The term fintech, at a glance, sounds simple enough: the use of technology in the financial sector. But the implication actually has a much broader range. Fintech encompasses a wide array of applications and solutions that leverage technology to streamline various aspects of financial activities, including banking, payments, investment, insurance and so on. Fintech companies often develop digital platforms, applications, software and services that were generally provided by traditional financial institutions. In a way, fintech has started to take over the traditional banking landscape and as they are evolving nearly every day, they have started to put pressure on traditional industry heavyweights to adapt to the changes they’re bringing forth.
Growth of Fintech and The Resulting Rise in the Need for Cybersecurity:
The integration of technology within the financial industry has led to prominent changes across various sectors of finance. The seeds of fintech were sown with the advent of electronic trading and the digitisation of financial data. The proliferation of smartphones and mobile internet access played a pivotal role in the fintech industry’s growth, and with that came the concept of mobile banking. Mobile banking and payment allowed even the unbanked people to participate in financial activities. The introduction of blockchain technology and cryptocurrencies brought about decentralisation and transparency in financial transactions. Soon after, Artificial intelligence (AI) and machine learning were introduced, which played a vital role in automating financial processes, varying from customer support chatbots to fraud detection. As fintech expanded, difficulties arose with ensuring consumer protection, data privacy and maintaining financial transparency. In an era characterised by rapid technological advancement and increasing reliance on digital transactions, the significance of fortifying cybersecurity cannot be emphasised enough. The evolution of fintech attracted a plethora of cybersecurity threats. Financial institutions serve as custodians of vast amounts of personal and financial information, and as the whole process was digitalised, it was easy for them to become prime targets for cybercriminals seeking to exploit vulnerabilities. Without steadfast security measures in place, these institutions face the looming threats of data breaches and other cyber intrusions. These intrusions not only compromise their operations but also hinder the livelihood of their customers. Various types of cybersecurity risks pose significant challenges to the fintech industry’s security landscape. How well a company understands and mitigates these risks speaks a lot about its integrity and competence.
Insider Threats and Third-Party Risks:
Insider threats involve individuals within an organisation who abuse their access privileges to compromise the security of a company. Employees who steal information on purpose, accidentally disclose sensitive information, or are persuaded or pressured into leaking sensitive data are all examples of insider threats. Insider threats, as it is, are a big security risk for any traditional bank or financial institution. But with the digital inclusion that’s been going around, insider threats have become much bigger a problem for these institutions. Because of the availability of the internet, protecting information is already a tedious task for a company. And with insider threats in the mix, it becomes a huge cybersecurity issue for a fintech company. Addressing insider threats requires a multi-faceted approach that includes selective access controls, continuous monitoring of employee behaviour, and establishing a culture of security awareness. Fintech companies must implement effective mechanisms to detect anomalous activities that could point to insider misconduct.
Third-party risks occur when fintech companies collaborate with outsider vendors to provide specialised services like cloud computing, payment processing, etcetera. Third-party vendors may not adhere to the same security standards, potentially leading to vulnerabilities that cybercriminals can exploit to gain unauthorised access. For fintech, third-party risks pose a bigger challenge than it does for traditional companies because technology makes it a lot easier for the third party to exploit and misuse sensitive information. To manage third-party risks effectively, companies must initiate contracts with third parties with clear security guidelines and requirements. Continuous monitoring is also pivotal to avoid third-party risks. In an industry where data breaches and cyber intrusions can have extensive consequences, fintech companies have to remain vigilant in their effort to counter both insider threats and third-party risks.
The Cybersecurity Talent Shortage in Fintech:
As digital innovations continue to reshape the financial industry, the demand for cybersecurity expertise sees a surge. However, the limited pool of qualified professionals has created a skills gap that poses significant risks to the future of a company. Fintech companies require professionals who can design and implement robust security tools, monitor security threats and effectively solve any sudden security breach. But unfortunately, the supply of cybersecurity experts has struggled to keep pace. The fact that the fintech companies are coming up short in meeting the salary demands of these skilled professionals does not help either. Not only that, talent shortage hampers innovation and hence output for a company, as the talents they have are all used up in addressing the cybersecurity threats and mitigating them rather than in exploring ways to develop the fintech landscape. To address the talent shortage, there needs to be proper education and training for the youth. Fintech companies should reserve a significant portion of their costs to provide the employees with the salaries that they deserve. Collaborating with universities and regulatory bodies can also help bridge the skills gap. By addressing the cybersecurity talent shortage, the fintech sector can work towards building a stronger defence against the ever-evolving cybersecurity threats.
The fintech companies need to adopt a proactive and holistic approach to cybersecurity in order to navigate the cybersecurity challenges and to build a resilient defence against cyber threats. In order to do that, collaborative efforts from the companies are pivotal. Regulatory compliance is also something that is absolutely necessary.
Collaborative Efforts to Combat Cybersecurity Threats:
In an increasingly interconnected digital scenario, collaborative efforts between traditional financial institutions, fintech startups and regulatory bodies are crucial to strike a balance between innovation and regulation. Without collaboration, there will never be a robust defence against cybersecurity threats. Even though collaborative efforts offer a formidable advantage in battling against security threats, it requires a lot of work on all ends. Effective collaboration includes getting everyone on the same page, being a team player-albeit with some ground rules, and having the mindset to be able to give your team members some sort of autonomy. If collaboration is done effectively, it provides greater threat visibility and improved threat detection tools. In the case of fintech, traditional institutions and regulatory bodies need to work in tandem with fintech startups to secure an entirely digital landscape free of cybersecurity challenges in the future.
Use of Artificial Intelligence (AI) and Machine Learning (ML) in Threat Detection:
The dynamic duo of artificial intelligence and machine learning empowers fintech firms to proactively identify and counteract cyber threats that ordinary security measures might miss. AI and ML algorithms excel in processing vast volumes of data and discerning subtle patterns that might elude human analysis. And that enables the companies to identify potential threats, fraud or privacy breaches. These algorithms constantly learn from new data, which helps them detect anomalies better. This adaptability plays a big role in counteracting emerging cyber criminals. AI-driven biometric authentication systems strictly ensure that there is no leakage of private information and that there is transparency in the whole process. Most of all, AI and ML algorithms constantly evolve in a way that poses as a challenge for cyber criminals to catch up. Any new idea that cyber criminals have is instantly countered by the algorithms, and that makes it a lot harder for the potential threats to manifest themselves. So, it is very evident that by using AI and ML, fintech companies can completely revolutionise their security systems.
The interdependent relationship between financial institutions and their customers wholly depends on the assurance of security. As we navigate through an era of constantly evolving cyber threats, robust cyber security measures are the only key to our financial well-being and it is safe to say that the companies that come up with the better defence against cyber threats will prevail in the long run.
Author- Adrita Zahin Hiya
