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Cyber ResilienceIn the last decade, fintech has emerged as a game-changer in the financial industry, disrupting traditional banking models and offering consumers new, innovative financial solutions. Fintech, as we know it, refers to a set of technologies enabling financial services to be delivered more efficiently, cost-effectively, and customer-centrically. However, with these technological advancements come new cybersecurity risks that threaten the security and privacy of sensitive financial data.
Due to the sensitive nature of the financial data they handle, fintech companies are often primary targets of simple and sophisticated cyber threats, including Phishing attacks, social engineering, data breaches, malware attacks, third-party risks, insider threats, DDoS, and ransomware.
Cyberattacks can impact fintech companies and customers in several ways. For companies, cyberattacks can result in financial loss, reputational damage, and legal consequences. Customers may suffer financial loss and identity theft, resulting in significant financial distress.
This article explores the importance of cybersecurity in the fintech industry and why it is a critical concern for companies and customers alike.
In the last decade, fintech has emerged as a game-changer in the financial industry, disrupting traditional banking models and offering consumers new, innovative financial solutions. Fintech, as we know it, refers to a set of technologies enabling financial services to be delivered more efficiently, cost-effectively, and customer-centrically. However, with these technological advancements come new cybersecurity risks that threaten the security and privacy of sensitive financial data.
Due to the sensitive nature of the financial data they handle, fintech companies are often primary targets of simple and sophisticated cyber threats, including Phishing attacks, social engineering, data breaches, malware attacks, third-party risks, insider threats, DDoS, and ransomware.
Cyberattacks can impact fintech companies and customers in several ways. For companies, cyberattacks can result in financial loss, reputational damage, and legal consequences. Customers may suffer financial loss and identity theft, resulting in significant financial distress.
This article explores the importance of cybersecurity in the fintech industry and why it is a critical concern for companies and customers alike.
Cybersecurity Across Fintech Verticals
Digital Banking:
Digital banking platforms allow customers to manage their finances through online and mobile applications. These platforms are vulnerable to cyberattacks that target customer financial data, such as login credentials, account information, and transaction histories. Malicious actors can use this information to steal funds, conduct fraudulent transactions, or commit other financial crimes.
Digital Wallets:
Digital wallets allow customers to store and manage payment information and transact through a single platform electronically. Companies operating in this fintech vertical are at risk of fraudulent transactions and data breaches where threat actors manipulate the system for their selfish gains.
Payment Remittance:
Payment remittance is the process of sending money from one location to another, often across international borders. Fintech companies that offer payment remittance services are vulnerable to cyberattacks that target customer financial data, such as bank account information and transaction histories.
Buy Now, Pay Later (BNPL):
BNPL is a payment model that allows customers to buy goods or services and pay for them in installments. BNPL services are vulnerable to account takeover attacks, where access can be gained to a customer’s account by a malicious actor, and unauthorized purchases are made.
Personal Finance Management:
Personal finance management platforms help users manage their finances by aggregating all their financial accounts in one place and providing insights and advice on spending and saving. These platforms are vulnerable to cyberattacks that target customer financial data, such as bank accounts and credit card information.
Lending and Borrowing:
Fintech companies that offer lending and borrowing services are vulnerable to cyberattacks that target customer financial data, such as social security numbers, income, and credit scores. Using these stolen information, malicious actors can create fraudulent loan applications or conduct other financial crimes.
Peer-to-Peer (P2P) Lending:
P2P lending platforms connect borrowers directly with investors, eliminating the need for traditional financial intermediaries. These platforms are vulnerable to cyberattacks that target borrower and investor information, such as social security numbers, bank account information, and credit scores. Malicious actors use this information in many ways, including creating fraudulent loan applications, collecting and defaulting loans with another person’s identity, and conducting other malicious activities.
Robo-Advisory:
Robo-advisory platforms use artificial intelligence and machine learning to provide financial advice and investment management services. These platforms are vulnerable to cyberattacks that target customer financial data, such as investment portfolios and transaction histories. All of this information can be used to pretend as agents from the robo-advisory company and make unsuspecting customers fall for social engineering.
Insurtech:
Insurtech companies use technology to offer customers innovative insurance products and services. These companies are vulnerable to cyberattacks that target customers’ personal and financial data, such as social security numbers, medical histories, and payment information.
