The financial technology market has become a hotbed of innovation and investments. In 2015 alone, it is estimated that $22.3 billion was pumped into the financial technology market as investments. Commonly abbreviated as FINTECH, the financial technology ecosystem is plagued with numerous challenges most of which are security related.
The unique challenges that face fintech companies have made it difficult for many fintech startups to grow to profitability. The number of large-scale corporate hacks that have occurred in the past few years is worrying. Additionally, some fintech startups have been unable to keep up with tactics used by modern hackers. Here are some of the most persistent security challenges faced by fintech companies and the steps they are taking to correct them.
Fintech Firms Have Become Prime Targets
Before the global acceptance of financial technologies, people were more cautious about handing out sensitive financial information via the web. Today, however, the number of people that transact via the web using credit cards has increased exponentially, and many people have lowered their guard when it comes to exchanging their financial information online.
This means that more and more people are today willing to provide sensitive financial information for online transactions. Unfortunately, many fintech companies struggle to maintain high standards of cyber security. In addition, today’s, hackers have become more sophisticated and have widened their target groups.
In the past, hackers targeted banks since only banks transacted with large sums of money. Today, however, fintech companies have become prime targets for hackers as the fintech market continues to grow.
Additionally, some fintech startups get direct access to financial institutions but lack some of the sophisticated security systems employed by large financial institutions. In this regard, hackers are targeting such companies in a bid to get to the larger financial institutions. Also, third party service providers may act as an entry point for hackers, which is another problem facing fintech companies. However, a large number fintech companies work with reputed and trusted third party service providers to solidify their networks, such as KBZ for instance.
To bolster cybersecurity, fintech companies and financial institutions are transitioning from using passwords to using other forms of identification. Biometrics have become the preferred alternatives with many fintech companies adopting biometric scanners in their transactions. Fingerprint scanners are also being used to guarantee clients’ security. As a matter of fact, it is estimated that all mobile phones being produced in 2019 will have a fingerprint scanner.
The use of photographs to authenticate clients’ identity is also catching on among fintech companies. Chinese online retail giant Alibaba is one of the companies adopting these new technologies.
However, security is still not guaranteed especially with fingerprint scanners. Studies have revealed that fingerprint scanners can still be compromised. In this regard, it is very much possible that hackers will innovate and come up with more sophisticated attack techniques. As a matter of fact, it has been shown that you can hack a fingerprint scanner using nothing but a mere printer.
Nevertheless, the use of biometrics and fingerprint scanners is seen as a step in the right direction. This is especially since many users use the same password on multiple transaction websites. This increases the chances of their financial information being stolen.
Consumers that use services offered by fintech companies are advised to take measures to ensure their own security. However, not all consumers take measures. The use of easy passwords is prevalent in the financial technology world. Additionally, as already stated, some consumers use the same passwords on multiple websites.
Lack of substantial information on cyber security among consumers is another challenge facing fintech companies. Hackers find gaining entry into a financial system through a client’s’ account easier. Nevertheless, there are several startups that are helping consumers improve their own security. These startups are helping consumers through the use of alternative credit cards.
Instead of using their own credit cards, clients are given alternative credit cards to transact with. Thus, if the information is stolen, a hacker is not able to trace the information back to a client’s original and authentic credit card. Also, the use of cryptocurrency is gaining momentum as a way of securing clients’ financial details.
The financial technology market will continue to evolve as the demand for convenience increases. The increase in demand for financial technologies is likely to fuel a rise in corporate hackings. However, with advancements in technology, fintech companies will be able to mitigate against the threats of cyber-attacks.