Why Cybersecurity is a Growing Concern in Fintech in 2018

Featured article by Zakhar Yung, Independent technology Author

For the past few years there has been a significant capital infusion in the fintech ecosystem . According to KPMG fintech reports, the total global investment in this sector in the years 2015, 2016, and 2017 reached $122 billion. Two subcategories, insurtech and blockchain, are the most investment-attractive with over $2 billion and $500 million correspondingly of venture capital (VC) investment in the last year. It would be fair to say that fintech is not an immature market anymore because investors are done with experiments and come in with definite strategic goals.

Those who opt for going with the fintech stream rather than against are likely to remain in the market and contribute to its overall development.

Cybersecurity is a key challenge

The growing number of venture capital deals and total expansion of the ecosystem are evidence of fintech prosperity. Everything looks great for the industry and financial software development services as well, but customers might be concerned about innovations in finances due to security reasons.

It is rather difficult or, most likely, impossible to build an impeccable software tool free of any vulnerabilities. Hence, there is a probability that malefactors will use security gaps to jeopardize customers’ money. At the same time, financial losses are not the only possible issue. Users won’t be willing to use solutions with a poor cybersecurity reputation. As a result, frequent cyber attacks will significantly slow down the fintech adoption rate.

The number of fintech companies is growing

Every year from 2014 onwards, the number of VC transactions has outstripped 1K. Such terrific figures indicate the growth of fintech market players. However, in this context, bigger does not always mean the better. With so many ventures entering the market, the overall quality of solutions falls. There is no doubt that some startups pay special attention to cybersecurity, but a desire to deliver a product as fast as possible often results in cutting corners. As a result, insufficient testing before release can lead to a poor quality solution.

Financial services are available for a large number of people

You may wonder why we deem the availability of the financial services for a large number of people as a concern. The increased clientele is supposed to raise the industry development. At the same time, this expanded access entails cybersecurity challenges.

Market newcomers without much IT security experience are more risk prone. They tend to be easy prey for hackers and miscellaneous malefactors. Besides, robust cyber security is a costly affair, which is often underworked in an attempt to deliver a financially affordable solution for the general public. Millions of users get financial services without decent digital security literacy and hence are exposed to unfavorable outcomes.

The integration of fintech solutions with traditional financial service providers brings more vulnerabilities

The development of fintech startups depends on collaboration with traditional providers of financial services. It includes the building of application programming interfaces (APIs) to connect different systems. APIs, in turn, can be a weak point exposed to cyber attacks and other attempts to violate the system’s integrity. At the same time, we can avoid bad consequences in the future by improving the development cycle. It means that creating a product should include strict testing regulations, as well as other activities aimed at eliminating any vulnerabilities of the aggregated system.

Blockchain security challenges

Blockchain’s flexibility is beyond words. The technology finds a use for versatile industries and applications. In finance, blockchain is a fertile territory that offers a large functional area in both basic and complex financial transactions. In fact, the technology is a perfect fit for security-oriented purposes. However, securing the solutions based on blockchain is a particular challenge. It entails multiple cybersecurity-related issues including storage and deploying of private keys, transaction confirming techniques and methods, identification mechanisms, etc. So, using blockchain benefits for cybersecurity means looking at specific challenges.

What can be a solution?

The aforementioned trials are not crucial if you follow a sophisticated approach to your product development/support activities. There is always a solution to make your fintech venture properly secured.

Startups need to focus on thorough testing instead of fast time-to-market

There is no need to slow down your startup’s development to ensure high quality. On the contrary, a lot of ventures fail due to being too slow to release products. At the same time, it is better   (make haste slowly) than to strive to cut the time-to-market.

In most cases, cybersecurity issues result from insufficient or undervalued quality testing practices. In pursuit of fast market launch, ventures reduce the emphasis on quality assurance and debugging. More focus on implementing thorough testing techniques would solve numerous cybersecurity issues.

Machine learning solutions can solve security challenges

Strange though it might sound, machine learning (ML) is playing for both teams – it can solve and create security issues. In fact, the technology has a high-potential future for multiple startups. With that in mind, fintech companies will be using ML benefits to ensure the top level of cybersecurity. On the other side of the coin, the algorithms the system develops could create unforseen weaknesses. Nevertheless, ML-based fintech solutions have great promise for reducing system vulnerabilities and increasing cyber defense.