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Money transfers, savings, investments, and bill payments have shifted onto a digital level, from standing in a line to making a few clicks and maybe using an ID-touch.
Thanks to many fintech apps at hand nowadays, the need to visit actual banks has been reduced. As a person involved in the fintech domain, you know that this industry rapidly grows and draws tons of startups, investors, and cybercriminals too. The fintech infrastructure has a different format, ways of processing data, and communication with customers. Still, the standards and requirements have barely altered, one of which is fintech security.
As a Solution Architect, I have faced the main security threats for fintech products. And today, I'll share with you the list of the best fintech app security solutions on these new cyber grounds and give you a detailed fintech security checklist.
Fintech security glossary
Before we start, let's ensure that we're on the same page with some of the fintech security terms you will come across in this article.
Cyber attack/ cybersecurity attack – an attempt to gain access to a system, software, or computer network to disable, disrupt, destroy or control the systems or steal the data held within these systems.
Data breach/ data leak – a situation when data held by some party is accessed, viewed, or potentially stolen by unauthorized third parties.
For example, a hacker accessing a database copies users' data such as email addresses, passwords, etc.
Fintech security practices – a set of information security standards used by fintech organizations worldwide to establish protected data management systems. It contains policies, frameworks, and development activities that help fintech organizations protect different types of data from cyber attacks.
Fintech security: Why does it matter?
Banking has always attracted fraudsters, regardless of whether the financial operation is being carried out in a bank or online. Important information can also be exposed to simple human blunders or complications of a technical kind.
Regardless of the reason for the data leak, it can destroy your business's reputation in the blink of an eye. It leads to irreparable financial damage, loss of intellectual property, etc. Below I gathered the key cybersecurity statistics, not to scare you but to show how important it is to remain alert and protect your software at all times.
Cybersecurity stats: The number of attacks increased by 28% in 2022
- The number of cybersecurity attacks increased by 28% in the Q3 of 2022 compared to the same period in 2021. (Check Point Research)
- During the Q3 of 2022, approximately 15 million data records were exposed worldwide through data breaches. It’s a 37% increase compared to the previous quarter. (Statista)
- Europe, Asia, and North America – are the top 3 most affected regions affected by breaches in 2022'Q3. 50% of total Q3 breaches took place in Europe. (Surfshark)
- $9.44 million – the average cost of a data breach in the U.S. in 2022, which is up from $9.05 million in the previous year. The global average cost per data breach was $4.35 million in 2022. (Statista)
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What will happen if you ignore fintech security? 3 Main Risks
After all, be it a blackout or ransomware, your company remains responsible for protecting your customer’s data if it gets lost or damaged. And speaking of finances, we must also mention the vulnerability of all information processed. So let’s take a look at some of the possible risks.
This issue occurs when someone steals personal or financial data and thus obtains access to what you, your colleague, or client is authorized to, for instance, the bank account credentials. Considering the risk that anyone can be a target for identity theft, it’s difficult not to notice how crucial the distribution of access and certain functions within a business network are between the workers. Identity theft is also likely to cause a chain of further difficulties, such as phishing or spoofing, which may lead to huge data and financial losses.
Violation of a customer’s trust
Good news doesn't have a tendency to spread as fast as the bad one. If your customers are satisfied with your fintech app, they will definitely keep using your product. Moreover, they are likely to recommend it to their friends. But imagine the situation when a customer’s data gets broken, though: not only will you lose the trust of your actual client, but also of other potential users.
Even though implementing fintech security consumes time and money, winning the trust back takes far more effort.
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I’ve mentioned the case when the information gets stolen or lost. Well, it can also be misused if a fraudster manages to read the data. And a hacker doesn’t need to make much effort to read and use the stolen information if it is plaintext or secured in a bad way. All in all, it leads to, again, the violation of customers’ trust, reputational issues, and profit losses.
These are the three main security risks I often highlight for clients. The bad news is any system can be hacked anyway, but the good one is the scale of losses, such as time and money needed to recover – depend on the level of your fintech security.
So let’s move further, and I’ll give you my list of the best fintech security practices we use at Uptech.
💡Starting a venture in fintech? Check out our article on how to avoid 5 common fintech mistakes and increase your odds of success.
Fintech Security Best Practices
Below, I gathered security best practices for fintech application development and listed them regarding their importance level. So let’s start with the critical ones.
Data loss isn’t always a threat from the outside, but it can also be the result of a human error or hardware failure. Creating a copy of crucial data prevents it from getting lost completely. To save as much edited data as possible, ensure that important files are backed up regularly, saving edited and changed information.
Expert tip: Configure backups and test recovery procedures at least once per 6 months.
Data storage encryption
Data encryption is an essential security practice that prevents unauthorized eyes from reading your data. When we encrypt data, we protect it from unauthorized external access on storage devices.
