Data Privacy Practices every Fintech Firm needs to Keep in Mind!

Financial technology is reimagining the roles and scope of traditional financial institutions riding on the back of technological advancements and digital innovation. Consumers increasingly expect more from their financial services providers and aspire for financial inclusion.

Fintech is leveraging APIs, distributed ledger technology, artificial intelligence, and biometrics to quickly become the norm. The global fintech market is expected to reach USD 124.3 billion by the end of 2025 at the Compound Annual Growth Rate of 23.84 percent.

Amid all the growth in the fintech sector, data security and cybersecurity remain challenging aspects of doing business.

Read More: Why Banks will Benefit from Open API

Here are a few tips for fintech companies to ensure better data privacy.

First, know that you are an easy target

Instead of focusing a lot on gaining market share and growing business, fintech firms must build awareness around secure digital transactions. Only a few startups in the fintech domain today implement effective cybersecurity measures, even those with instant loans and electronic funds transfer capabilities.

According to Sajay Kathar, MD, Quick Heal Technologies Ltd, the sensitive customer data that fintech companies possess is the key alluring point for cyber attackers. Cybercriminals motivated by financial gains either perform security breaches for identity theft or perpetrate a direct fraud. Knowing that you are a meaty option for cybercriminals can help set the record straight in the first place.

Incorporate security in software design

Most security liabilities are a consequence of undetected coding errors committed during the development stages. It is, therefore, crucial to design software with security in mind, instead of integrating it toward the end.

If your fintech company employs cloud storage, you have an entirely new avenue from where cybersecurity challenges might creep in. Implement dynamically scalable, multi-cloud security standards and protocols to protect financial data. Secure data centers with stringent authentication methods to prevent distributed denial-of-service attacks on large amounts of data.

Implement automated threat detection

As cyber criminals increasingly rely on automation to break into your network and gain access to data, companies in the fintech sector need to incorporate automated threat detection systems to keep up with attackers.

Such systems automate the process of collecting information from all at-risk devices and compare it against attack methods and trends, sharing that information through secure networks.

Conduct web app penetration tests

Most fintech organizations today stand at the target of random, indiscriminate attacks. You need to look out for attackers trying to steal cryptographic keys or reverse-engineering them. Organizations can prevent such attacks by conducting web app penetration tests.

This involves an expert analyzing your apps by proactively looking for vulnerabilities just as a criminal hacker would. This can allow a fintech company to discover data security loopholes before an attacker does.

Onboard a dedicated data security officer

Some experts believe that fintech companies fail to place someone in charge of data security at high positions in the company hierarchy. A fintech company can easily differentiate itself from large competitors by having a data security officer at the executive level with direct access to their fellow management team and the board.

Formally appointing a data security officer might change how you approach the subject and how security officials function to ensure security round-the-clock.

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Set up internal data security controls

Reduce in-the-moment thinking and prepare for cybersecurity in the long haul. Setting up internal data security controls improve your regulatory compliance and also helps financial institutions you collaborate with stay assured that they meet their own regulatory compliance obligations.

Here are a few steps to make this happen:

  • Identify the systems and processes (assets) that need to be secured.
  • Engage in risk assessment by regularly evaluating the particular threats to data security that you face, the likelihood that those threats will come to pass, and the potential costs associated with their mitigation.
  • Develop and implement security measures to address and control the specific threats you have identified in risk assessment.
  • Educate your employees, partners, and contractors on an ongoing basis to keep them up to date on security best practices and how to handle a situation of cyber threat.
  • Continuously monitor and test your software solutions and keep a close eye on internal activity.
  • Review and revise this procedure in light of changing security needs.

Implement and use network security protocols

Fintech companies have access to sensitive information and must maintain stringent policies on handling and transmitting data by employees, especially through third-party servers. When confidential data is stored outside your firewall, it creates opportunities for targeted eavesdropping or man-in-the-middle attacks.

Use proactive strategies to incentivize employees, so they follow the seemingly burdensome security procedures and help address potential data risks. Here are a few network security do’s:

  • Maintain a secure network by installing a firewall configuration that guards sensitive data. Never use vendor-supplied defaults for system passwords or other security parameters. Encrypt the transmission of sensitive data across public or open networks.
  • Use strong access control measures bt assigning a unique access id to each user and restricting physical access to sensitive data.
  • Regularly monitor networks and test them. Monitor developments in the network to keep security at par.

If you are a new entrant in the fintech market, these tips will be your starting point. What would you add?

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