The world market of fintech (financial technology) is expected to grow at a CAGR of 8.6% from 2021 to 2024.
The rapid rise of e-commerce, the escalating use of digital payments and mobile banking apps, and even the ramifications of COVID-19 are propelling this trend.
Fintech is so appealing to both startups and cybercriminals. Financial services firms deal with sensitive personal and business data, yet data storage concerns, cross-platform malware contamination, data leakages, and other risks frequently compromise that data.
A financial sector data breach costs an average of USD 5.85 million. However, startups are more vulnerable because they frequently lack the financial and human resources to address fintech security concerns.
The good news is that companies may avoid many breaches by adhering to best practices in fintech security. App development focused on data security is a significant element of a reliable financial services firm, and it gives it a competitive advantage. The very existence of the company may be at stake.
What data protection standards in the financial services business may apply to your app? How should software developers safeguard the code of their apps? What exactly is AES? How can security be addressed at the enterprise level? Continue reading to find out the answers and other helpful pointers for building a secure fintech solution.
Let us begin with some of the significant issues that organisations worldwide are facing today.
The Most Critical Fintech Security Challenges
We should safeguard an app from intrusion or suspicious activity using an identification, authentication, and permission system. However, password-based authentication and even two-factor authentication (2FA) may be vulnerable to cyberattacks.
Fintech firms require solid processes and procedures to control who has access to, creates, modifies, and deletes their data. Data ownership, or the possession and accountability for data, demands a thorough understanding of a variety of technical and legal processes, as well as adherence to state regulations and standards.
Vulnerabilities in Fintech Systems
Hackers can gain access to sensitive information by exposing system flaws. Unfortunately, most organisations are never aware of assaults or data breaches in their systems until too late. In addition, the growing use of gadgets and IoT devices complicates managing these risks.
Involvement of Third-party Services
Integrations with prominent payment gateways, analytics systems, social networks, or chatbots can jeopardise fintech app security. Hackers may utilise third-party access to impersonate a legitimate user to gain access to the system.
Migration to the Cloud
Many financial firms have transferred their operations to the cloud to improve performance, scalability, and cost-efficiency. However, the complexity and volume of transactions in various cloud settings might make data supervision and protection problematic. In addition, the incorporation of yet another technology may introduce new vulnerabilities.
Malware attacks are the most common sort of security threat facing financial technology applications.
Errors Caused by Human Activity
Human mistake is the most common cause of successful phishing attacks. However, devices that are lost or stolen give chances for fraudsters as well.
Regulations On Data Protection At The Regional And International Level
Depending on a fintech company’s location and target markets, it must comply with various financial services industry rules. Otherwise, it runs the risk of becoming isolated from specific markets. Furthermore, noncompliance may result in millions of dollars in lost productivity, business disruption, fines, and penalties.
Here are some of the rules and regulations you may be required to follow:
- PCI DSS (Payment Card Industry Data Security Standard) compliance is required for any companies that collect, transmit, or store credit card information.
- Another international certificate that fintech companies may be obliged to implement is ISO/IEC 27001.
- General Data Protection Regulations (GDPR) apply to all organisations in the European Union and the European Economic Area that provide financial services.
- The second Payment Services Directive (PSD2) governs electronic payments and cross-border transactions in the European Union.
- eIDAS (Electronic Identification and Trust Services) establishes a legal framework for interactions between fintech enterprises, businesses, governmental authorities, and EU people.
- The Financial Conduct Authority (FCA) regulates financial enterprises in the United Kingdom that provide services to consumers.
- GPG 13 is a best practice guide for all British government systems and networks, vendors, and outsourced firms.
- If your fintech app handles the private data of Japanese people, you must comply with APPI (Act on the Protection of Personal Information).
- The PIPA (Personal Information Protection Act) applies to entities in South Korea that deal with private data.
Throughout the software development process, developers of fintech solutions must address both regulatory compliance and data security risks.
The approaches and best practices outlined here can assist your company in addressing these problems, developing a compliant fintech product, and safeguarding your customers and your company’s valuable data.
How to Safeguard Data in Your FinTech Startup
Let’s have a look at the most recent ideas and tactics that can assist you in dealing with the issues we’ve identified and protecting sensitive data within your FinTech product.
