Fintech is a word used in modern parlance within the financial industry that refers to the use of technology and innovation for financial services and systems.
Over the years, hackers and cybercriminals have taken advantage of rapidly changing technology as they carry out organized attacks on financial institutions (FIs) by leveraging loopholes in outdated technology and human error, costing institutions millions of dollars in losses and reputational risk in the market.
To understand how to make cybersecurity foolproof to organized cyberattacks, it is important to identify new challenges in the field.
1. Cloud Computing Issues
Most digital financial services, such as payment gateways, net banking, digital wallets and digital form filling, happen through a cloud-based computing platform.
Although cloud computing offers benefits including scalability, speed and ease of access, it has a lot of data flowing into it, making it a perfect smokescreen for cyberattacks. Therefore, it needs to be secured differently from traditional local data centers.
It is vital to choose a reliable and secure cloud service provider that can design the cloud according to the needs of the customer.
2. Third-Party Access
Banks and FIs often use third-party services and software for many applications. These applications are integrated into the main systems of the institutions and become entry vectors for hackers disguised as legitimate employees or users of the third party.
To overcome cybersecurity challenges for fintech, banks must exercise discretion when choosing a trusted third-party service. In addition, they must also reduce and limit access to the main systems via any third party.
3. System Complexity and Compatibility
Big FIs and banks often have multiple branches and headquarters throughout the world, each provided with infrastructure from different manufacturers and developers.
These systems are interconnected but may not be compatible or they may create complex connections, thereby forming loopholes in the network. These loopholes form entry points for cyberattacks.
Therefore, it is crucial to stick with a single or a small number of third-party manufacturers and developers with a global reach that have a compatible infrastructure.
4. Malware Attacks
Malware attacks are the most prominent form of cyberattacks. Malware has developed in leaps and bounds and is now becoming even more challenging to detect and remove.
Unlike other attacks, malicious software can have multiple entry points from emails, third-party software, untrusted websites and pop-ups. It is especially dangerous as its rate of transfer/spread is lethal and can cause entire networks to crash.
Therefore, it is essential to choose cybersecurity infrastructure providers that update their malware detection software frequently and have features like automated real-time malware detection.
5. Money Laundering Risks
Cryptocurrencies have seen an increase in popularity in recent years and have emerged as one of the major cybersecurity challenges for fintech. The origin of the money can be anonymous and cryptocurrency can be used to launder money made through illegitimate means.
Furthermore, cryptocurrency transactions can be scams and entry points designed by hackers for data theft, causing heavy losses and problems with law enforcement.
Thus, banks and FIs that deal with cryptocurrencies should be careful and only use secured platforms for trading. They must choose trusted traders as well as universally recognized mainstream cryptocurrencies.
6. Identify Theft and Authentication
Banks and FIs often use tools like one-time payment, biometrics, passwords and other modes of authentication to provide security and verify identity. However, the drawback of these methods is that they can often be replicated and become an entry for hackers to siphon off large amounts of money.
Although these methods are useful, banks and FIs must use multiple verification gateways based on different principles to ensure difficulty in penetration.
7. Online Digital Platform
All banks and FIs have moved to online platforms. This means that most users access their accounts through mobile phones and computers, making the devices easy to hack. Thus, even if the bank’s network is secure, it cannot detect a breach in the user’s device.
Therefore, customers must conduct large transactions on more secure devices like laptops and PCs. In addition, it is recommended to install anti-virus software with real-time detection and protected browsing when banking on these devices.
Fintech must meet compliance and regulatory requirements depending on the type of service. For example, data protection laws insist on multifactor authentication and encryption for online transaction processing.
Similarly, know your customer laws make it mandatory to monitor customers for illegal practices like money laundering and tax evasion.
The regulations are based on specific services such as insurance, lending/borrowing, share market and financial advice. That said, some regulations are common compliance requirements for all institutions.
These regulations are put in place to maintain a certain standard of safety for the money and data of the customers. Moreover, ignoring these requirements or failure to meet them can lead to fines and government action.
Thus, corporations looking to crack down on current cybersecurity challenges for fintech must follow regulations to the best of their abilities.
9. Existing Banking System Migration
Banks and FIs are rapidly migrating from traditional banking system technology to better and faster ways of functioning.
But the problem that occurs during this migratory period is that the core banking systems are exposed to cyberattacks, particularly if the system consists of an older generation of technical infrastructure.
Therefore, banks must implement newer technology in phases and with appropriate security controls. They must always have a disaster management protocol in case there is a loss of data or a cyberattack.
10. Scale and Finance of Cybersecurity
The financial services market is extremely competitive. With the customer being highly price-sensitive, banks are trying to provide more facilities and services at a lower cost. This often causes banks to cut costs in areas like cybersecurity infrastructure.
Banks often have a considerable scale of operations. With technology developing at a fast rate, it can be expensive to keep changing the infrastructure to meet every new technological development.
The losses from cyberattacks far outweigh the cost of the acquisition of infrastructure. As a result, banks must invest heavily in cybersecurity.
FIs are dealing with millions of bytes of data every day related to confidential, personal and financial details, making it a gold mine for hackers. As such, cybersecurity threats will always be a pressing issue for banks.
As a result, it is imperative that cybersecurity and data protection companies always stay ahead of the curve in finding an innovative solution to cybersecurity challenges in fintech, thereby restoring the consumers’ trust in the platform.