Fintech and Data Protection: The Keys To Protect Your FinTech
The coalition between the financial industry and technology started way before what we have now. Ever since the first ATM in the 1960s, the two industries became joined at the ribs. Furthermore, the evolution of mobile internet paved the way for better improvement in the financial sector. A quick look at the user-friendly and easy-to-use nature of fintechs reveals the stark difference from traditional banks. While fintechs give an aura of freedom, physical banks are often stuffy and brooding. Sure, we love these new developments—the easy transactions and zero-stress payment methods—but we need to consider fintech data protection. What’s The Importance of Data Protection in Fintech? Data is the one thing every business needs in varying amounts, and the sporadic growth of the internet means that organisations have lots of it at their disposal. So, do fintechs use data? Yes, they do. In fact, the category of data fintech companies use and store is very sensitive. We are talking about passwords, credit card numbers, account details, home addresses, etc., and these kinds of data attract the wrong attention. Here comes fintech data protection, which is how fintech companies safeguard data from compromise, loss, or unauthorised access. As a fintech company, there’s a ton of reasons you cannot do without data protection. First is regulatory compliance; as a result of the neverending occurrence of cyberattacks, countries and industries set down laws to oversee the act of safeguarding data. The GDPR for example, protects data of EU citizens regardless of the organization’s location. Similarly, organisations operating in Nigeria answer to the NDPA (Nigerian Data Protection Organisations). Is regulatory compliance necessary for fintech companies? If they wish to boycott the fines and penalties of non-compliance, then they need to protect data. For confirmation, a 2023 report reveals that over 60% of fintechs pay at least $250 000 in compliance fines and one-third pay higher than $500 000. While fintechs are concerned with non-compliance fines, they’re more bothered about customer confidence. The nature of the financial industry doesn’t encourage data breaches because of the severe effects (identity theft, financial fraud, etc.). Once it happens, clients migrate immediately and may never return. Key principles of fintech data protection Data protection is not merely an obligation; it’s a cornerstone to fostering trust, transparency, and growth in the fintech industry. A look at the vast amount of data circulating in the fintech world: data protection must be done (the right way!). So, what are the basic principles datworld:ection fintechs need to follow? Below are some. Lawfulness, fairness and transparency Data collection, processing and storage must follow the lawful pathway and be for legal reasons. Data subjects (data owners) must be informed about the data being collected, the purposes, and their rights. This means that fintech companies have no right to collect, use, or even keep user data without informing the client. We’ll explore how this principle protects data later. Purpose Limitation Data cannot be collected nor processed for reasons beyond the stated. If the need arises, fintechs must inform users about new developments. Data Minimization Data collected must be relevant to the purpose for which it’s being collected. This principle works hand in hand with purpose limitation. It means that data should be adequate, relevant, and limited to what is necessary for the purpose of processing. Integrity and confidentiality appropriate technical and organizational measures must be implemented to protect personal data from unauthorized or unlawful processing and accidental loss Storage Limitation and Accuracy Users’ personal data must be accurate and kept up to date. As a result, fintechs must implement a system to detect and rectify all inaccuracies. Accountability Fintech companies are held accountable for compliance with the above data protection principles. So, they must be able to defend their compliance. To do this, regular risk assessments and appropriate governance structures must be carried out in addition to employee trainings. Beyond, fintechs should create a data protection framework that addresses issues like third-party access, cross-border transfers, and data breaches. Challenges To Fintech Data Protection The journey to data protection for fintech companies would’ve been smooth, but for the challenges it faces. These challenges lower the efficiency level of the system but are also combatable. Let’s look at a few of them. Cybersecurity Threats The financial sector took advantage of the widespread mobile internet to introduce easy transactions and place the customer first. While it produced desited results, the sheer amount and nature of data fintechs use makes them vulnerable to cyberattacks like phishing, hacking, ransomware, etc. A report by Statista confirms the financial industry as one of the most cyberattacked industries, as it takes the no. 2 position. Now, these threats operate in such a vicious and never-ending manner that it takes more effort for fintechs to gaurd against them. Take AI as an example. Cyberminals use AI to scrutinise Fintech’s defence system for vulnerabilities, and it does the job faster than the victim company can rectify the situation. Insider Threats Based on facts, fintech employees are regarded as one of the most security-conscious across various industries. Regardless, their actions, particularly unauthorised access, contribute to the threats to data. A prime example of this is the “NDPC fines Fidelity Bank” fiasco, where the bank (maybe a staff member) used the client’s data without her consent or knowledge. And that’s not even critical. There are situations where cybercriminals exploit the organisations due to the careless nature of the staff. In a recent report, about 49% of fintech staff admit to bending the rules for work ease. Third-party Risks Most times, fintech companies collaborate with other organisations that need access to user data. This practice poses more challenge to fintech data protection as the third-party may have weak data protection practices. All it takes is one hit for cybercriminals, and every available piece of data is compromised. Data Protection Measures For Fintech Companies Prevention, they say, is better than cure. The saying rings true for fintechs, and here are some protection measures they can apply. Understanding Regulatory Compliance Data protection regulations like the General Data Protection
