Financial services companies should embrace a healthy dose of caution when implementing new fintech in their business. Fintech, or any technological innovation in the financial sector, is not inherently more or less secure than any other new technology, but because it works with substantial sums of money, it is a common target for hackers and would-be criminals. Financial services companies need to keep up with innovations in how people transact business including cryptocurrency, digital cash, blockchain technology, smart contracts and open banking in order to remain competitive. Therefore, it’s vital that companies working with fintech pay close attention to risk mitigation and security.
Fintech Is Growing
Bitcoin is likely the best-known and most publicly discussed story in fintech today. It’s an excellent topic for discussion because it’s well known outside of the financial industry for both its potential and problems. Bitcoin shows its potential with its fluctuating value, starting at just pennies a coin and reaching a peak value of over $15,000 USD as of early 2018. However, Bitcoin also has a high-profile case of the risk associated with new technology: the 2014 MtGox theft, which resulted in more than $800,000 in stolen Bitcoins.
As of early 2018, fintech startups continue to proliferate and innovate. Fintech startup funding reached $17.4 billion in 2016 and was on track to surpass that for 2017.
According to CB Insights, there were 26 venture-capitalist backed fintech firms with a combined value of $83.8 billion in Q2 of 2017.
Fintech is chipping away at the traditional financial institution, so the traditional businesses need to embrace it in order to remain competitive. Consumer demand drives financial services companies to use these new technologies; however, it’s the businesses that shoulder security risks.
Security Vulnerabilities Thrive in Fast-Growth Environments
Fintech’s incredible level of success is the very reason it’s a cybersecurity threat at financial services companies. With such a large number of innovations being adopted in the financial services industry, it’s inevitable that some technology won’t have sufficient security in place. If the vulnerabilities exist, it’s only a matter of time before hackers will find and exploit them. Because there are so many players with so much money on the line, it could lead innovators to push technology to the market as fast as possible at the expense of proper security development. Enterprise Innovation cites a survey respondent who expresses concern that the financial services industry can’t keep pace with how quickly fintech is evolving.
Unfortunately, there’s no easy way to cover all the possible threats that can come from new fintech — because those threats don’t exist until the technology exists. However, financial services companies must ensure they employ proper security practices. Firms need to use fintech platforms securely and ensure devices are always running the latest versions of software for security purposes. Additionally, businesses should be prepared for problems outside of their control with insurance. The 2017 Equifax hack is a warning sign for any business that wants to skimp on security, because it shows exactly how destructive the financial hacks that exploit poor security can be.
MPA Networks offers extensive experience and incredible expertise in providing IT service and support to financial services. If your business is expanding into fintech use, contact us today to learn more about how we can enhance the safety of your information and your customers.