The subsequent increase in financial technology cannot be ignored at any rate. And why not since there are so many reasons to take into account such as huge and wide investment, complimenting demographics, Government pushing all businesses irrespective of their sizes to consider fintech technology, easy internet access and what not! The severe advancement in technology and digital infrastructure seems to have changed everything and like it or not traditional banks, old financial institutions are considering effective financial strategies and financial software development services to play for the long haul.

The following post focuses on certain fintech challenges faced by the entire financial sector and traditional banking sector today. But before we delve into that, let us take a bit of a detour and understand how the concept of financial technology rose from rags to riches. Let’s begin!

 

All About Financial Technology

If someone asks me why I must invest in financial technology right away then there is one sure shot answer from my end, the global fintech market is supposed to reach $190 billion in no time, maybe two-three years down the line. Not to mention with the rise in mobile and global digital payments transactional services, it has been already proven that combining financial services with information technology is a winning move.

Now, what is the meaning of the term fintech? Financial Technology’s abbreviation is fintech. However, it cannot be defined in a para as it is a broad concept. But for now, it is crucial for you to understand that fintech is all about companies making the most of the available mobile and tech expertise to offer the best possible financial services from their doorsteps. Harnessing fintech app development services is limitless, one can use either to streamline payments, manage investments for a wide range of customer genres. Apart from digital currencies, fintech also promotes big data, blockchain, among both banking and non-banking entities. The fundamentals of our lives seem to be changing and in a good way! For example, businesses irrespective of their size are found gearing up to compete in the best manner, customers no longer are asked to pay huge chunks and get nothing, in fact, now they receive is the best user experience with mobile technologies/ever-increasing digital innovations, and unmatchable banking services even via traditional banking systems.

Now many of you have this misconception that how to trust something that recently came into existence? Well, the Fintech industry is not new. It has been since the time we were asked to use credit cards and ATMs and later on we got acquainted with convenient mobile banking services. With the rise of fintech banks, micro remittances, distributed ledger tech, massive blockchain adoption, mobile payments, peer to peer lending, and budget planning seems to have reached another height. In other words, now you have ample ways to manage your money. Also, you can find several financial services firms that offer low prices and try to remain adhered to every customer’s needs. Not to mention this has definitely resulted in global economic growth.

Imagine fintech is looking after your savings. How cool is that! Now if you have sweet in your hand, then flies will constantly keep on bothering you. Further, I would like to mention certain challenges that many prominent fintech companies face day in day out.

 

Challenges Almost All Fintech Companies are Facing these Days

A new blend of technologies such as blockchain technology, big data, mobile banking apps seems to be paving its way into the finance and banking industry. All these have resulted in several benefits such as detecting fraud, security breaches in advance and making user’s data secure, precise customer insights and personal data insights, going beyond customer expectations, seamless wealth management, reduction in high-risk banking services, managing transactions effectively and what not! The rise in the fintech sector can be a boon or a bane. Down below I would like to mention certain challenges fintech organizations are found facing all across the globe. Some of the potential risks faced by the financial sector include third-party risks, malware attacks, security breaches, digital identity theft, Cloud-based frauds, and so forth.

FinTech Regulations and Policies

Of course, fintech organizations irrespective of their size do require cybersecurity. But the only thing that concerns them most is do they all possess similar requirements, despite being from different locations? Probably not! And most fintech organizations fail at this point. They often ignore the company’s location and the financial behavior of the market. So before you even begin considering cybersecurity for your financial organization, it is advisable to go through several data protection rules and regulations available.

GDPR – This one is for the European Union’s Residents. It’s a legal framework that guides how personal information should be taken care of. After May 2018, the regulation was imposed to protect user data to a great extent. FCA – The Financial Conduct Authority is chosen for the U.K.’s residents. Just to establish a clear and fair looking market for each person in the finance sector, the FCA regulation was made. Here they not just protect consumers but their markets and promote healthy competition at the same time. APPI – The Act on the Protection of Personal Information adheres to Japan. This one is pretty much resemblant to GDPR and is highly applicable to companies working from overseas. Yes, the regulation is about protecting information. ISO/IEC 27001. – Another regulation for information security assists companies to manage as well as protecting a significant amount of data. Here certain aspects such as Cryptography, having control access, securing information are included. PSD2 – This regulation is again for EU residents. This one ensures seamless banking business and electronic payment services. PIPA – The Personal Information Protection Act, as the name implies this one ensures the security of private data in South Korea. If not being followed then people especially financial organizations here are liable to pay financial fines and criminal charges.