1. Encrypt Sensitive Data.
The application of advanced mathematical methods to encode data is known as data encryption. Special keys are required to decode this data. Here are the four most secure encryption techniques available:
- AES is an acronym for Advanced Encryption Standard (AES). AES is a symmetric cypher, which means that it uses the same key for both encryption and decryption. The algorithm employs AES-128, AES-192, and AES-256 block cyphers with 128-, 192-, and 256-bit key lengths. A 128-bit key takes 10 rounds to encrypt data, a 192-bit key takes 12 rounds, and a 256-bit key takes 14 rounds. Data replacement, transposition, and mixing are all part of each round. To protect sensitive and secret data, the US government employs AES encryption.
- Rivest-Shamir-Adleman is an abbreviation for Rivest-Shamir-Adleman (RSA). It’s an asymmetric encryption method that encrypts and decrypts data using various keys. The encryption key is made public, while the decryption key is kept secret. This encryption algorithm is relatively safe. It is, however, slower than other methods, which is notably apparent when dealing with big data sets.
- Triple Data Encryption Standard (TripleDES). The TripleDes cypher is based on the DES cypher. DES is a Feistel cypher implementation that encrypts data with a 56-bit key. TripleDES applies the DES cypher method three times to each data block to increase security. This technique is often used to encrypt credit card PINs as well as other forms of passwords.
- Twofish. Twofish is a symmetric block cypher that employs 128-bit data blocks and takes keys of any length up to 256 bits. Thus, regardless of key length, there are always 16 data encryption rounds.
Each encryption algorithm is unique and is used to encrypt different types of data.
2. Develop Secure Code and Secure Architecture.
The architecture and coding of your application are essential to its security. Bugged, jumbled code is easy to hack. If your application contains security flaws in its business logic, even automation tools will struggle to discover them. Reviewing codes and pair programming are the most effective ways to avoid them.
The technological stack you select for your project is equally important. For example, a FinTech startup’s primary programming language must be quick, scalable, dependable, diverse, well-supported, and secure.
Ruby, for example, includes a slew of built-in features for improving code security. In addition, the Ruby community encourages the Security Development Lifecycle, DRY, SOLID, and other software development concepts to keep code secure, clean, and easy to work with.
Ruby also provides hundreds of ready-to-use open-source libraries known as gems, which not only reduce development time and money but can also improve the security of your FinTech product. There are treasures for:
- Authentication and authorisation that is safe
- Vulnerabilities are found through scanning code.
- Safe payments
- Debugging and Testing
Ruby was adopted by Twitter, Airbnb, Shopify, Twitch, and Netflix for their projects.
3. Secure Authentication
As already said, FinTech software requires safe and exact identification and authentication. Therefore, you can use the following methods in addition to OTP and adaptive authentication:
Access Control Based on Roles
RBAC (role-based access control) grants access to software and systems based on a user’s role. Each role can only access designated files and systems and cannot use other sections of the software.
Data leaks and breaches can be caused by more than just cyberattacks and malware. Data loss can also be caused by human errors and, in certain situations, deliberate actions by staff. Systematically updating passwords lowers the danger of data leaks and protects sensitive information from ex-employees and mishaps.
Shorter Session Lifetimes
The session lifetime refers to the amount of time a user can log in to a system or software. Therefore, you can reduce the danger of harmful third-party access to a user’s applications from an active session by limiting the session time.
Keeping Track of Failed Login Attempts
You can detect and prevent cyberattacks by tracking failed sign-in attempts and other suspicious activity. Set a sign-in attempt limit, and if a user goes over it, require further (multi-step) identity verification.
Tokenisation is a data security technique that involves converting meaningful data into random strings of symbols or tokens. The original data is referenced using tokens. However, unless you have access to a particular database, that data can’t be utilised to decrypt the original data. The relationships between the original data and the produced token are stored in this database, a token vault. Tokens are nothing more than a collection of symbols if they aren’t stored in a database.
Tokenisation is a data storage and highly secure transmission technology. The most crucial step is to secure the token vault. Encrypting the database is a common approach to do this.
5. Code Obfuscation
Code obfuscation is a good approach to keep your software from being cloned. Program clones resemble the original software in appearance and functionality and are designed to collect personal information from users.
Obfuscation makes analysing an app’s source code more complex, makes understanding algorithms impossible, and prevents reverse engineering.
For both startups and hackers, FinTech is a lucrative sector. That’s why it’s critical to safeguard your software product and all of the data it handles suitable from the start before an attack occurs.