Developing a secure FinTech application is a complicated, time-consuming, and, most importantly, expensive ordeal. And that’s if your team has relevant experience and awareness of FinTech security requirements. If it doesn’t, your project has every chance to go above and beyond the budget and time estimates.
How do you make a highly secure and compliant financial platform without wasting resources?
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Keep reading to learn about the essential cybersecurity policies, tools, and approaches to developing a FinTech platform.
Table of Contents
Current FinTech Risks and Challenges
Like we said earlier, developing a FinTech solution is no piece of the cake. Here are just some of the FinTech security challenges faced by organizations worldwide.
Identity management Seamless data sharing is a key attribute of FinTech. But there’s a catch. Financial organizations accumulate tons of data, which creates data ownership and digital identity management concerns. What happens with the client’s info after they cancel the subscription? Your company may face compliance issues if you don’t implement data deletion mechanisms. And what if someone steals the data you didn’t erase? This takes us to the next challenge of FinTech — data security.
Cybersecurity concerns Data security in FinTech is the top concern for 70% of banks consulted during the Sixth Annual Bank Survey. According to the Ponemon Institute Study, capital market firms and banks spend approximately $18.5 million every year to combat cybercrime. And if that’s not enough, the annual cost of hacker attacks is up to $18.3 million per financial services provider. These providers collect high volumes of personally identifiable information, including financial, contact, and health data about customers, visitors, and staff. Hackers can exploit system weaknesses to access this information and use it for financial fraud and data theft. The worst part — most companies don’t know about the attacks until it’s too late. According to Bitdefender’s survey, around 64% of companies aren’t aware of data breaches in their systems.
Regional FinTech security requirements Financial technology applications must follow KYC (Know Your Customer) practices and regional data protection regulations. For example, companies that provide financial services for European Union citizens have to abide by GDPR (General Data Protection Regulation). And what if your FinTech application processes information about Japanese residents? It means your app should comply with APPI (Act on the Protection of Personal Information) as well. Here’s the deal. Regional privacy legislation can limit the data your FinTech software can collect and process. Besides, companies need to understand how different countries interpret the same legislative concepts. Building a secure FinTech application requires practical tools and familiarity with local regulations. Otherwise, you risk isolating yourself from specific markets.
FinTech Regulations and Policies
Cybersecurity requirements for FinTech applications vary based on your company’s location and targeted markets. Let’s look at the most common regulations for data protection in the financial services industry:
GDPR. A set of rules for protecting privacy in FinTech applications that process information about the European Union’s residents. GDPR isn’t limited to European companies — you must comply with this regulation if you plan to work with EU residents and businesses.
PSD2. The revised Payment Services Directive regulates electronic payment services activities in the EU to help banking services secure their tech. As noted in the Deloitte Legal 2018 research, PSD2 and GDPR often overlap and lack legislative clarity. Therefore, you may need to consult with cybersecurity experts on this issue.
eIDAS. Electronic Identification and Trust Services is another EU regulation for cross-border electronic transactions. It aims to provide a common legal framework for secure transactions between FinTech organizations, businesses, governmental entities, and end-users.
FCA. The Financial Conduct Authority supervises financial services in the United Kingdom. This regulation focuses on secure protection for consumers and market integrity. On top of that, local FinTech service providers have to undergo a registration procedure with the FCA.
GPG13. The Good Practice Guide affects service providers and outsourcing companies involved with the UK’s governmental system. This compliance guide is a part of the official Security Policy Framework that focuses on cybersecurity, events logging, and intrusion detection systems.
APPI. The Act on the Protection of Personal Information applies to financial technology vendors that handle Japanese residents’ private data. This regulation is extraterritorial, just like GDPR, meaning it applies to companies that operate from other countries.
PIPA. The Personal Information Protection Act regulates private data security measures for private and governmental organizations in South Korea. Unlike other FinTech compliance documents on our list, PIPA violators can face financial fines and criminal liability.
PCI DSS. Payment Card Industry Data Security Standard applies to entities that gather, process, and use credit card information. For example, MasterCard and Visa force service providers to validate their services with this standard. There are four PCI DSS levels. The more transactions you process every year, the more requirements you have to abide by.
ISO/IEC 27001. A set of FinTech security standards for information security. It contains policies and frameworks that can help organizations worldwide establish and maintain protected data management systems. Its policies include Cryptography, Access Control, Clear Screen, and Informational Security. However, the full range of required standards depends on your company’s size and location.
FinTech security compliance with IEC 27001 requires companies to go through formal procedures and gather various documents. This is quite troublesome for most organizations. But it gets worse! ISO/IEC 27001 isn’t specific about these requirements and documents, making the process even more difficult.
