How often do we hear questions like “What is the guarantee that my account will not be accessed maliciously, if I transact through your platform?” or “Does your application provide enough security for my personal data?”
Fintech has brought in a huge disruption in the way the entire financial industry runs across the segments – be it banking, insurance, funds management or transfers and payments. We have seen emergence of newer technologies and platforms that facilitate the processes across the above segments. It is also true that with the introduction of newer technologies, uncertainties and vulnerabilities are getting exposed. These vulnerabilities get compounded, considering the kind of sensitive data that is core to the financial industry. The valuable data in turn makes security as one of the most critical aspects to be looked into from a Fintech company perspective and should never be ignored. In fact, with the increase in the number of connected buyers and sellers across the globe, this will gather more importance for the success of Fintech initiatives.
This whitepaper delves into the security and privacy challenges that are core to Fintech companies and explains how one should go about formulating the security strategy for the Fintech initiative. It also brings into perspective, the various technical aspects of the secured environment from a Fintech point-of-view.
The increase in the number of services that are going online has subsequently increased the amount of data available in the digital formats. Data in the digital format does ease out the analysis process and enhances the insights from the same. Thus, helping to provide more customized and user – friendly services. But this also brings in data ubiquity along with the concern regarding data security. The data available includes a lot of personal information. Protection of this data and allowing access to this data in a secured manner are the biggest challenges that are being faced by the Fintech companies.
With the seamless data sharing between new and traditional financial partners, the enforcement of stronger mechanisms for customer consent for data sharing brings in a new challenge. They should implement ways for data life cycle management in order to ensure that data is not misused or exploited by any of the entities. These partnerships also bring in the challenge of data ownership. The Fintech companies must overcome these by combining strong technical capabilities backed by legal measures.
The advent of devices like mobile phones as authentication devices through biometric use, onetime passwords (OTPs) and code generating has brought in another problem for the Fintech companies which is that of managing the digital identities of individuals and enterprises alike. With the reduced reliance on conventional authentication mechanisms such as passwords and PINs, it becomes easier to misuse the data. The above challenges force to revisit conventional and traditional security models. Security goals, measures and architecture for Fintech companies need to be redesigned taking into account these trends.
Even before embarking on the development journey, it is essential to keep in mind the security concerns and taking the steps in the right direction. Now that we know the security challenges that are faced by the Fintech companies, let’s go ahead and see the processes that need to be followed in order to mitigate those risks.
1. Employ a security evangelist
It is crucial to have someone identified at the beginning who will provide the necessary measures related to security. It is imperative that everyone in the organization is aware of the fact that security is a process and everyone needs to play the appropriate role for the same. Thus, the first step should be to select an individual who will take up the leadership role and communicate effectively, the need to propagate security practices across the organization.
2. Ascertain and implement data protection obligations
There has to be absolute clarity on different laws and regulations that the business needs to comply with. Any non-compliance, leading to personal data breaches have the potential of ruining the entire goodwill and reputation of the business, leave alone any legal ramifications. Therefore, it is of utmost importance to understand the legal security aspects, take appropriate steps and implement them from the beginning.
3. Setup internal risk monitoring mechanism
Fintech companies should at the outset only, get a good understanding of the data assets related to the specific business. Accordingly, a cyber risk calculation framework should be set to assess risks properly. This helps to get better performance with regards to internal security audits from an early stage when the size of the company is smaller. It goes without saying, if one is dedicated for a cause from the beginning, the future is likely to yield greater results.
4. Conduct frequent audits
The perfect utilization of the risk monitoring system shall stem from a well-defined regular audit, with a motivation of continuous monitoring and vigilance of all systems for perceived threats. The security evangelist should be driving this initiative with close involvement of someone from the development team having strong knowledge of the architecture to identify gaps and fix them on priority. These audits should not only be limited to the internal Fintech systems, but also, extend to technology and business partners. This would keep a check on the vulnerability that arises out of the transmission of data via insecure interfaces.
After considering the above processes and procedures, the organization needs to make sure that employees are well trained in the security aspects. To stay ahead in the secured environment game, the staff needs to have the requisite knowledge and skill sets required for their specific roles. In this case, a one-size-fits-all solution might not work. The company should pay heed to the fact that the developers and technical staff have the right skills and that they are informed about the latest security measures.
The above process, if carried out diligently, would ensure that the company is ready to take the plunge on the actual development of a secure Fintech solution. There are many more development and technical aspects of security which help to avoid mistakes and release a secure solution or application that won’t succumb to the first attack. The other crucial aspects that need to be considered are as follows.
1. Architecture design and code review
Even before initiating the development procedure by writing the first line of code, one needs to design the architecture to make sure that the security aspects are met. A balance between convenience in development or usage and security needs to be maintained. In addition, once the coding is completed there should be mandatory reviews conducted ensuring no security loopholes exist in the code. During the review, the team needs to be informed about the mistakes so that they don’t get repeated. Reviewing every line of the code might sound tedious, but this will ensure no errors occur.
2. Bug fixing : quick and efficient
Fintech companies have to react quickly to the bugs that are being found. There should be mechanisms which would help all teams to work collaboratively. They should be able to identify the bugs at the earliest, reproduce them efficiently, fix them and prepare for retest. Working in a DevOps setup ensures that these happen seamlessly. It provides a holistic view of the entire software delivery chain or the product life cycle and takes into account shared services. This further, facilitates continuous development, integration and delivery inherently thereby, building a quality product.
3. Encryption ensuring security in transmission
One of the foremost challenges in securing the solution is related to the storage and transmission of data across the partners. This is a large scale issue and the answer to this is encryption. The entire data should be encrypted, while being transferred internally or outside network. There is a fear that encryption will affect the solution performance. But this encryption could be run on a separate dedicated server other than the core solution. This ensures that the data is secure and the performance does not get affected. Facebook runs encryption in a similar way and does not perform slow. Having SSL or HTTPS during transmission is not enough. The entire core product: every line of data, every layer of the product, and the lines of code should be obfuscated to make the transmission secure.
4. Security Testing
You need to make sure that the functional security features testing are core to the quality assurance testing that is being performed. The security features are possible to test using similar techniques as the other features of the product. The core security concerns for the solution should be identified, documented well into the test plan and should be tested without any compromise.
5. Penetration testing and proactive security assessment
One of the most important security assurance steps, which is often ignored, is penetration testing. This can neither replace any of the security tests that are mentioned above nor does a ‘clean’ penetration test report show that the system is perfectly secure. However this procedure assures that the product code does not get affected when subjected to attack. These penetration tests should be performed once before a new build with changes are released.
The above processes and technical considerations might help get the Fintech company a security compliant product or solution. Having said that, you need to keep in mind the complicated, varied and dynamic environment in which the Fintech companies operate. Therefore, security attacks are almost inevitable. This industry is exposed to threats that can detect the limitations which exist within the ecosystem. Leaving aside the financial losses, these attacks are capable of ruining the goodwill of the company and hampering the business permanently. It becomes extremely important for Fintech companies to focus on security as it is one of the most essential aspects and a core feature of their solution. This should be intertwined with the operations from the beginning and should not be added at the hindsight or considered an afterthought of any eventuality. This is the only way to ensure the Fintech companies’ progress and that they are able to confidently play their part in this digital-driven economy seamlessly.