Cyber Security
Cyber Security In Fintech: 8 Reasons Why Is It Important
Updated 01 Nov 2023
According to a European multinational information technology service and consulting company, Atos , $50 billion is invested yearly in fintech. The same report highlights that two out of three financial transactions are now done online. Another report by Allied Market Research shows that the global fintech market size is estimated to reach $698.48 billion by 2030. It was $110.57 billion in 2020. The rising demand for e-financing among customers, a surge in the adoption of finance technology in banks and financial institutions, and increasing use of the internet in daily lives are the forces driving the growth of the fintech industry globally.
From these statistics, we can say that the fintech industry has made a commendable transformation over the past few years. As the industry deals with the sensitive information of businesses and individuals, it is the top target of cybercriminals who want easy and quick financial gains. Therefore, it is important for firms in the sector to pay attention to cyber Security in fintech. Before we dig deeper into how’s and why’s associated with cyber security in fintech, let’s have a look at a few examples of cyber attacks in the fintech sector.
Examples of Security Breaches in the Fintech Industry
In 2020, the fintech sector in India only witnessed 60% of phishing attacks. Let’s take a glance over other global examples of cyber security attacks in the Fintech sector:
• First American Financial Corp Data Breach
Personal and financial records of more than 850 million people involved in real estate transactions were exposed due to a normal website design error.
• Experian Data Breach
Personal and professional records of customers were disclosed to a threat actor, imposing to be a client of the company, during a normal course of business. The breach impacted 24 million customers and almost 800,000 businesses.
• Block Data Breach
One of the employees of the company downloaded reports mentioning customer information, which resulted in compromising data of 8.2 million current and former customers.
• Flagstar Bank Breach
This massive data breach leaked SSNs (social security numbers), banking info, and personal information of almost 1.5 million customers to the cybercriminal.
6 Common Types of Cyber Security Threats in the Fintech Sector
1. Data Breaches
People are increasingly using mobile applications for digital payments and online banking. These applications contain a humongous amount of personal and financial data, such as bank account details, security question-answers, credit card details, etc. Bad actors steal this data by establishing phishing attacks, taking advantage of exposed API endpoints, launching malware, etc., to commit financial fraud or sell it to others to gain profit.
2. Identify Theft
Hackers stealing login credentials (username and password) of users to access their bank accounts and steal money falls under the identity theft cyberthreat. Most hackers attack APIs to compromise authentication and verification methods that keep a user’s account secure.
3. Loopholes in Integration
In order to offer financial services, fintech applications have to connect with banks by using multiple custom APIs. Lack of complete security and testing, API integration can leave room for data breaches.
4. Phishing Attacks
Phishing attacks happen when a hacker, posing to be a legitimate entity such as a bank executive or government executive, convinces customers to share their financial information or reset passwords through email or over the phone. By sending unwanted and undesirable emails or messages, hackers attempt to steal sensitive information.
5. Insider Threats
Insider threats happen when a dishonest or disgruntled employee purposely destroys or leaks an organization’s data. It could also occur if the employee falls into the trap of a hacker who pretends to be a legal entity.
6. DDoS (Distributed Denial of Service) Attacks
JDDos attacks cause a website to slow down or restrict user access by flooding it with excessive traffic from different sources and locations. This type of attack is done to create distraction and conduct serious cyber crimes and frauds in the background.
Why is Cyber Security in Fintech Important?
According to EY , up to 75% of the customers worldwide use at the minimum of one fintech service; this number is expected to increase as people are moving to contactless payments, online lending, e-banking, and a plethora of other fintech-enabled financial activities. In these times where digital or cyber threats are growing multifold, it is a must for fintech companies to maintain top-notch standards of technology and keep themselves updated with the upcoming cyber trends. Here are the eight most common reasons indicating the significance of cyber security in fintech:
1. To Secure Different Types of Data Involved
Like banks, fintech organizations also deal with sensitive data, which makes them an attractive target for cybercriminals. The day may include bank account numbers, account balances, transaction histories, personal phone numbers, and more. Having access to a huge volume of data, right from collecting to storing, makes a fintech organization highly vulnerable to cyber-attacks.
