Top 6 Cybersecurity risks in fintech

The rapid expansion of the Smart-everything movement, combined with advancements in Artificial Intelligence (AI), has resulted in complex cyber attacks that traditional methods cannot resist. Cyber threats are essential in financial technology (FinTech), which is a data-centric sector that is expected to provide services around the clock. This study offers a new and updated taxonomy of security concerns in FinTech and conducts a thorough systematic analysis of protective solutions. 

 

What is Fintech?

 

Fintech is a combination of the words "finance" and "technology." It refers to any app, software, or technology that enables individuals or organizations to digitally access, manage, or get insight into their accounts or conduct financial transactions.

 

Fintech emerged during the last decade as customers increasingly accepted digital tools to assist them handle financial difficulties and progress towards financial goals. As a result, people have come to rely on fintech for a variety of purposes, including banking, budgeting, investing, and lending, as well as practical everyday benefits.

 

A fintech company is any company that provides financial services or apps that are highly reliant on technology. Fintech companies are frequently industry disruptors, utilizing technology to alter how consumers engage with the financial sector. This frequently entails increasing access to financial goods, cutting fees, and offering faster, more personalized service.

 

Fintech is frequently used as a self-identifier rather than a formal title assigned by an industry regulatory body. The most well-known examples of fintech organizations are fintech banks, although there are several other fintech verticals that we'll look at later. 

 

The industry has grown rapidly in recent years. In the Americas alone, the number of fintech companies grew from 5,868 in 2018 to 11,651 in 2023. However, the industry has cooled significantly. In 2021, global fintech funding reached a new high of $132 billion, accounting for 21% of total venture capital dollars. Global funding for fintech businesses fell 46% to $75.2 billion in 2022, compared to the previous year. Still, fintech funding is up 52% from 2020, indicating that the decrease from 2021 to 2022 is more likely a market correction than a sign of the industry's decline. 

 

Also Read | Cyber Security Awareness: Ways to Protect Cyber Attack Vulnerability

 

Top 6 Fintech Cybersecurity Risk

 

Financial Technology (FinTech) companies have transformed the way we handle our finances by providing convenience and accessibility. However, this progress has created a slew of cybersecurity threats that jeopardize the integrity and security of financial systems. Here, we'll look at the six cybersecurity concerns that the FinTech business faces, as well as effective solutions to these difficulties.

 

1. Data Breach

 

Due to the sensitive nature of financial data, data breaches in the FinTech business constitute a significant concern. Recent breaches at well-known financial organizations have highlighted the systems' vulnerabilities. Hackers use flaws in security systems to get unauthorized access to user information, resulting in financial fraud, identity theft, and reputational harm. 

 

2. Reputational Risks

 

If any of the aforementioned risks are not appropriately managed by fintechs, the reputational damage might be severe, especially if the company in issue deals with customer data through a B2C model. Negative publicity, whether caused by security breaches, regulatory concerns, or poorly executed customer service methods, can be damaging to a fintech's customer base. High-profile fines for noncompliance are among the most prevalent failures for fintechs, and for companies with thin financial margins, the consequences can be even more severe than for larger businesses. 

 

3. Insider Threats

 

Insider threats in FinTech organizations occur when workers or partners with access to sensitive data abuse or exploit their privileges. These dangers can be either purposeful, such as hostile actions for personal benefit, or unintentional, such as accidental data exposure due to negligence. 

 

4. Regulatory Compliance

 

The FinTech industry operates in a complicated regulatory framework that necessitates careful adherence to many regional and industry-specific compliance standards. Noncompliance can lead to serious financial penalties and reputational damage. Continuous monitoring and a proactive approach to compliance management are critical. 

 

5. API vulnerabilities

 

Application Programming Interfaces (APIs) are critical for data sharing and integration across the FinTech ecosystem. However, they introduce weaknesses that cybercriminals can exploit. Secure API architecture, the use of robust authentication techniques such as OAuth or API keys, and constant API traffic monitoring are critical for limiting API vulnerabilities. 

 

6. Ransomware Attacks

 

The surge in ransomware attacks on FinTech organizations creates major operational and financial threats. Regularly backing up essential data and ensuring strong network segmentation reduces the impact of ransomware attacks. Employee training in recognising suspicious behaviors and responding quickly to possible threats reduces the probability of successful ransomware attacks.

 

Also Read | What is FinTech Blockchain?

 

What are the hazards of open source for fintech companies?

 

The development of open source libraries and packages complicates finance cybersecurity efforts. Cloud applications often include a large number of open source libraries and services. This allows creators to build on previous work, but it also provides an opportunity for attackers to enter networks.

 

These open source software may contain vulnerabilities that could make it into production. When they are discovered at the end of the construction process or during production, it causes project delays.

 

Transitive dependencies (or dependencies of dependencies) provide a distinct risk since they result in a complex dependency tree. This makes it easier to overlook when your application invokes a package containing vulnerabilities. As open source usage grows, modern banking applications face a broader attack vector than just the proprietary code they create.

 

Conclusion

 

Overall, fintech growth and innovation are providing more and better financial services to consumers, even those who have hitherto been overlooked.The Federal Reserve discovered that 5% of Americans are completely "unbanked"—meaning neither they nor their spouse have a bank account—a figure that rises dramatically in lower-income households. 

 

In conclusion, the evolution of FinTech has resulted in unprecedented convenience in financial services. However, with innovation comes the duty of protecting sensitive financial data from emerging cyber dangers. A multifaceted approach, ongoing education, collaboration, and adaptation to emerging threats are required to strengthen cybersecurity in the FinTech sector. Prioritizing these actions allows FinTech companies to better protect their systems and users, creating trust and confidence in the digital financial world.