What is the Importance of Cybersecurity in Fintech in 2024
Fintechs are the main deal now. They serve as evidence of the massive digital evolution happening right before our eyes. As much as fintechs sound like the latest development, the collaboration between the financial and technological industries started with the first ATM. Now, the evolution has grown beyond simple ATMs and traditional banks to mobile apps and online payments. Currently, the entire financial sector uses one slogan, “customer first,” and the emergence of mobile internet made it easy. Bank users can access their accounts from any location using their mobile devices; no long queues at the bank, and no week-long transactions—fintechs embody the word ease. So, where does cybersecurity come in? This blog explains the importance of cybersecurity in fintech. Cybersecurity in Fintech: The Landscape Cybersecurity is the process by which every piece of data, software, and device in an organisation is protected from loss, compromise, and external. Cyber security differs from data security as it’s not limited to data only. It covers every mobile device, computer, drive, laptop, and software that belongs to the organisation’s network. Fintechs operate with large amounts of user data; to open an account, they collect BVN, emails, phone numbers, passwords, credit card details, and lots of sensitive data. What this does is attract vicious cybercriminals, who in turn use this data for identity theft, fraud, and targeted attacks. While fintech companies try their best to outsmart these malicious actors, they’re losing the fight. The situation worsens as cybercriminals use upgraded and sophisticated forms of attack. Certain technologies make it harder for companies to catch up, e.g., Artificial Intelligence AI. Cybercriminals use AI to constantly monitor the cybersecurity network of fintechs for entry points, and it gets the job done fast. Thankfully, there are cybersecurity tools to assist fintechs. Besides the sophisticated mode of cyberattacks, insider threats pose another challenge to cybersecurity in fintech. Records declare Fintech employees as one of the most cyberaware staff across various industries. But, in a recent survey, 49% of fintech staff admit they work around politics for work ease. While it’s a harmless intention, the result leaves room for data breaches to sneak in. So, what is the importance of cybersecurity in fintech? Here’s exactly why fintech companies need to implement cybersecurity systems. To prevent a data breach Presently, more and more companies fall victim to data breaches. In fact, research shows that 6 of 10 businesses fall victim to a cyberattack this year. And more often than not, these attacks are financially motivated, and personal data is the target. Sure, every company handles personal data at one point or another, but fintech companies are on a whole new level. Fintechs handle highly sensitive data that can make or mar their users. On September 11, 2022, Revolut, a financial transactions company, experienced a severe data breach due to a social engineering attack. The breach compromised the personal data of around 50,000 users, including their names, addresses, emails, and payment card information. To prevent a successful data breach and protect their customers, it’s important that fintechs establish a solid cybersecurity plan. To comply with data regulations The repercussions of a successful cyberattack, or data breach, affect the data subject (data owner) the most. For example, in a credit card or phishing effect, it’s the client’s money that gets stolen. Although unfavourable effects might reach the Fintech company, it is often the client’s headache. To grant data owners more control over their data, countries and industries alike established laws and regulations to guide organisations towards data protection. For instance, the organisations in the EU answer to the GDPR and its requirements while the NDPA protects Nigerian data. These data regulations hold companies—fintechs included—subject to them being accountable for the security of client’s data. So, they penalise non-compliant companies with hefty fines or even downtime. For instance, Fidelity Bank, a Nigerian bank, was slammed with a 555.8 million Naira fine in 2024, and many other financial institutions face such, if not worse. The importance of cybersecurity in fintech shines through the fact that fintech companies need it for maximum compliance with the laws. To prevent financial and reputational damage Unlike other industries, it’s extremely difficult for a fintech to bounce back after a successful data breach. Why? With each data breach occurring comes severe backlash. First, we have the reputational damage. No one would walk down an alley infested with bandits. Neither will a smart person keep money in a hole-riddled pocket. Such is the fate of fintechs. Consumers place a lot of trust—and sensitive data—in fintech companies that it’ll be hard to start over. So, fintechs must make cybersecurity important. The financial implications of a data breach cannot be explained enough (data breaches cost a lot). There are lawsuits from victim users, which take a huge chunk of money. Then there are direct expenses like forensic experts, hotline support, in-house investigations, etc. According to IBM, Organizations with a high level of noncompliance show an average cost of $5.05 million, 12.6% higher than average How To Improve Cybersecurity in Fintech Fintech security measures must continuously improve to counter the ever-evolving cyber-attacks. We have an idea of the challenges to cybersecurity in fintech, but how can fintechs overcome them? first, through regular security audits. Fintech start-ups and established companies should conduct an in-depth assessment of their security measures periodically. This allows them to spot and strengthen weaknesses in time. Also, as cybercriminals come up with newer modes of attack, a regular audit lets fintechs update their cybersecurity systems to prevent a data breach. Basic security measures like access controls, layered security, data encryption, staff awareness, etc. are essential to reduce the likelihood of a data breach. Fintech companies should implement access control on a need-to-know basis, so staff have access to only data necessary for their office. Also, access permissions should be reviewed and adjusted regularly to prevent loopholes. Data encryption technology should be implemented to keep data unreadable even when stolen. This technology keeps data safe ‘in transit’ or ‘at rest’.