Fintech Security Challenges

With severe advancement in technology, hackers and bad guys have also started updating themselves and making advanced moves in their cyberattacks. Over the past decade, there has been observed an extreme use of ransomware and Distributed Denial of Service (DDoS) to access confidential information from traditional banks and financial institutions. It may quite interest you to know that among all industries, fintech is pretty much the target of security breaches. As a result, both fintech companies and customers are pretty much worried about their information being leaked every now and then.

At present, Advanced Encryption Standard (AES), Rivest-Shamir-Adleman (RSA) and Triple Data Encryption Standard (3DES) algorithms are being used to protect sensitive information and data. Apart from this, methods such as One-Time Password (OTP), transaction PINs, IVR PINs are pretty much promoted to reduce unnecessary data breaches and fraud. AI and blockchain technology are being used again and again. With AI, facial recognition/ voice recognition, biometrics can be implemented and with blockchain technology, traditional banking services providers can be used in audit trails, access logs especially during the financial crisis.

Data Encryption

Data storage issues, unnecessary data leaks, and weak encryptions have always been a major concern in the fintech market. As mentioned above data is pretty easy to steal from bankers globally. You see banks fetch data so that they can create efficient financial strategies for their customers. In fact, today every bank offers a mobile app banking service where global digital payments transactional aspects can be taken care of. Now, do you remember Equifax? Yes, this one has been considered as the best example for not considering security. Today, it has become extremely crucial for fintech companies, traditional banks and financial institutions to offer services, payment apps not on the verge of compromising user data.

So what can be done? Of course, any fintech app you are about to create must have a robust infrastructure. So try incorporating security at an early stage. Consider using AWS enterprise cloud. This one does stand against all DDOS attacks and also assists in faster data recovery. Apart from this try including complicated passwords, multi-authentication, keep a keen eye on aspects such as geolocation, IP address and allow the fintech app to block any suspicious entry right away!

Penetration testing

This is a method to check whether your fintech app is vulnerable to cyber-attacks and if yes, then up to what extent! It is mainly done to identify the loopholes in the firm. Here two teams are created and the scenario turns out to be pretty more realistic and responsive. Unknown and not-so-obvious vulnerabilities are being identified, real risks are shown, cyber-defence capability is being tested, unbiased opinion from third-party, etc are benefits offered by penetration testing.

Do penetration testing, maintain the ISO 20071 certification and nothing can harm your organization’s reputation.

Secure Application Logic

Now when you are building a fintech app, security must be considered at every stage from start to finish. Also, it is equally important for fintech organizations to identify most sensitive data and deal with it accordingly. Have you ever come across the concept of Tokenization? Apple’s idea to minimize data breaches.

Have a strong authentication plan in place, fintech companies must compel their customers to create strong, complicated passwords and keep changing them every now and then or atleast at an interval of 3 months. Most financial services firms tend to log user activity all day long. Now what’s included in the user activity, their transactions, User ID or account in the platform, IP address, geolocation, device data.

Secure code

When developing a fintech app, security is a major concern. After all there is no point in creating an app that is full of vulnerabilities. So what must be secured is the app architecture, specifications of the design, optimizing the code, and so forth. Now the question is how to create a secure code?

Is data input validation appropriate? Did you check the authentication? How is the password being managed? Are you practicing cryptography? How are errors being handled? Is the communication safe?

All these answers will surely lead to secure coding.

Testing Stages

One of the loopholes in any software development or app development project is to consider testing afterward. Now since fintech apps must be perfect in regards to security they must be tested at every stage. Right from the network security to Client-side penetration, and then server-side check. Keep looking for possible vulnerabilities, if yes up to what extent they can harm? Are there any weak links detected?

And that’s All folks!

So that’s it! The Fintech industry is growing and so is the threat. There are fair chances of the personal information of billions of people being exposed in a day. It’s high time fintech startups must consider these aforementioned points and create a fintech app that is best in regards to security. If you still have any doubts or query, feel free to mention that in the comment section below.