The fintech industry has witnessed tremendous growth and innovation in the fast-paced digital age. Fintech companies and neobanks have emerged as disruptors, offering customers convenient and user-friendly financial services. However, this rapid progress comes with its fair share of cybersecurity challenges. As the industry evolves, these companies must prioritize cybersecurity to safeguard their clients, companies, and partners.
The Advantage of Agility and the Pitfall of Cybersecurity
Fintechs and neobanks have a distinct advantage over traditional financial institutions – their agility. This agility enables them to swiftly adjust to shifting market requirements, deliver innovative solutions, and gain a competitive edge. However, this advantage often comes at the expense of cybersecurity, sometimes treated as an afterthought.
Riccardo Galbiati, CTO at Palo Alto Networks for Australia and New Zealand, emphasizes the need for a “secure by design” approach in the development lifecycle of fintech applications. This approach involves embedding vulnerability and compliance checks during application-building, creating digital “guardrails” for developers to ensure security without compromising speed and efficiency.
While larger financial institutions may have more experience, larger budgets, and dedicated security teams, they face the challenge of coordinating a strategic and cohesive cybersecurity approach. Building tactical solutions without a holistic view can lead to fragmented cyber tools and weaken overall security posture.
John Karabin, director of cybersecurity at NTT, echoes the importance of “secure by design” and emphasizes the need for qualified security practitioners as integral parts of DevOps teams. Incorporating security and compliance into the early stages of design and focusing on people, processes, and technology can result in better security outcomes and cost savings.
Addressing the Cyber Talent Shortage
One significant challenge faced by fintechs, neobanks, and even larger financial services firms is the need for cybersecurity specialists. Australia has a limited pool of only 17,240 cyber specialists available for work. This scarcity means companies must find creative solutions to bridge the talent gap.
Smaller and more agile financial organizations can seek immediate help within the partner community, leveraging skilled advisors to enhance their cybersecurity coverage and support. Virtual Chief Security Officers (CSOs) offered by partners can provide valuable guidance and help shape growing cybersecurity teams.
Automation also plays a crucial role in optimizing the efforts of security specialists. By automating tasks that machines can perform, such as processing large amounts of data, cybersecurity teams can focus on critical decision-making and problem-solving that require human intervention. Striking a balance between automation and expertise can improve security outcomes, increase staff satisfaction, and improve retention rates.
On the other hand, larger financial institutions have the advantage of dedicated security teams but must ensure that their security policies are effectively implemented. Good security governance is essential, but the actions of each member of the organization genuinely count. A strong security culture, supported by a proactive security approach, forms the bedrock for protecting organizations from growing threats.
The Impact of Cybersecurity Challenges by the Numbers
Cybersecurity challenges in the fintech industry are not merely hypothetical concerns. The impact of these challenges can be quantified through real-world examples and statistics.
For instance, over 300,000 Android users fell victim to Trojan banking apps downloaded via the Google Play Store. Due to improper permissions, these apps allowed Trojan actors to breach user data and compromise smartphones. This highlights the need for robust security measures in mobile applications to counter evolving threats.
Ransomware attacks pose another significant challenge. According to recent data, the average cost of recovery from a ransomware attack is nearly $2 million. Only 8% of businesses that paid the ransom in 2020 successfully retrieved their data. These statistics underscore the urgency of combating ransomware and implementing effective cybersecurity measures.
Recognizing the gravity of cybersecurity challenges, leading financial institutions like JP Morgan Chase have allocated substantial budgets for cybersecurity. JP Morgan Chase has set aside $600 million for cybersecurity investments and employs over 3,000 cybersecurity professionals to protect its systems from hackers and cybercriminals.
Top Cybersecurity Challenges in Fintech
While the rise of fintech and neobanking has opened up new avenues for financial services, it has also exposed vulnerabilities that cybercriminals are keen to exploit. Understanding the specific challenges faced by the industry is vital for developing effective cybersecurity strategies.
Unpreparedness for Ransomware
Ransomware attacks pose a severe threat to fintech and neobanking applications. These attacks can disrupt services and extort money from financial companies. Many neobanks need more IT capabilities to protect themselves from these malicious threats adequately. Consequently, they become vulnerable to junk network traffic that halts service delivery and allows criminals to demand ransom.
Limited Cybersecurity Budgets
Limited cybersecurity budgets challenge fintech and neobanking companies, particularly startups. Compared to traditional banking systems, these companies have smaller budgets, which can discourage them from investing in comprehensive cybersecurity measures. Many companies rely on third-party vendors and software product engineering consulting companies to mitigate this challenge to optimize their security efforts while minimizing costs.
Integration Loopholes
Integrating banks with fintech platforms requires multiple custom APIs, which can introduce security risks. Fintech software development companies must carefully test and secure these integration points to prevent criminals from exploiting vulnerabilities. Regular testing and patching are essential to ensure the security of API endpoints and protect against potential breaches.
In addition to these challenges, fintech companies face the risk of phishing attacks, Distributed Denial-of-Service (DDoS) attacks, malware, and other threats that can lead to data breaches. The introduction of AI has made cybercriminals more sophisticated in identifying vulnerabilities. However, companies can also use AI for fraud protection and threat detection.
Conclusion
As the fintech industry continues to flourish, addressing cybersecurity challenges becomes paramount. Fintech and neobanking companies must prioritize security to protect their clients, companies, and partners from cyber threats. The success of these organizations lies in their ability to stay ahead of cyber attackers and proactively address vulnerabilities.
Companies like Tntra, at the forefront of the fintech revolution, provide valuable fintech solutions to enhance cybersecurity for players in the industry. Organizations can safeguard their systems and build customer trust by investing in dedicated cybersecurity teams, leveraging automation, and developing a robust security culture. With continuous advancements in technology and evolving cyber threats, the battle against cybersecurity challenges must be fought with vigilance and innovation.
Tntra stands ready to support BFSI companies in their digital transformation journey. Whether securing systems, implementing best practices, or providing expert guidance, Tntra offers comprehensive software product engineering solutions to protect organizations from cyber threats in the rapidly evolving fintech landscape.
Acquire software solutions for your FinTech enterprise through a renowned software product engineering company, Tntra. Our team of dedicated specialists is ready to assist you in achieving industrial digital transformation using intelligent alternatives.
