global number of adults who lacked access to a banking institution has decreased by 20 percent from 2.5 billion in 2011 to 2 billion in 2014. Hackers can take advantage of these new group by pretending to be a representative wing of their bank or financial institution, tricking them into downloading malicious software, sharing sensitive information or entering passwords into an insecure, fraudulent website. To minimize these instances, we need to educate them via programs regarding digital financial literacy. They should also be advised to have proper encryption system in their mobile phones.
As this sector continues to expand, the cybersecurity risks will also compound with it. As cybersecurity specialists are revisiting conventional security models, Fintechs must find ways to invest and use their existing resource more effectively. To outsmart hackers, and retain customer trust, measures must be taken to identify and mitigate such risks that help maintain the synapse between robust cybersecurity solutions and the financial institutes.