Role-based access control
It is a common security practice to assign permissions to your colleagues based on a position they hold within a company. A certain degree of access to different data and features doesn’t imply your mistrust but improves work efficiency due to reduced administrative workload.
Expert tip: Create admin, read-only, and developer roles and control permissions given to the roles.
Unit tests for access control logic
Security unit tests for access control are one of the critical fintech security practices. Performing unit tests is a must for us in every fintech project. We do it to check if a user sees the right screen, an admin sees the right screen, and so on. It's super sensitive information, and you have no place for mistakes here.
Vulnerabilities monitoring in the installed packages
Fintech apps often use third-party software providers. This software sometimes has its own vulnerabilities and weaknesses that cybercriminals can use to hack into, which makes them riddled with security flaws. Hackers can implement an attack known as a supply chain attack in which they compromise third-party to get access to the data.
I suggest checking the third-party providers before using them and regularly monitoring them during implementation. It will help you spot the vulnerabilities in your project, reveal what area it can affect and what you need to fix.
Encryption key management
We use AWS KMS for encrypting sensitive credentials and rotating the encryption keys. We can also search for alternative ways to match your specific product needs and business requirements, but Amazon Security Lake covers all the main needs.
Why does Key Management so important? Without getting too technical, all that needs to be done is to keep users’ data secure and confidential.
Single entry point guarantee
Just like in physical banks, make sure you have one single “passage” for accessing the internal resources, which is controlled and monitored at ease. If you detect unauthorized entry, you close the entry to prevent fraud from reaching the files.
Expert tip: If you need access to the internal resources, database, etc., make sure you have a controlled entry point (aka VPN) that can be monitored.
Gathering IP and device ID for users that access the login is a simple action you can do to detect unwanted access. The data you can track depends greatly on your fintech app category (e.g., payment, loan, money transfer, banking). You're not free to track all data, and should be very accurate here to avoid gathering sensitive information about users.
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Here is the full fintech security checklist with 15 security best practices.
Bonus: Fintech’s main regulations and policies
Though some fintech products, like neobanks, are not directly regulated. Instead, it is the bank with which the neobank or other fintech app is partnering with that is the regulated entity.
To have all the main regulations, acts, and directives that apply to fintech businesses at hand, I have gathered them in one place.
- Bank Secrecy Act (BSA): Also known as the Currency and Foreign Transactions Reporting Act. This law requires financial institutions to help detect and prevent money laundering along with U.S. government agencies.
- Anti Money Laundering Act (AMLA): This act requires the Treasury Department to set forth policies and regulations that protect against money laundering and terrorist financing. It compels organizations to develop and adhere to risk-based AML compliance programs.
- USA PATRIOT Act: More commonly known as the Patriot Act, this law came into effect as a response to the attacks of September 11th, with the aim of tightening and strengthening national security through enhanced foreign terrorism monitoring. For Fintech compliance, it means monitoring and preventing terrorism financing.
- Electronic Fund Transfer Act (EFTA): Enacted in 1978, this act establishes the rights and liabilities of consumers when it comes to funds transferred electronically, which includes monitoring the use of ATMs, debit cards, and automatic withdrawals from bank accounts.
- Electronic Signatures in Global and National Commerce Act (ESIGN): Enacted in 2000, this law regulates the use of electronic signatures and records, as well as lays out the guidelines for interstate commerce.
- Red Flag Rule: Established by the FTC and the NCUA, it works to prevent identity theft in the financial industry, and also improves consumer access to credit information, the accuracy of consumer reporting, and financial education and literacy.
- Fair Credit Reporting Act (FCRA): Passed in 1970, it ensures consumer information is accurate, fair, and private, protecting consumers from the inclusion of information on their credit report that could affect their credit unjustly.
- National Automated Clearing House Association (Nacha): Responsible for managing the ACH Network, which serves as a network for consumer, business, and government payments. It is an essential component of the electronic movement of money and data in the U.S.
- Jumpstart Our Business Startups Act (JOBS): Also known as the CROWDFUND Act, this law eased security regulations, allowing companies to use crowdfunding as a means of issuing securities.
Fintech security is key in the financial services industry as it determines your company's success. Whether you provide a safe solution to users and they will stay with you, or you'll deal with unsatisfied users, security issues, and lawsuits.
Therefore, to acquire new customers and win their trust, your fintech business needs to have a comprehensive fintech security system to prevent cyber security attacks and cyber-criminals from stealing customer information and financial data.
Thinking like a hacker would be of little help if sensible data gets stolen, broken, or misused. Security measures I have listed above work as a forethought, reducing the chance of cyberattacks or at least their effect on the subject hacked, as well as from other factors that are prone to put your database at stake.
If you have a fintech project and are unsure about its security level or need consultation, feel free to contact our team. We'll be happy to share our expertise with you.