Major Security Challenges in FinTech Sector
Security attacks have made the Fintech industry highly vulnerable. This industry deals with a lot of sensitive and valuable financial information, such as passwords, bank accounts, identities, etc. Any threat to the information could result in severe consequences.
We need to examine the major cybersecurity challenges to better understand the most efficient and successful security solutions for the Fintech sector. So, let’s go.
Threat to Digital Identity
Despite the fact that digital identities are not used as often today, the market for digital identity verification is expected to grow to $12.8 billion by 2024. However, the security of IDs remains the main concern of both customers that share their information with banks and other financial institutions and service providers. This is because password-based systems and 2FA processes are still vulnerable to cyberattacks. Fintech companies employ risk-based authentication and one-time passwords (OTP) to prevent unauthorized access and improve biometrics technology that is currently used for authentication. But instead of these security measures, the threat to digital identity is there in the mind of customers.
Companies that deal with sensitive data like the fintech industry are always under threat of cyberattack, causing a threat to data security. In fact, it is one of the top concerns for financial service providers since they have access to high volumes of personally identifiable information (PII) such as full names, phone numbers, email addresses, birth dates, home addresses, and tax ID information. If this information lands in the wrong hands, it can result in blackmail, interruption in business operations, or ransom calls.
To lower the chances of data theft, companies must develop procedures for controlling who has access to information and who can create, modify, or remove it. If data security is breached, it can be easily seen who is responsible for it. This makes it easier to settle disputes.
Compliance with Security Requirements
Companies need to comply with the rules and security regulations of their home country. In the situation where a business fails to comply with all regulations and standards in the country where it is located, there can be consequences.
Cloud solutions are essential for fintech companies because they offer better performance, scalability and availability, and cost optimization. But it’s becoming more difficult to monitor data transfers between different environments. It is crucial to select tools that will allow you to manage your cloud solutions with integrity, especially for Fintech companies. It is possible for technology and parties to become more involved, which can lead to increased vulnerabilities.
Third-party Components Can Compromise Security
Integration with third-party components like payment gateways, analytics, social media buttons, chatbots, and payment gateways can compromise your Fintech product’s security. Companies should reduce the number of third-party components they use or create these components from scratch to address this problem. Fintechs should choose trustworthy vendors and partners if they require complex functionality that is not within their capabilities.
Protection from Major Security Challenges
Now that we know the major security threats that the Fintech industry faces, let us discuss the solution and how to protect oneself from such security threats.
Encrypt Sensitive Data: Data is everything in the Fintech industry. So it should be protected at every cost. To protect classified and sensitive information, encryption can be used. Make use of mathematical algorithms to encrypt data. The following are the best encryption algorithms that one can consider for data protection:
- Advanced Encryption Standard (AES)
- Rivest-Shamir-Adleman (RSA)
- Triple Data Encryption Standard (TripleDES)
- Rivest-Shamir-Adleman (RSA);
Use Artificial Intelligence (AI)/ Machine Learning (ML): AI and ML are not only the optimal option to improve automation through algorithms. They can also be employed to increase the reliability of clients. Businesses want to minimize the use of sensitive personal information. However, hackers could use these loopholes to misuse financial systems or create false identities. AI and ML can be trusted to estimate credit worthiness and detect inconsistencies. Companies also have the opportunity to save money on labor costs with AI and ML.
Use Code Obfuscation: To protect their software against cloning, Fintech companies have the option to use code obfuscation. Program clones may look very similar to the original software and can be used to gather personal data. Hackers will find it hard to read the code of the app and understand its algorithms. This makes it impossible for them to reverse engineer the code. Using code obfuscation, you can get protection against trade secrets theft, unauthorized access, bypassing licensing, and vulnerability discovery.
Tokenization: A token can be used to replace sensitive information such as a credit card number. Instead of using actual data, systems create tokens that connect with real data but are encrypted, so you can’t return to the original data. These tokens can be used for temporary purposes and may expire after one-time use. This will allow Fintech companies to avoid transactions that could allow someone to track sensitive data.
Set Secure Authentication Process: FinTech companies can benefit from secure identification and authentication. These are the steps you can take to provide secure code and secure architecture for your business:
- Role-based Access Control (RBAC). It allows users to access software and systems based on their roles. Each role has its files and processes, and access is restricted to other parts of the software.
- Password expiration. Regular password changes can help reduce data leakage and prevent the use of former employees.
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