For some time, fintech startups have been growing at a staggering rate. They are not only improving the products and services of the existing financial services but are also offering an alternative to conventional financial solutions. However, despite this rapid growth rate with which the fintech solutions have transformed the global market, there are still some risks in the industry mentioned above. With the emergence of online platforms and disruptive technologies, the chances of cyberattacks increased significantly. And that became a more significant challenge for the fintech industry. Not only that, but the integration of fintech solutions in the existing banking services also raised concern over data security.
According to sources, the average cost of a data breach globally is approx 4.9 mn Euros per cybersecurity incident. Hence, it is vital today to know about all the challenges that one might face during the integration of robust fintech services.
Top Cybersecurity Challenges for Fintechs
The first and foremost challenge that is faced by the organizations leveraging the fintech solutions is risks involved in the third-party software integrations. It is no surprise that internal security is not always enough, especially when it comes to banks and financial organizations. Therefore, to solve the security issues, many banks, and other financial organizations utilize third-party software solutions, from a not so trusted service provider. As a result, they end up losing their critical data and other vital user information. Not only that, but they might also even experience service failures and eventually suffer from a loss in reputation. Hence, banks and financial organizations should consider financial risks while evaluating their risk management system.
It is no surprise that data plays a crucial role in all sorts of businesses and industries, and the financial sector is no exception. The data related to users, related to banks, and those related to financial services are of utmost importance. However, with the introduction of online digital services, the problem of data breaches rose to a great extent. Today, the attackers can seamlessly access the sensitive information of the users as they are readily available on the online platform. As a result, online transactions are becoming more prone to cyber thefts.
Another challenge that financial organizations might face is the risk due to system complexity. It is often seen that banks and financial institutions, to enhance their services, integrate third-party software in their existing systems. But, as most of these software solutions are not developed at the same time, resulting in increased complexity of the system. Due to all those complexities, it is quite challenging to identify the vulnerabilities arising due to system complexity.
Compliance failures is another big challenge that fintech startups face while implementing fintech solutions. Depending upon the type of business operations and regulations, fintech startups may have to meet the compliance and regulatory requirements accordingly. These may include GDPR, PSD2 compliance, and so on. However, when a startup fails to meet those obligatory compliances, problems like data breaches and regulatory fines take place.
Application Related Risks
We all know that financial institutions, especially banks, often leverage the online fintech solutions to access the real-time information of their users. That information is further utilized by the banks to carry out the financial transactions and for performing other vital banking operations. However, due to inadequate security modules and inefficient codes, those solutions often become prone to cyber thefts. As a result, all the critical information of the users is easily accessible to hackers. Hence, if a person is planning to develop a fintech software solution, then it is vital to pay heed to security and other essential features.
Malware attacks and hacking are the two most prominent threats that the global market has been facing for quite some time. We all know that SWIFT systems are widely used by almost all the banks of the world to exchange vital financial information. However, in this cyber-prone world, hackers are now targeting SWIFT more seamlessly. In fact, the recent attack on the SWIFT infrastructure indicated the level of sophistication and ease of the hackers and malware attackers. That’s a challenge that marketers still need to consider while implementing fintech software solutions.
Cloud-based solutions are, without a doubt, one of the most effective tools for the global fintech market. Besides providing ease and efficiency, it also makes the online payment secure and effective for the users. It offers nearly everything that the fintech sector needs to grow efficiently. However, despite the robustness of the cloud-based services, the fintech startups might experience leaks in sensitive financial information. Many a time, when fintech startups partner with an inefficient cloud-based service provider, they experience data breaches and other vital problems. Therefore, fintech marketers need to stay updated and wise while partnering with the service provider.
Existing Banking Systems
Existing banking systems are also one of the sources of the risks that are faced by fintech startups. It is no surprise that banks are struggling hard to integrate advanced fintech solutions into their existing systems. However, these non-patched core banking systems are very much prone to cyberattacks, and the main concern is way more than that. When these tech-friendly fintech solutions integrate with the existing banking solutions, they too become the main target of the hackers and attackers. Hence, a financial institution should firstly refresh their core banking system before implementing fintech solutions in their business.
Online Digital Platforms
The introduction of digital platforms in the global market led to the increased use of mobile applications utilizing the one-time password and security codes. However, these codes and passwords are easily accessible by hackers and attackers. Due to a faulty fintech software solution, the critical information of the banks and financial organizations is seamlessly accessed by the malware attackers. Hence, the organizations should always partner with a trusted and experienced fintech software development company to ensure security and stability.
Money Laundering Risks
Last but not least, money laundering risks are also a vital challenge for fintech startups during the implementation stage. The banks and other financial organizations often use cryptocurrency to carry out financial transactions efficiently. No doubt, these cryptocurrencies have become an integral part of the fintech ecosystem, but any set of standards does not regulate them. As a result, the frequent use of these non-regulated currencies results in illegal transactions and even in terrorist funding. And since identifying the beneficiary of these illegal transactions is not possible, the money laundering challenges are difficult to address and resolve.
To conclude, we can say that the fintech sector is growing and transforming every aspect of the global market. The fintech software solutions are not only simplifying the existing systems of the banks and financial institutions but are also helping them to enhance their services. However, there are certain challenges involved in fintech software implementation. Be it cloud-based risks, data migration risks, or even the risks associated with the existing systems; the businesses need to address them all to make their operations secure and efficient. In short, an efficient, balanced platform is required in order to promote growth and mitigate risks associated with the fintech software implementation.