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Cybersecurity in FinTech: Traversing Risks and Best Practices

Updated Date: Sep 11, 2024
Cybersecurity in FinTech

Quick Summary: FinTech companies are among the top targets of cyberattacks due to the sensitive nature of the data they handle. So, they need to be more vigilant and proactive to secure their data. There comes the role of cybersecurity that provides the tools and practices for data protection. Learn more about FinTech cybersecurity, challenges, and best practices in this article to make the right decisions.

FinTech firms use technology to deliver financial services. Consequently, they’ve solved many problems in which the traditional finance and banking sector failed – convenience and speedy delivery of services. Today, a person can send money to another person on the go using a mobile app. Similarly, they can do other tasks related to banking and finance without visiting their branch or contacting customer care.

However, there are other challenges for FinTech companies, and the most prominent is cybersecurity. The use of technology makes them susceptible to cyberattacks. FinTech firms are one of the most common targets for attackers. Hence, investing in robust cybersecurity is crucial to prevent such risks.

You must understand why cybersecurity is important in FinTech and how it helps to defend your digital assets from attackers. This article provides a deeper understanding into the role of cybersecurity in FinTech and other details. Keep reading to get the information.

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Table of Contents
  1. Why is Cybersecurity Essential in FinTech?
  2. Top FinTech Cybersecurity Risks to Defend Against
  3. Best Practices for Cybersecurity in FinTech
  4. Cybersecurity in Fintech: Is the Future Bright?
  5. Final Thought

Why is Cybersecurity Essential in FinTech?

Cybersecurity provides a shield against attackers who are always looking for an opportunity to breach your systems and steal valuable data. It helps you prevent unauthorized parties from accessing your data or systems. The following points show the importance of cybersecurity in FinTech.

Data Criticality

FinTech firms deal with a kind of data for which security is paramount. Indeed, they handle critical financial information such as account numbers, credit card/debit card information, cash flow records for a business, and more.

If this data is compromised and an attacker gains access to it, there will be drastic financial loss to companies and individuals. In fact, attackers are always on the hunt for such data because it gives them a big deal.

So, they need robust security measures to prevent it from getting into the wrong hands. By investing in cybersecurity, FinTech firms can put the right strategies and measures to protect data.

Cost of Data Breaches

$4.45 million is the average cost of a data breach annually. This data tells the whole story of how costly data breaches are. It’s not just about the cost but there is also a huge impact on the reputation of a company.

A dwindling reputation will lead to a loss of customer trust. Cybersecurity in FinTech provides a strong shield against cyberattacks that prevent data breaches. It will help you maintain customers’ faith in your business and avoid reputational damage.

Legal Consequences

FinTech must meet some compliances and standards such as GDPR, PCI DSS, and FISMA. Many of these compliances and standards are linked to cybersecurity. If a company fails to meet these compliances and standards, it must face heavy penalties.

Failing to protect the data of customers who are using your FinTech product can also pose legal challenges. It has happened to many companies in the past and the famous example is Equifax.

Equifax, one of the largest credit reporting agencies, had a huge data breach incident back in 2017. The data of 147 million people was exposed after this incident. The consequences were drastic, leading to a significant drop in stock prices and a lawsuit against Equifax that was settled for $575 million.

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Top FinTech Cybersecurity Risks to Defend Against

There are different types of risks that FinTech companies face when they don’t pay much attention to cybersecurity. The following is a list of such risks.

Risks of Cybersecurity in FinTech

Phishing Attacks

Phishing is a social engineering technique used by attackers to trick victims into divulging their critical information. This type of attack happens by sending victims emails or text messages that seem legitimate but contain malicious attachments, inducing them to provide credentials or click links.

Phishing continues to be among the most prevalent cybersecurity risks in FinTech. The latest Statista report shows that financial institutions are the third most targeted industry by phishing, as shown in the image below.

Graph of Phishing Attacks

This data clearly shows that phishing has become one of the most critical cybersecurity risks in FinTech. Companies need a good strategy to combat such threats. Multifactor authentication, educating employees on cybersecurity, updating security protocols, and utilizing email filters are a few methods to overcome such risks.

Insider Threat

Often, companies focus more on external threats, and little or no attention is paid to the potential threat within their organization. This is known as an insider threat. It arises when partners or employees with access to sensitive information misuse their role.

One major incident of insider threat occurred at Tesla company in which former employees shared crucial information with a foreign media outlet. So, this can also happen to your FinTech company. It is also among the most critical FinTech cybersecurity risks.

Following the principle of least privilege and implementing strict access controls is an effective way to combat such threats.

API Vulnerabilities

APIs play a critical role in the FinTech ecosystem. They are everywhere and help in data exchange. However, they could also pose security challenges by exposing sensitive information due to vulnerabilities. APIs are susceptible to various vulnerabilities such as OWASP API Top 10 security risks.

There are many ways to protect APIs, including strong authentication like API keys or OAuth and secure design. Besides, scanning APIs using an API security assessment tool provides insights into potential threats and loopholes to mitigate the risks.