2. To Ensure Secure Sharing of Data
Cyber Security in fintech is necessary to ensure the secure and seamless sharing of data among stakeholders. Fintech companies and financial enterprises need a strong mechanism to get the consent of consumers to facilitate data sharing. The companies also need to implement top data encryption methods and modern technologies to maintain the security and privacy of data during the sharing process.
3. To Securely Manage Digital Identities
Cyber Security solutions empower fintech companies with the secure management of digital identities that most financial institutions are offering to provide an integrated and omnichannel customer experience. Any loophole in digital identity management can give cyber attackers a chance to be an imposter and conduct various frauds.
4. To Prevent Cross-Platform Malware Infections
Fintech companies involve communicating and collaborating with multiple organizations or platforms. A lack of cyber security may give a hacker the opportunity to infect one platform and propagate that malware into another platform. Along with cyber security risks, cross-platform malware infections also cause compatibility problems.
5. To Avoid Cloud-Based Security Risks
Cloud-based applications and solutions are popularly used in all domains, including the fintech industry. These are used in e-wallets, payment gateways, web applications, and mobile apps to enable security, speed, accessibility, and scalability. Cyber Security in fintech can help avoid risks involved in cloud-based solutions.
6. To Meet Compliances
Each country or region specifies particular cybersecurity compliances that should be met to ensure the safety of customers’ data and prevent cyberattacks. A fintech company also needs to follow these compliances to run its operations and ensure prevention against all kinds of online threats.
7. Due to High Cost of Breaches
The cost of breaches doesn’t only mean the money; rather it also includes damage to the reputation of the company. Moreover, it may also incur the fines a fintech organization has to pay in case of a breach. Some data breaches may even lead to legal consequences such as fines and lawsuits.
8. To Earn Customer Trust
Following a privacy-first approach by adopting robust cyber security solutions or getting cyber security services gives customers a sense of security and data safety. They would not only be loyal to your business but also recommend others to get your products or services.
Best Practices to Avoid Security Breaches in Fintech
Eliminating cyber-attacks completely is not possible; however, by implementing top-notch cyber security software, fintech companies can minimize the risks significantly. Here are some of the practices that should be kept in mind while building such software for the fintech sector:
1. Use the Secure by Design Approach
Following the secure-by-design approach while building the software and during the product development process can help keep cyber-attacks at bay. Secure-by-design is meant to integrate advanced security techniques at different stages (design, development, testing, and maintenance) of software development.
2. Follow the Shift-Left Rule
The shift-left rule means implementing security techniques in the initial stages of the software development lifecycle. It also contributes to lower the costs involved in identifying and troubleshooting bugs that might occur during software development. The rule also ensures up to a 30% reduction in maintenance costs.
3. Partner with the Right Cyber Security Consulting Service Provider
Choosing the right partner or cyber security service provider for fintech app development can help prevent cyber threats. Make sure the provider has engineers with great analytical skills. Additionally, they should perform a variety of tasks such as risk analysis, threat modeling, security testing on different stages, etc.
To Sum Up
Adopting top-notch cyber Security solutions or getting reliable cyber security consulting services will not completely stop cyber-attacks in the fintech industry. However, it will help staying aware of such threats and adopting preventive measures to prevent them and take action within time. Cyber Security in fintech enables fintech businesses to avoid identity thefts, money theft and laundering, data breaches, data leaks, application breaches, cloud security risks, spoofing, and malware attacks. So, what are you waiting for? Implement a robust cyber security solution or get cyber security consulting services to create a security layer in and around your fintech organization.
Table of content
- – Examples of Security Breaches in the Fintech Industry
- – Common Types of Cyber Security Threats in the Fintech Sector
- – Why is Cyber Security in Fintech Important
- – Best Practices to Avoid Security Breaches in Fintech
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