Nonetheless, you can overcome this challenge with the right software development vendor. Relevant has helped companies worldwide build secure FinTech products using carefully considered frameworks and methodologies.
FinTech Cybersecurity Solutions
Cybersecurity should be your key concern during development.
However, many organizations don’t devote enough resources to make their platform safer. How else can you explain yearly record-breaking statistics for data leakages and cyber attacks?
Companies that care about their reputation and financial well-being must leverage the latest techniques and approaches to data security. What can you do to protect your business?
Let’s take a look at some of the best practices for building secure FinTech solutions.
Encryption and tokenization are incredibly effective financial security solutions.
Encryption refers to encoding information into a code that requires special keys to decipher it into a readable format. You can protect critical data with complex encryption algorithms, such as:
RSA. A highly secure asymmetric algorithm with public encryption and private encryption key.
Twofish. A freeware algorithm that encrypts data into 128-bit blocks.
3DES. The preferred encryption method for encrypting credit card PINs. Triple DES divides data into 64-bit blocks and ciphers each one three times.
Tokenization is the process of replacing sensitive data with a generated number (token). You can decrypt the original information into a readable format by using unique databases (token vaults).
Want to go a step further? You can encrypt the token vault to make your application even more secure.
Role-Based access control
RBAC restricts access to the network based on the user’s relationship to the organization. For example, your application can have the following roles:
Online support staff
Thanks to a varying access level, ordinary employees and end-users won’t access corporate information. As a result, you will reduce internal and external security threats.
Developing an RBAC-enabled FinTech application requires significant knowledge and expertise. Therefore, you should choose a software development company with the relevant technology stack and background.
Secure application logic
A strict password policy is imperative for FinTech security. But that’s not enough to protect your application from targeted attacks.
You should implement precise authentication technologies, such as:
One-Time Password (OTP) system. Dynamic PINs work as extra layers of protection. How do they work? The application automatically generates an additional limited-time password each time a user wants to log into the account or complete a transaction.
Mandatory password change. Over 80% of data leakages and breach incidents in 2019 were a result of password compromise. FinTech organizations can significantly reduce security risks by forcing regular password changes for customers and employees. For example, many online banking applications enforce the resetting of users’ account passwords every three or six months.
Monitoring. With a tracking system, you can analyze suspicious activity (such as failed log-ins) to detect instances of unauthorized access. Furthermore, this solution can prevent data breaches by blocking an account after several suspicious transactions.
Short log-in sessions. Reduced session time is handy for the protection of financial data. Why? Because even if a hacker gains access to the account, he’ll have limited time to capture important data.
Adaptive authentication. Multi-factor authentication is no silver bullet. In fact, it can even amplify data breach risks (for example, if a hacker manages to clone your smartphone). But with adaptive authentication, your systemwill analyze users’ behavior to detect suspicious activity. As a result, your platform will gain extra protection of financial data and personal information.
Internet security institutions register over 350,000 malicious and potentially harmful applications every day. Governmental FinTech regulations don’t stand still either. How can you keep up with the evolving FinTech cybersecurity landscape?
How To Build a Fintech Product With 150 000 Customers
There’s an answer. You should use DevSecOpsto create secure FinTech solutions. DevSecOps methodology makes cybersecurity an integral part of the production pipeline, including architecture design, coding, and testing phases.
Given that FinTech software requires testing throughout the development life cycle, how can you make it more effective? Here are some proven methods for building a secure FinTech platform:
Build a professional security testing team. You need vetted engineers and managers who will come up with realistic data breach scenarios and improve your code. The fastest and most cost-effective way to do it is tohire FinTech security testers from an outsourcing vendor.
Run penetration tests. Penetration testing refers to faux attacks on your app. This can help you detect potential vulnerabilities and patch them up with attack-resistant code.
Perform an IT security audit. A security audit is more than testing. It’s a complex process that can uncover technological flaws, evaluate FinTech compliance, and verify your security strategy’s effectiveness.
Testing and audit help set up the right priorities during development. However, these processes are reliant on the expertise of developers and testers, as well as the effectiveness of their interaction.
Do you want to build secure FinTech software at a reasonable price?
Build Secure FinTech Solutions with Relevant
Now you can see how many security challenges you have to face when building financial technology software. Undoubtedly, this raises concerns for a company without previous experience in the field.
So, how to develop a secure FinTech app with a limited budget and a “green” development team? There’s a solution. You should hire a reputable software vendor with the right tech stack and relevant expertise.
Relevant is a seasoned industry player that can build a high-grade and secure software platform from scratch. How do we deal with FinTech security concerns and regulations during development? Let’s take one of our previous projects as an example.