Cybersecurity Across Fintech Verticals
Fintech is a rapidly growing industry encompassing various sub-sectors or “verticals.” While many of these verticals share similar cyber threats, some are more vulnerable to some kinds of threats than others. The following are some of the most typical fintech verticals and the cyber threats they are vulnerable to:
Digital Banking:
Digital banking platforms allow customers to manage their finances through online and mobile applications. These platforms are vulnerable to cyberattacks that target customer financial data, such as login credentials, account information, and transaction histories. Malicious actors can use this information to steal funds, conduct fraudulent transactions, or commit other financial crimes.
Digital Wallets:
Digital wallets allow customers to store and manage payment information and transact through a single platform electronically. Companies operating in this fintech vertical are at risk of fraudulent transactions and data breaches where threat actors manipulate the system for their selfish gains.
Payment Remittance:
Payment remittance is the process of sending money from one location to another, often across international borders. Fintech companies that offer payment remittance services are vulnerable to cyberattacks that target customer financial data, such as bank account information and transaction histories.
Buy Now, Pay Later (BNPL):
BNPL is a payment model that allows customers to buy goods or services and pay for them in installments. BNPL services are vulnerable to account takeover attacks, where access can be gained to a customer’s account by a malicious actor, and unauthorized purchases are made.
Personal Finance Management:
Personal finance management platforms help users manage their finances by aggregating all their financial accounts in one place and providing insights and advice on spending and saving. These platforms are vulnerable to cyberattacks that target customer financial data, such as bank accounts and credit card information.
Lending and Borrowing:
Fintech companies that offer lending and borrowing services are vulnerable to cyberattacks that target customer financial data, such as social security numbers, income, and credit scores. Using these stolen information, malicious actors can create fraudulent loan applications or conduct other financial crimes.
Peer-to-Peer (P2P) Lending:
P2P lending platforms connect borrowers directly with investors, eliminating the need for traditional financial intermediaries. These platforms are vulnerable to cyberattacks that target borrower and investor information, such as social security numbers, bank account information, and credit scores. Malicious actors use this information in many ways, including creating fraudulent loan applications, collecting and defaulting loans with another person’s identity, and conducting other malicious activities.
Robo-Advisory:
Robo-advisory platforms use artificial intelligence and machine learning to provide financial advice and investment management services. These platforms are vulnerable to cyberattacks that target customer financial data, such as investment portfolios and transaction histories. All of this information can be used to pretend as agents from the robo-advisory company and make unsuspecting customers fall for social engineering.
Insurtech:
Insurtech companies use technology to offer customers innovative insurance products and services. These companies are vulnerable to cyberattacks that target customers’ personal and financial data, such as social security numbers, medical histories, and payment information.
Open Banking: The Cyber Risks Involved
Open banking is a concept that refers to the sharing of financial information between different financial institutions or third-party providers through an open application programming interface (API). This enables customers to share their financial data securely and quickly with other financial institutions or third-party providers.
This form of banking is vulnerable to many forms of cyber threats that are worthy of being highlighted, including:
- API Vulnerabilities: Open banking relies heavily on APIs to share data between different institutions. If these APIs are not adequately secured, cybercriminals can exploit them to gain unauthorized access to sensitive data. These attacks can be through API vulnerabilities, including SQL injection attacks, XML injection attacks, and cross-site scripting attacks.
- Man-in-the-Middle Attacks: Man-in-the-middle (MITM) attacks occur when a cybercriminal intercepts communication between two parties and steals sensitive information. In open banking, MITM attacks can occur when a cybercriminal intercepts data being transmitted between a bank and a third-party provider. They can then use this information to gain unauthorized access to bank accounts or other sensitive data.
- Credential Stuffing: Credential stuffing occurs when a cybercriminal uses stolen login credentials to access an account. In open banking, malicious actors can leverage credential stuffing to access a customer’s bank account or other sensitive financial data. This can occur if the third-party provider does not have strong enough security measures to protect customer login credentials.
- Account Aggregation Risks: Account aggregation involves aggregating data from multiple bank accounts into a single platform. This can create a single point of failure for cybercriminals to target. If a cybercriminal gains access to the account aggregation platform, they can potentially gain access to all the aggregated accounts, which can be catastrophic.
Open Banking: The Cyber Risks Involved
Open banking is a concept that refers to the sharing of financial information between different financial institutions or third-party providers through an open application programming interface (API). This enables customers to share their financial data securely and quickly with other financial institutions or third-party providers.
