Top Cybersecurity Threats Plaguing Fintech

The fintech industry is booming with increasing innovations entering the landscape for the financial sector. As fintech companies expand, their IT infrastructure becomes more complex along with their governance measures. It enables them to grow at an even more rapid pace, providing revolutionary solutions.

As the organization grows, it becomes more prominent. Consumers begin relying more on the companies and start trusting them with more personal data and assets. The more successful a fintech organization becomes, the more likely it will catch the attention of cybercriminals looking to make easy money.

A Growing Threat to Fintechs

As the fintech industry continues to proliferate, so does the cybersecurity threat that can cause severe harm to the companies. It can result in expensive damage repairs that fintechs have to deal with. Sometimes, the damage can completely devastate the companies.

According to IBM Security’s 2020 report, the average global cost of a data breach in the financial sector is more than US$3.86 million per cybersecurity incident.

Larger fintechs might take it on the chin and recover their losses after improving security. Fintech companies with lower capital and human resources face a steeper incline as they progress when facing cybersecurity challenges. Gradually, they might face threats that they cannot overcome and risk data breaches by cybercriminals.

A significant attack on a fintech startup or even an established company can lead to financial loss and a tarnished reputation. Customers cannot trust them with their data or assets again, and it can even lead to the collapse of Fintech companies.

Top Cybersecurity Threats Plaguing the Fintech Industry

Cybercriminals use a wide variety of methods to breach the security of fintech companies for their benefit. Remaining atop cybersecurity threats is mission-critical for fintech companies.

Some of the most prominent cybersecurity threats that fintech companies face today include:

1.    System Complexity

As fintechs expand, they might integrate systems run by third-party companies. The increasing integration of more third-party systems increases the risk of the cybersecurity vulnerability. Various aspects of the company designed by different developers can lead to compatibility issues and challenges in maintaining cybersecurity. The result is that your team can fail to recognize potential weak links and leave them open for cybercriminals to exploit.

2.    Application-Related Vulnerabilities

Fintechs rely on applications that can access their users’ data for various purposes in real-time. Cybercriminals primarily target the fintech companies’ applications as their mode of entry into the infrastructure if they can find any vulnerable coding.

3.    Third-Party Involvement

Fintechs use their own applications, but they have a certain aspect of control when managing security measures. However, they also frequently use third-party services and solutions as they expand. If cybercriminals cannot gain access through a fintech’s own applications, they can try to mask themselves as legitimate users and exploit third-party providers’ weaknesses.

4.    Cloud Computing Threats

Cloud computing is essential for the fintech industry to operate. Many fintechs rely on cloud computing services to achieve scalability at a lower cost. The best cloud computing providers maintain top-notch security protocols and encryptions to provide adequate protection to their clients. However, any breaches at their facilities can put all their clients’ data at risk.

5.    Human Error

The most vulnerable kink in the armor for fintechs is not their encryption or their coding. It could be the human element anywhere in the pipeline. Employees working at the firms can have adequate training to prevent cybercriminals from gaining access to the fintech’s network and infrastructure. However, the same cannot always apply to clients.

Cybercriminals typically gain access to applications and accounts through human error. They have a wide assortment of techniques to exploit the human element. From phishing attacks to inadvertently leaving devices vulnerable to these criminals, the people are an ideal target for these criminals.

According to IBM’s 2019 Security Report, 24% of malicious data breaches were caused by human error.

6.    The Balance of Convenience and Security

Consumers consistently expect fintechs to provide them a more streamlined experience of using their services. Fintechs need to oblige their customers by making the user experience as convenient as possible. However, some measures that make using fintech services easier can also increase the risk of data breaches. Fintechs need to find the best solution that balances convenience and security.

7.    Managing Digital Identities

Speaking of balancing convenience and security, fintechs typically provide several services to their customers. The clients typically use mobile device authorization to access the network. Cybercriminals can target smartphones to clone the digital identities of fintech users and gain access for their malicious purposes.

The use of mobile-based security measures like one-time passwords and other security codes can expose vital data to cybercriminals. According to the Varonis Data Lab’s 2019 Global Data Risk Report, 62% of security breaches that did not involve human error were caused by the use of stolen credentials.

8.    Outdated Banking Systems

Longstanding financial institutions that are trying to innovate their offerings to enter the fintech industry are also facing a challenge due to their outdated systems. Developing and introducing advanced fintech services to their non-patched core banking systems exposes them to the risk of cyberattacks. As tech-friendly fintech services integrate with existing banking systems that do not provide adequate security measures, they can also be exposed to cybercriminals attacks.

Bottom Line

Despite the increasing threats to fintech companies from cybercriminals, there is no denying that it is the future of the financial world. As fintech keeps evolving rapidly, the companies also need to prioritize their security measures, compliance, and data privacy. The threats will always be there. It is a matter of staying ahead of the curve and taking preemptive measures to deal with them before they become a problem.