In recent years, the global economy has become a victim to the butterfly effect. In response to the pandemic, quarantine, and lockdown, the use of cash has declined, and the volume of e-commerce has grown, along with the number of fraudulent attempts and security threats that are relevant to both eCommerce businesses and financial services.
In this article, we’ll take a look at the primary security threats in fintech and ways to effectively deal with them. Remember, awareness is the first step towards effective protection.
Top 5 Fintech Security Threats Taking Shape
Below are some of the most essential fintech risks to take into account and develop backup response strategies in advance.
1. Mobile payment apps vulnerabilities
The use of mobile payment applications is on the rise against the backdrop of the pandemic. Well aware of this trend, fraudsters are constantly searching for opportunities to hack mobile apps and get users’ data.
The only way to protect your business and your users from this fintech security threat is to keep your application updated and compliant with the industry-accepted security practices. For instance:
Make sure your online payment application employs the recent technologies on its back-end part;
Keep your app updated and be attentive with each new version launch - more versions and updates mean more potential security loopholes and bugs;
Make sure you are using 3D Secure. This is a financial data protection practice that improves the safety of users’ credentials;
Validate your users with the opportunity to use biometric authentication such as fingertip and Face ID.
Always use two-factor authentication via one-time generated codes, QR codes, and SMS.
2. Human Neglect
According to Kaspersky, one of the leading anti-virus software providers, the human factor is one of the most crucial IT fintech security threats that comes from within.
For example, Wanna Cry 2017 ransomware attack happened just because of human neglect - the malicious algorithm was randomly looking for the IP addresses that don’t use the Transmission Control Protocol 445, then it tested them for one more vulnerability, and infected with black door Double Pulsar. It, in turn, blocked access to information and demanded payment in cryptocurrency for unblocking it.
This is only one of the possible examples, however, the scale of the human factor as one of the leading threats in financial services is much greater. According to the Accenture research, three-fourths of financial companies have experienced fintech security issues as a result of human-related incidents.
According to the Kaspersky survey, 52% of businesses believe they also have security threats in financial services that come from within. This research has also shown the main issues that may happen because of the human factor:
inappropriate data sharing using mobile devices (for example, sending credit card credentials via instant messengers or social media);
physical loss of mobile or portative devices used for job-related purposes. In the case employees are using personal devices, this fintech risk increases even more - and this is just the case we may observe because of the sharp with to remote working provoked by the pandemic);
incidents related to the connected devices usage and data breaches because of the breach on the third-party company the employees have share data with.
Thus, this security threat in fintech is quite serious. What’s more, it can sometimes be unobvious and unpredictable, so below are the best practices to eliminate it:
Educate your employees on the importance of data protection since a lot of people still consider the data breach will never happen to them personally or are just unaware of the necessity of the data protection practices;
Use human error prevention tools. For example, Nightfall is an AI-powered solution that tracks the behavior of the employees and the ways they deal with data and allows for setting custom actions to prevent a potential vulnerability - for example, automatic deletion of the message with valuable data.
Try to supply your team with the devices that will be used for the work-related tasks exclusively. Restrict social media and instant messengers usage on these devices, plus equip them with the app that will allow for remote data management, control, and deletion in case the device is lost or stolen. For example, Drive Strike may be an option. If the usage of personal devices is inevitable, then go back to the first point.
3. Payment fraud and identity theft
Payment fraud and identity theft are fintech security concerns that go hand-in-hand. As a rule, identity theft precedes payment fraud. These are two of the most common types of fraud, especially relevant because of the pandemic, the rise of eCommerce and financial services usage it provoked, and the increased use of social media.
Fraudsters often find it very easy to find out the users’ personal data and identity details from their social media profiles and enter or guess the passwords (65% of users have the same passwords for multiple devices and accounts, so this isn’t a difficult task) to get access to the payment app.
Artificial intelligence and machine learning solutions are the most effective tools to deal with fintech security risks like payment fraud and identity theft. Their data analysis features detect anomalies in users behavior to conclude the legitimate or fraudulent nature of each transaction. Since weak passwords are the reason behind 81% of hacking-related breaches, using such solutions as 1Password or Last Pass makes sense as well.
4. Money laundering
Money laundering is one of the most serious security threats in financial services slowing down economic growth. According to research, 2-5% of global GDP is laundered each year. It’s especially dangerous for systems that are completely digital and have lightweight algorithms for verifying identity and the authenticity of transactions.
In this case, a trained machine learning algorithm may be quite effective. As well as with payment fraud detection, an ML-powered system is able to find behavior patterns that may be a sign of money laundering, and block such transactions.
5. Data breaches
According to Forbes, usage of fintech mobile apps increased by 72% during the pandemic. eCommerce sales increased by 27% in recent years. Users began to generate more data, thereby creating security loopholes that fraudsters may benefit from. Online fraud also increased significantly against the backdrop of the pandemic. When taking the combination of these factors into account, breach of fintech app security becomes the most serious security threat in fintech.
That’s why protection from data breach risks should be strategic and ongoing. Below are some of the most effective practices:
Use AI-powered data protection tools;
Make sure all the passwords you and your employees use are unique, they don’t repeat each other across the different accounts, and are frequently updated;
Use secure cloud storage with the opportunity to encrypt your data and have a backup of all the important information to quickly restore business operations in the case of successful attack.
There are quite a lot of fintech security concerns that financial companies and banks must deal with. However, powerful data and financial app security solutions have also arisen to make detecting and preventing security threats easier.
What’s more, a customized solution developed for your specific business may promise even more effective protection compared to the ready-made ones.
The Faster Than Light team is glad to offer our technical expertise to create an anti-fraud and security defense application for your financial business.