This form of banking is vulnerable to many forms of cyber threats that are worthy of being highlighted, including:
- API Vulnerabilities: Open banking relies heavily on APIs to share data between different institutions. If these APIs are not adequately secured, cybercriminals can exploit them to gain unauthorized access to sensitive data. These attacks can be through API vulnerabilities, including SQL injection attacks, XML injection attacks, and cross-site scripting attacks.
- Man-in-the-Middle Attacks: Man-in-the-middle (MITM) attacks occur when a cybercriminal intercepts communication between two parties and steals sensitive information. In open banking, MITM attacks can occur when a cybercriminal intercepts data being transmitted between a bank and a third-party provider. They can then use this information to gain unauthorized access to bank accounts or other sensitive data.
- Credential Stuffing: Credential stuffing occurs when a cybercriminal uses stolen login credentials to access an account. In open banking, malicious actors can leverage credential stuffing to access a customer’s bank account or other sensitive financial data. This can occur if the third-party provider does not have strong enough security measures to protect customer login credentials.
- Account Aggregation Risks: Account aggregation involves aggregating data from multiple bank accounts into a single platform. This can create a single point of failure for cybercriminals to target. If a cybercriminal gains access to the account aggregation platform, they can potentially gain access to all the aggregated accounts, which can be catastrophic.
Cybersecurity Best Practices for Fintech Companies
Multi-Factor Authentication:
Multi-factor authentication (MFA) adds an extra layer of security to user authentication by requiring the user to provide two or more authentication factors before granting access to a system (MFA is an important aspect for organizations implementing defense-in-depth). This could be a combination of something the user knows (such as a password), something they have (such as a physical key), or something they are (such as a fingerprint). MFA significantly reduces the risk of a cyberattack by adding an extra layer of security that is much harder for hackers to bypass.
Data Encryption:
Encryption converts data into a coded form that someone with the decryption key can only access. Fintech companies should use encryption to protect sensitive data in transit and at rest. Data in transit refers to data sent over the internet, while data at rest refers to data stored on servers. Encryption ensures data is scrambled and unreadable to unauthorized parties.
Cloud Security:
Ensures the platform built in the cloud is secured and hardened with security controls. Cloud security is a crucial aspect of fintech cybersecurity. It is essential for fintech companies to implement strong access controls and authentication measures, encrypt data both in transit and at rest, and regularly monitor and audit their cloud environment for any suspicious activity.
API Security:
API and open banking security are crucial aspects of the fintech industry. Open banking allows third-party providers to access customer financial data through APIs, increasing the risk of unauthorized access and data breaches. To ensure API and open banking security, strong authentication and authorization measures, such as access tokens and API keys, should be implemented. Regular monitoring and auditing of API activity can help identify and prevent any malicious activity. Open banking providers should also work with reputable third-party providers that have strong security protocols and compliance certifications. Usage of API security gateway will also significantly enhance API security posture.
AppSec (Application Security)
AppSec and source code management are essential components of fintech cybersecurity. AppSec involves identifying and addressing security vulnerabilities in applications, including web and mobile applications. To ensure AppSec, it’s crucial to implement secure coding practices, such as input validation and output encoding, to prevent attacks like SQL injection and cross-site scripting (XSS). Regular security testing, such as penetration testing and vulnerability scanning, can also help identify and remediate security vulnerabilities. Source code management involves implementing secure code development processes, such as version control and code reviews, to prevent errors and ensure that code changes are properly tested and deployed.
Tokenization:
Tokenization is the process of replacing sensitive data with a non-sensitive token, which can be used for processing transactions without exposing the original data. Fintech companies must employ tokenization to protect customer payment card data and other sensitive information.
Continuous Monitoring:
Threat detection and response are crucial for maintaining the security and reliability of financial systems. A dedicated CSOC function (outsourced or in-house), can help ensure effective threat detection and response by implementing security monitoring and alerting systems into a XDR data lake with logs from SIEM, EDR, FWs, WAFs, AD, MFA, PAM, etc and incident response procedures to mitigate the impact of security incidents.
Regular Security Audits:
Fintech companies should conduct regular security audits, vulnerability assessment and penetration testing to identify vulnerabilities and potential risk areas. This can be done in-house or by hiring an external security firm to conduct the audit. Security audits typically involve a comprehensive review of the company’s security policies, procedures, and technical controls.