Ransomware Attacks

Ransomware is a big challenge for every type of company, and FinTech firms are no exception. Well, it is a kind of cyberattack in which a system is locked with an encrypted key that only the attacker knows. After this, the attacker demands money in exchange for the key. Moreover, the system cannot be used unless the key is provided.

Unfortunately, ransomware is among the most notorious FinTech cybersecurity challenges as well. So, FinTech firms must adopt robust measures to prevent this threat and avoid paying huge sums of money. Here comes the role of vulnerability assessment which helps to identify vulnerabilities to prevent such attacks.

DDoS Attack

DDoS is another attack type that poses a significant cybersecurity challenge in FinTech. In this case, an attacker tries to overload a server or system by sending excessive requests. However, the system or server fails to handle the explosion of requests, resulting in failure.

Typically, the goal of a DDoS attack is to disrupt the services or damage the target system/server. You can prevent such attacks by adopting various cybersecurity measures and monitoring traffic. Besides, you should also adopt a solid response plan to quickly overcome this challenge and restore services.

Endpoint Vulnerabilities

Another challenge for cybersecurity in FinTech is endpoint vulnerabilities. While you may have a highly secure mechanism to protect your digital assets, vulnerabilities arising at the user end can be fatal. Suppose there is a vulnerability on a user’s side which enables an attacker to access their account.

Further, this may allow the attacker to access critical information that helps compromise your systems. Consequently, a security breach could arise from the endpoint. Therefore, you need to ensure robust security for endpoints.

Releasing regular security updates to patch vulnerabilities in mobile apps, using strong authentication, encryption protocols, and educating users on cybersecurity practices are some ways to avoid this risk.

Third-party Services Risks

Many FinTech security challenges arise from third-party partnerships and collaborations. Third-party integrations and collaborations can expose FinTech companies to more risks. Usually, companies don’t have control over these third-party services that pose a potential threat.

Hence, you need stricter methods to deal with these third-party threats. There must be contractual agreements that define the liabilities and security protocols. Plus, regular monitoring is helpful to ensure that the agreed compliances are met.

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Best Practices to Achieve Optimal Cybersecurity for FinTech

Achieving optimal security can be challenging as the threat landscape is more complex in FinTech. However, you can mitigate the risks by following the best cybersecurity practices for FinTech, as given below.

Best Practices of Cybersecurity for FinTech

Regular Security Audits

Security audits are crucial for FinTech cybersecurity. It helps identify weak spots that must be fixed. Vulnerabilities open a hidden door of opportunity for attackers. They can use vulnerabilities to launch a DDoS attack or cause a data breach.

By performing regular vulnerability scanning using a dynamic application security testing tool, you can discover these weaknesses. After this, you can fix them before they pose any threat. As a result, you can prevent potential data breaches that could ruin your reputation and affect your business.

Policy of Least Privilege

Unauthorized access is one of the key reasons why data is exposed to unknown entities such as attackers. Hence, you must adopt strong authentication and access mechanisms to enhance cybersecurity.

The principle of least privilege is pivotal in ensuring optimal security of digital assets for FinTech firms. According to this principle, a user must be given only the minimum levels of required access to prevent unauthorized access.

Employee Training

Make sure your employees are updated on the latest cybersecurity best practices. Plus, educate them about company policies and procedures on cybersecurity. Regular training and education will help you build a strong security posture for your FinTech firm.

Data Backup

Ensuring regular backups helps you protect your data. It is a good practice to create copies of data stored in any other location. In the event of a system failure or security breach, you can retrieve this data from the backup.

Cybersecurity in Fintech: Is the Future Bright?

With the rise of emerging technologies such as blockchain, IoT, AI, and machine learning, fintech industries can perform unshakeable security protocols to safeguard the entire financial infrastructure against sophisticated cyber-attacks, thanks to emerging cybersecurity mechanisms.

Cybersecurity has been a focal point for the fintech industry by driving a stronger push for developing global cooperative frameworks. If we turn the pages backward, detecting sophisticated cybercrimes was nearly impossible, which caused the fintech industry to bear huge losses. The key reason behind this was a lack of advanced technology.

Well, the lack of modern technology underscores the importance of cybersecurity in fintech by emphasizing the need for advanced protection strategies to address emerging threats. So, it’s safe to say that a robust cybersecurity framework will be crucial in the coming years for securing financial assets and ensuring the integrity of digital transactions by driving intelligence and advancements in the fintech ecosystem.

Final Thought

Cybersecurity is pivotal for FinTech companies to defend against various cyber threats. It helps companies protect their digital assets with effective measures, best practices, and tools. One of the aspects of cybersecurity is the identification and remediation of vulnerabilities.

You need a powerful vulnerability testing tool like ZeroThreat to scan and accurately detect security loopholes. It is a fast and efficient scanner that can detect a wide range of vulnerabilities, such as OWASP Top 10. Try it and see the benefits.

Frequently Asked Questions

What is FinTech cybersecurity?

FinTech cybersecurity refers to the practices, tools, and processes used to protect a FinTech company’s systems, networks, and other digital assets from cyberattacks.

What are the trends in FinTech cybersecurity?

What do cybersecurity frameworks for FinTech mean?