Financial technology (Fintech) has improved its products and services, but risks still exist. If you’re wondering why Fintech companies should perform a cyber risks assessment, this is the primary reason.
Integrating Fintech products into existing systems can pose threats to data security. There is also the problem with expanding digital platforms that can make networks vulnerable to cybersecurity breaches.
In this article, you’ll find information on the risks Fintech can pose to a company. You’ll also learn how a cyber risk assessment can help you prevent potential data breaches.
Risks Fintech Companies Face
Fintech companies face several threats from multiple sources. Knowing what these risks are will show why a cybersecurity assessment is critical when it comes to protecting personally identifiable information (PII).
Risks from Third-party Vendors
Your company’s internal cybersecurity protocols aren’t always strong enough to prevent data breaches when third-party vendors are involved. If the fintech services aren’t provided by a trusted supplier the business is at risk and could be held responsible if data is lost or stolen.
Along with a damaged reputation, the organization can also face fines and penalties that result from non-compliance with industry standards. Eliminating third-party risks must be a part of every financial organization’s cybersecurity protocols.
Attacks from hackers and malware are two of the common problems organizations face both at home and internationally. Even the Society for Worldwide Interbank Financial Telecommunication (SWIFT) has become a target of hackers.
SWIFT systems exchange financial data between organizations and are used by most banks around the world. While SWIFT does make it easier for financial institutions to share information, it has also made it a popular target for cybersecurity theft.
Hackers can find vulnerabilities in the companies’ systems. Once the vulnerabilities are found, malware can be introduced to give cybercriminals access to protected data.
Financial institutions depend on data to conduct daily business. It applies to all organizations that collect, manage, and store PII but often more so to the banking industry. Credit and debit cardholder information is at particular risk due to fintech systems with exploitable vulnerabilities.
Often online transactions present the biggest risks and are the easiest for hackers to breach, especially if the fintech services are provided by a third-party. Regardless of where the data breach occurs, the financial institution will be the one found at fault.
Application Security Risks
Many banks depend on fintech services to provide them with real-time financial data about their customers. It is necessary to authorize transactions, approve loans, and handle other banking business.
If the fintech software used does not have adequate codes and security modules it is more vulnerable to hackers. The weaknesses in the application can be leveraged by cybercriminals to gain access to consumer data and other financial information.
Before an organization uses fintech software, it must verify that it has the appropriate cybersecurity protocols in place. If it doesn’t, the company will be vulnerable to data breaches.
Risks for Money Laundering
Cryptocurrency is often used by international organizations due to the ease with which it can cross borders without having to be exchanged. The problem with fintech systems and cryptocurrency is not with it being accepted as a form of payment for goods and/or services, but that it’s not regulated by any governing body.
The lack of regulations makes it easy for criminals to launder cryptocurrency through legitimate financial institutions, especially if the fintech services are not up to industry compliance standards.
Digital Identity Risks
Digital banking is convenient for the organization and consumers. Unfortunately, this convenience also comes with risks if the fintech system isn’t up to industry cybersecurity standards.
Passwords, even single-use ones that are deleted after a specified time are vulnerable to hackers whether there’s malware in the system or not. Fintech systems and the financial institutions that use them need to perform a risk assessment regularly on their online security protocols and practices.
It’s also recommended that the organization run a risk assessment on their practices before implementing fintech.
Core Banking System Risks
Traditional or core banking systems are vulnerable to cyber-attacks primarily because financial institutions often have difficulties successfully implementing fintech applications into their non-secure networks.
Before a company implements fintech services they first need to look at its non-secure networks, both internal and external. Running a cybersecurity assessment will help identify vulnerabilities that need to be addressed before fintech is added to the network.
Leaving any weaknesses in the system will make it easier for hackers to find a way in. Once this happens, you’re dealing with the ramifications that come with a data breach.
Cloud-based Cybersecurity Risks
One of the advantages of fintech is the services it provides. It includes everything from securing online payments to creating payment gateways and digital wallets. These services are convenient for the bank and its consumers, but there are also risks involved.
Cloud-based storage services are considered secure as long as adequate protocols are in place. The service is only as safe as the cybersecurity practices implemented to protect consumer data.
It is the company’s responsibility to ensure that the cloud-based services are adequately protected from cyber-attacks. It will mean performing a risk assessment annually, sometimes more frequently depending on the size of the business.
Other Reasons to Perform a Cyber Risk Assessment
There are a few other reasons why a cyber risk assessment should be performed regularly by all fintech companies.
One reason is due to transactional speed. It is one of the advantages of implementing fintech, but it also creates vulnerabilities in the system. Transactional information moving in real-time benefits the institution and consumer, but it also makes it harder to keep up with weaknesses hackers can exploit. Businesses can also find it difficult to keep up with regulatory and fraud reports. Missing these deadlines can result in official audits and even monetary penalties.
Cross-border transactions are standard for most companies and while fintech makes it easier, it also opens up ways for cyber-thieves to get in if your security is less than adequate. Keeping data private is another concern but implementing cybersecurity protocols will minimize this threat.
There is no denying that Fintech products and services are opening doors for financial institutions and consumers. It makes it easier for consumers to pay online and transfer funds from various accounts.
Companies can do business across borders easier and cryptocurrency can easily be used for deposit or payment.
As convenient as fintech is, it also comes with potential problems that could expose vulnerabilities in your system for hackers to exploit. Regardless of whether a data breach occurs on your end or through an associated third-party, your business is the one that will be held liable.
It only makes sense to perform a cyber risk assessment if you use fintech and the experts at RSI Security are here to help. Whether you have questions or need an assessment performed, contact us today for a free consultation.