Hiring a Reputable Cybersecurity Agency:
The fintech industry is fast-paced, with new forms of vulnerability sprouting out daily. The in-house cybersecurity team may not be equipped with the best techniques to prevent these ever-evolving threats. With the fragility of the data they handle, fintech companies must invest in their cybersecurity by hiring a reputable cybersecurity firm to help them with risk evaluation, management, and recovery technique to combat the evolving threats.
Get in touch with DTS Solutions to gain insight into how to build a personalized cybersecurity solution for your fintech.
Cybersecurity Best Practices for Fintech Companies
Fintech companies must take cybersecurity seriously to protect their systems and data from cyber risks. The following are some of the many cybersecurity measures that fintech companies must implement to combat cyber risks:
Multi-Factor Authentication:
Multi-factor authentication (MFA) adds an extra layer of security to user authentication by requiring the user to provide two or more authentication factors before granting access to a system (MFA is an important aspect for organizations implementing defense-in-depth). This could be a combination of something the user knows (such as a password), something they have (such as a physical key), or something they are (such as a fingerprint). MFA significantly reduces the risk of a cyberattack by adding an extra layer of security that is much harder for hackers to bypass.
Data Encryption:
Encryption converts data into a coded form that someone with the decryption key can only access. Fintech companies should use encryption to protect sensitive data in transit and at rest. Data in transit refers to data sent over the internet, while data at rest refers to data stored on servers. Encryption ensures data is scrambled and unreadable to unauthorized parties.
Cloud Security:
Ensures the platform built in the cloud is secured and hardened with security controls. Cloud security is a crucial aspect of fintech cybersecurity. It is essential for fintech companies to implement strong access controls and authentication measures, encrypt data both in transit and at rest, and regularly monitor and audit their cloud environment for any suspicious activity.
API Security:
API and open banking security are crucial aspects of the fintech industry. Open banking allows third-party providers to access customer financial data through APIs, increasing the risk of unauthorized access and data breaches. To ensure API and open banking security, strong authentication and authorization measures, such as access tokens and API keys, should be implemented. Regular monitoring and auditing of API activity can help identify and prevent any malicious activity. Open banking providers should also work with reputable third-party providers that have strong security protocols and compliance certifications. Usage of API security gateway will also significantly enhance API security posture.
AppSec (Application Security):
AppSec and source code management are essential components of fintech cybersecurity. AppSec involves identifying and addressing security vulnerabilities in applications, including web and mobile applications. To ensure AppSec, it’s crucial to implement secure coding practices, such as input validation and output encoding, to prevent attacks like SQL injection and cross-site scripting (XSS). Regular security testing, such as penetration testing and vulnerability scanning, can also help identify and remediate security vulnerabilities. Source code management involves implementing secure code development processes, such as version control and code reviews, to prevent errors and ensure that code changes are properly tested and deployed.
Tokenization:
Tokenization is the process of replacing sensitive data with a non-sensitive token, which can be used for processing transactions without exposing the original data. Fintech companies must employ tokenization to protect customer payment card data and other sensitive information.
Continuous Monitoring:
Threat detection and response are crucial for maintaining the security and reliability of financial systems. A dedicated CSOC function (outsourced or in-house), can help ensure effective threat detection and response by implementing security monitoring and alerting systems into a XDR data lake with logs from SIEM, EDR, FWs, WAFs, AD, MFA, PAM, etc and incident response procedures to mitigate the impact of security incidents.
Regular Security Audits:
Fintech companies should conduct regular security audits, vulnerability assessment and penetration testing to identify vulnerabilities and potential risk areas. This can be done in-house or by hiring an external security firm to conduct the audit. Security audits typically involve a comprehensive review of the company’s security policies, procedures, and technical controls.
Hiring a Reputable Cybersecurity Agency:
The fintech industry is fast-paced, with new forms of vulnerability sprouting out daily. The in-house cybersecurity team may not be equipped with the best techniques to prevent these ever-evolving threats. With the fragility of the data they handle, fintech companies must invest in their cybersecurity by hiring a reputable cybersecurity firm to help them with risk evaluation, management, and recovery technique to combat the evolving threats.
Get in touch with DTS Solutions to gain insight into how to build a personalized cybersecurity solution for your fintech.
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