We built a secure FinTech SaaS (Software as a Service) platform for a UK-based company FirstHomeCoach. This app was to help buyers purchase real-estate, so it had to process financial data. Therefore, we had to integrate cybersecurity into every phase of the project’s life cycle.
Firstly, we had to define the project’s scope and boundaries. To achieve this, we needed to perform an in-depth IT security audit that would help us:
Specify risk tolerance levels and security target state
Pinpoint weak encryption practices and potential data storage issues
Define security target state and risk tolerance levels
Streamline penetration tests
Assure protected data exchange
Introduce security management practices to the client
A comprehensive audit usually takes quite a long time for inexperienced teams. But we managed to accelerate this process by dividing it into four sprints (or phases). In addition to that, we supplied FirstHomeCoach with a Project Manager and two Security Officers who took the helm. Here’s how it went.
The first sprint involved requirements gathering. Our experts interviewed the client, built and validated hypotheses, and outlined the project’s scope. At the end of this phase, we had developed:
Risk Log and Analysis
AWS Security Maturity document
Initial Cloud Assessment Report
During the second sprint, our engineers performed penetration testing and reviewed results to define the Security Target State. Eventually, we moved on to the third sprint. This phase consisted of security verification and risk assessment.
At the end of the fourth, final sprint, the client had a full Security Audit report and an ISMS (Information Security Management System) policy. These documents helped us write ISO 27001 controls and Annex A policies to build a secure and compliant FinTech platform.
We use JIRA software and ISMS to manage policies, evaluate risks, and build an effective RACI matrix. Cybersecurity is woven into our Scrum processes. We optimize data flow diagrams and conduct weekly threat modeling workshops to improve risk assessment and accelerate development.
Here is what our client has to say about working with us:
Do you want to develop a secure and compliant financial technology platform for a reasonable price? Contact us to learn more about our FinTech security solutions and software development services!
How does cybersecurity factor into the realm of fintech?
In the fintech realm, cybersecurity is of paramount importance. Fintech firms operating within digital landscapes are vulnerable to cyber threats such as hacking, data breaches, and cyberattacks. These threats can result in financial losses, tarnished reputations, and legal repercussions for both the firms and their clients. To safeguard their systems and data, fintech companies must implement robust cybersecurity measures.
Key strategies include encryption techniques, multi-factor authentication, intrusion detection systems, network segmentation, and security audits. Equally important is raising awareness among employees and customers about cybersecurity best practices.
How can FinTech companies manage and mitigate the risks?
By employing a risk management framework, FinTech companies can effectively address risks. This includes identifying potential hazards and devising suitable risk mitigation strategies. Firms should prioritize data security measures, adhere to regulations, and prepare crisis management plans. Key security measures encompass encryption protocols, multi-factor authentication, intrusion detection, and routine security audits to protect sensitive information.
Furthermore, compliance with anti-money laundering and know-your-customer laws is essential, as is establishing efficient compliance programs. Additionally, a comprehensive crisis management plan detailing employee responsibilities, communication protocols, and damage control steps is crucial. These actions contribute to maintaining the trust of clients and stakeholders.
What are the key regulatory bodies that oversee the FinTech industry?
The FinTech industry is supervised by key global and national regulatory bodies. These include the Financial Stability Board (FSB), which fosters international cooperation, and country-specific organizations such as the US Consumer Financial Protection Bureau (CFPB), the UK Financial Conduct Authority (FCA), and the European Securities and Markets Authority (ESMA).
Other notable regulators are the Australian Securities and Investments Commission (ASIC), the Monetary Authority of Singapore (MAS), and central banks. Collectively, they ensure FinTech companies adhere to relevant laws, protect consumers, and maintain financial stability while fostering innovation.
How do common cybersecurity solutions work to protect FinTech companies and their customers?
Common cybersecurity solutions for FinTech companies and customers include encryption to secure sensitive data, multi-factor authentication for enhanced access control, firewalls for network protection, and intrusion detection systems to monitor and block threats. Additionally, regular security updates, secure software development, employee training, and a robust incident response plan are crucial. These measures work together to safeguard FinTech assets and customer information, fostering a secure and trustworthy financial ecosystem.
What are the key technologies that can be used to build secure FinTech solutions?
Key technologies for building secure FinTech solutions include blockchain for tamper-resistant transactions, AI and ML for real-time threat detection, and biometric authentication for unique user verification. Additionally, data encryption, secure cloud computing, API security, and zero-trust architecture play crucial roles in safeguarding sensitive data and transactions. By employing these technologies, FinTech companies can provide reliable protection while maintaining customer trust.
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