Fintech is growing rapidly. This has resulted in an expanding ecosystem of devices, software, and services, which merits scrutiny in the face of more aggressive and sophisticated cyber threats. The global fintech technologies market is estimated to reach nearly $700 billion by 2030 or a CAGR of 20.3 percent for the 2021 to 2023 period. This means a massive potential attack surface that should be properly secured to avoid disastrous consequences.
The fintech ecosystem has already become an integral part of the global financial landscape. It involves a host of cutting-edge technologies that power billions of transactions. However, many users of fintech services do not have an idea of the underlying technologies, let alone the cyber threats they encounter regularly.
The fintech ecosystem and supply chain attacks
The fintech ecosystem at present is bigger than what many probably expect. After all, fintech is viewed as a solution to provide financial inclusion for the unbanked. It is more accessible compared to traditional banks because of reduced barriers to entry, cost-effectiveness, and personalized solutions. As long as there are web-connected devices and internet penetration, fintech can reach users and provide access to innovative forms of lending, payment, wealth management, and various other financial services.
On the other hand, a supply chain attack is a form of cyber assault designed to take advantage of trust relationships between organizations and external entities. Relationships here can be a vendor-supplier arrangement, business partnership, or something less formal but consequential like the use of third-party software.
Fintech ecosystems are bound by software. The devices used to facilitate payments and other financial services all rely on software to work systematically. From digital wallets to cryptocurrency, users need apps to manage financial assets and transactions. And this becomes a major target for threat actors.
Supply chain attacks happen when attackers find and exploit vulnerabilities in apps or software in general used in fintech. These attacks may also go after hardware but in most cases involving fintech, the primary target is software. The attack can result in data theft or corruption, financial theft, ransomware infection, the spread of malware, and other consequences that disrupt operations, inflict reputation damage, or
How supply chain attacks happen
One way is to infect software updates with malware. Threat actors can intercept software updates or distribution processes to introduce malicious software components that are then disseminated to devices. This is unlikely to happen if software vendors implement adequate security measures for their software supply chain and if users ascertain that their software only connects to legitimate sources of patches or updates. This attack can be undertaken by external and Insider threat actors.
Another method of supply chain attack is the manipulation of compromised integrity of software development tools and resources. Attackers inject malicious code into Integrated Development Environments (IED), for example, which impacts all software being deployed. Malware injection may also target development kits and software libraries.
In addition to software development tool compromises, threat actors may also target software code repositories or version control systems. These are crucial tools in software code storage and management. They are supposedly highly protected, but threat actors can manage to get through them and modify the code, inject malicious code, or supplant software components. In some cases, attackers target older versions of the software that are still being popularly used, since these are usually less protected.
Moreover, attackers can go after supply chain intermediaries or suppliers and third-party vendors that have some extent of involvement in the software supply chain. These intermediaries can be software integrators, software distribution websites, or OEMs that customize pre-existing firmware or software for their products. These intermediaries do not only allow threat actors to spread malware; they can also enable continuous data siphoning and user activity monitoring.
The impact of software supply chain attacks
As mentioned, the direct effects of supply chain attacks include privacy violations, data security breaches, financial theft, and disruptions in operations. However, these usually do not have the most significant impact on the fintech industry. At the macro level, there are consequences worse than these for the fintech industry.
Loss of consumers’ trust – The fintech industry is relatively new, which means it has yet to prove its worth and trustworthiness to prospective adopters. Attacks on it that result in major losses and system dysfunction can undermine consumers’ perception and result in a bad impression. The Magecart attacks on digital payments and e-commerce, for example, created panic among consumers. Of note, it’s difficult to build trust but extremely easy to destroy it. Fintech companies need to work hard to assure customers that their systems can be trusted and are resilient enough to survive or quickly recover from attacks.
Legal consequences – Another major challenge for fintech companies is the possibility of being held accountable for mistakes. Several celebrities are currently facing federal charges because of their supposed illegal promotion of cryptocurrencies. Imagine the impact of legal liabilities on fintech companies that fall prey to software supply chain attacks. Laws on privacy and data security, in particular, are quite strict and can land many companies in serious legal trouble. Not preparing for and downplaying the impact of supply chain attacks is a crucial mistake for enterprises that seek to cash in on the fintech revolution.
Overregulation – Numerous instances of fintech companies demonstrating their lack of security capabilities can lead to more regulation, and possibly overregulation to the point that companies lose the appetite to push through with their innovative offerings. Supply chain attacks are among the sophisticated attacks that tend to alarm regulators because many policymakers tend to lack adequate understanding of them and the corresponding solutions for these threats. Fintech companies need to take these attacks seriously and put in place all the necessary defenses to avoid consequences beyond the usual data/financial loss and disruption.
Emphasis on prevention and recovery
There are no special cyber defense solutions and strategies needed for fintech companies. The tools and defensive systems that work for most other companies also work adequately for the fintech industry. The challenge is in the execution and commitment to ensure good cyber defense.
Fintech companies should observe best practices when it comes to cybersecurity. These include due diligence on the many elements in the fintech ecosystem, including the suppliers, apps in use, and security controls. It is also important to ensure compliance with fintech regulations and relevant laws. Additionally, organizations should have a solid incident response plan to ensure resilience and quick recovery from attacks.
Software supply chain attacks are seriously damaging not only to the current operations of the fintech industry but more importantly to the prospects of fintech adoption. That’s why it is crucial to understand the impact of cyber attacks on fintech. It is a must to have all preventive security measures and tools in place while anticipating the possibility of attack penetration to accelerate recovery.
The fintech industry is not that different from other cyber attack targets when it comes to attack susceptibility. However, since it involves financial resources and systems, there should be ample strategizing, collaboration among stakeholders, continuous monitoring, and investment in the best security tools to make sure that fintech continues to gain consumer trust and allay fears over uncertainties. Fintech is the future of global finance, so embracing it is inevitable, and ensuring its security is imperative.