Is Cybersecurity the Biggest Challenge for Today’s Fintech Companies?

Fintech companies have disrupted the financial industry, but are they prepared when it comes to cybersecurity? Finance writer, Alejandro Arrieche, shares his thoughts. 

Financial technology or fintech has turned into a significant contender of traditional financial institutions and financial service firms due to the modern, easy-going, and low-cost structures they offer. However, this growing trend of startups providing financial services also poses a risk for both users and companies: their capacity to protect personal and financial information. The following article sheds more light on cybersecurity for fintech and how these companies are currently dealing with this situation in the U.S. 

Why Is Fintech Lending Becoming a Target for Hackers?

On July 15th, 2020, a large number of verified Twitter users had their accounts accessed by an unauthorized party that took advantage of their popularity to amass more than $100,000 in funds. The hacker ran a Bitcoin scam that sought to defraud users who blindly sent a certain amount of the cryptocurrency, expecting to get a higher amount in return.

Situations like these, among other high-profile hacks such as the Equifax data breach in 2017, have increased users’ awareness of the risks of sharing their personal information. Consequently, more and more users are demanding that companies demonstrate their ability to safeguard their crucial data from unauthorized access.

Learn More: 6 Things to Look for in an Integrated Payment Gateway to Avoid a Costly Mistake

Fintech lending is an appealing target for hackers for several reasons, such as:

• Fintech companies possess a vast amount of customer financial data, including social security numbers, credit card information, and bank account information. These data points would facilitate the task of accessing online banking systems without the users’ consent.
• Hackers can also use this information for identity theft and submit credit card or loan applications. This not only damages the user’s credit score but also the reputation of the institution issuing the instrument.
• Some fintech startups don’t have enough resources to strengthen their cybersecurity measures. 

According to a 2018 study by Microsoft and Frost & SullivanOpens a new window , cyberattacks resulted in a significant slowdown in the fintech industry’s growth. They also caused an economic loss of approximately $7.9 million for large firms and job losses and an indirect result. Other effects included loss of productivity, fines, remediation cost, a short-term drop in revenues, and potential long-term reputational damage.

Learn More: The Robinhood Warning: Digital Performance is Important for All, Critical for Financials

Preventing Cyberattacks: Best Practices for Fintech Companies and Users

Let’s look at some best practices that fintech companies and users can adopt to prevent cyberattacks.

Preventive Measures for Fintech Companies

Considering the severity of the impact of a cyberattack, fintech companies need to prioritize cybersecurityOpens a new window , not just to ensure the integrity of user data, but also for the continuity of their businesses. Companies may not recover from a severe data breach if the situation gets out of hand.

1. Limited Multi-layer Access

By creating data sets with multiple layers, companies can limit their employees’ ability to access critical information. This way, they can ensure that only the most trusted staff can view sensitive information that may appeal to cybercriminalsOpens a new window . Moreover, companies can create alerts and notifications to inform the management team about intrusions and alterations made by an employee. This will help them keep track of what is happening with the information provided by users.

 

• Communications Protocols

 

Nowadays, firms must rely on robust data encryption protocols that use complex cryptography to make it difficult –or even impossible– for a third party to access their system. Certain fintech lendings use strong transport layer security (TLS) protocols to ensure that user information cannot be intercepted or deciphered by third parties.

 

• Third-party Applications (APIs)

 

APIs facilitate communication between two different systems by using a common coding language. However, the ease of these solutions also makes them relatively vulnerable to unauthorized access and malicious use. Fintech companies should therefore ensure that any application they develop for third-party use cannot trespass the companies’ pre-defined boundaries in terms of what kind of information can be seen, modified, edited, shared, or captured in the process.

Learn More: More Money, More Problems: Can We Really Trust Facebook to “Fix” Digital Currency?

Preventive Measures for Fintech Users

Users can also take steps to make sure they only hand information to trusted sources and companies that have shown a positive track record of keeping their users’ data safe. They can prevent cyber crimes by taking advantage of tools created to safeguard their identity and information. 

 

• Use an Antivirus Software

 

Antivirus software is perhaps the most common solution users rely on to prevent cyberattacks on their personal computers. However, they must pay the license fees on time and keep the databases updated. This will guarantee that the system works smoothly. If virus and malware databases are up to date, it ensures protection against new threats.

1.   Avoid Sites Flagged as Unsafe

Some web browsers inform users automatically if a website fails to provide a secure environment for their personal information. If users visit any website that triggers those warnings, they should avoid sharing critical information as it may be accessed or intercepted by a third party.

Learn More: 3 Reasons Why The Digital Bank of the Future Will Be Collaborative

In Conclusion

Companies such as Quicken Loans, PayPal, Square, and other similar firms have grown to become some of the largest companies in the finance world, offering reliable platforms to get a loan, send money, or complete an online purchase. Others have developed financial products and services for small businessesOpens a new window and individuals, using a user-friendly platform that facilitates and expedites a process that would usually take days to complete in a traditional institution.

Fintech companies are the evolution of financial service firms. They aim to facilitate processes that are usually time-consuming and painstaking for users, relying on information technologies to deliver their services faster and reliably. However, as these companies grow, so does the amount of data they hold from their clients. Guaranteeing that this information remains adequately protected from unauthorized access will help them gain trust from their customers, new and old ones, which will ultimately keep the industry growing at a fast pace.

Let us know your thoughts about this article on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We would love to hear from you!