FinTech Cybersecurity Regulations and Strategies

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Cyberattacks can cause significant financial losses and damage market reputation in the financial sector. The industry has several regulations, but brands must improve their cyber-security game to stay safe. If they don’t set up adequate controls

With evolving technology innovations, the financial industry is rapidly growing and changing. But this also creates bigger security challenges, with several new risks and concerns.

Financial institutions may be more susceptible to cyberattacks because they are money dealers. This can cause significant reputation damage and financial losses if they don’t set up adequate controls.

FinTech Compliances and Regulations

Depending on the company’s location and the market it targets, different FinTech applications have different cybersecurity regulations.

Here are the most prevalent laws governing data protection in the financial services sector:

  • GDPR: General Data Protection Regulation is a set of rules to protect customer data privacy. It regulates data collation and monitors the permissions needed for safe data storage. In FinTech applications, it applies to the same – data and information about European Union residents.

This regulation is not just applicable to European businesses. It applies to all businesses that are based in the EU. It also holds for business dealing with companies based in the EU.

  • PSD2: The updated Payment Services Directive governs electronic payment service operations in the EU. It helps to aid in the security of banking services technology.

The research conducted by Deloitte Legal in 2018 pointed out that PSD2 and GDPR frequently overlap and lack legislative clarity. Firms might need to seek advice from cybersecurity professionals on this matter.

  • eIDAS: Electronic Identification and Trust Services is another EU regulation for cross-border electronic transactions.

It aims to offer an all-encompassing legal framework for safe exchanges between FinTech companies, companies, governmental bodies, and end users.

  • FCA: The Financial Conduct Authority regulates financial services in the UK. This regulation’s main objectives are the secure protection of consumers and market integrity.

Local FinTech service providers must additionally go through a registration process with the FCA.

  • GPG13: The Good Practice Guide impacts the UK’s government system’s service providers and outsourcing firms.

This compliance manual is a component of the official Security Policy Framework, emphasizing intrusion detection systems, events logging, and cybersecurity.

  • APPI:FinTechs that use the personal information of Japanese citizens are subject to the Act on the Protection of Personal Information.

Like GDPR, this regulation is extraterritorial, which also applies to business operations abroad.

  • PIPA: The Personal Information Protection Act governs privacy protection measures for private and public organizations in South Korea.

PIPA violations are punishable by monetary fines and criminal prosecution, in contrast to other FinTech compliance documents on our list.

  • PCI DSS: Entities that collect, process, and use credit card information are subject to the Payment Card Industry Data Security Standard.

For instance, MasterCard and Visa mandate that service providers verify their offerings following this standard. There are four levels of PCI DSS. The more regulations banks must follow; the more transactions they process annually.

  • IEC/ISO 27001: It is a collection of FinTech information security guidelines. It includes frameworks and policies that can assist businesses worldwide in setting up and maintaining protected data management systems.

Its policies cover information security, access control, clear screen, and cryptography. However, the size and location of your company will determine the full set of necessary standards.

Companies must follow formal procedures and compile various documents to comply with IEC 27001’s requirements for FinTech security. The majority of businesses find this to be very problematic.

It is even more challenging because ISO/IEC 27001 isn’t specific about these prerequisites and supporting documentation. However, by choosing the right strategies, firms can overcome this challenge.

FinTech Cybersecurity Solutions

When developing a FinTech solution, cybersecurity should be the top priority. However, many organizations don’t invest enough resources to make their platform safer.

Companies must use the most recent methods and techniques for data security if they value their brand and bottom line.

Let’s examine some of the top techniques for creating safe FinTech solutions.

1. Data protection

Financial security solutions like tokenization and encryption are incredibly powerful. Encryption encodes data into a code that requires specific keys for decryption.

Tokenization replaces sensitive information with a generated number (a token). Using special databases (token vaults), you can decrypt the original data and convert it into a readable format.

2. Access control based on roles

Based on the user’s relationship with the organization, RBAC limits access to the network. Only relevant users can access sensitive information.  This way, firms can control both internal and external security threats.

This RBAC-enabled application requires skills and experience to develop. Hence, it needs a team of experts to create.

3. Secure application logic

For FinTech security, it is essential to have strict password guidelines. However, shielding an app from deliberate attacks is not enough. Some tools and technologies can keep FinTech safe.

Authentication technologies like the one given below can help set up this security wall:

  • System of One-Time Passwords (OTP): Dynamic PINs are additional security measures. The application generates a new, limited-time password whenever a user attempts to access the account or complete a transaction.

Mandatory password change: Regularly changing passwords should be a routine process. It will help in keeping FinTech data and networks secure.

For instance, many online banking software mandates that users change their account passwords every three to six months.

  • Monitoring: Companies can identify instances of unauthorized access by examining suspicious activity (like failed log-in attempts) with a tracking system.

The account should be blocked if there is more than one suspicious transaction or access attempt. This can control data breaches.

  • Brief sign-in sessions: A shorter session length helps keep financial information secure. A short window to access crucial information will not allow too much damage, even if they gain account access.
  • Flexible authentication: There is no magic solution in multi-factor authentication.  However, with adaptive authentication, the system will monitor user behavior. If they find something suspicious, further steps can help to protect the data and the personal information.

Building a secure FinTech platform

Firms must test FinTech software throughout the development life cycle. Here are some tried-and-true techniques for creating a safe FinTech platform:

1. Create a skilled security testing team

Skilled developers, engineers, and managers should be part of a FinTech app’s development team. An experienced manager can combine these skills to ensure they deliver the best, safest product.

This team will identify potential risk points and create plausible data breach scenarios. Skilled developers can plug the leaks even before they happen.

Hiring FinTech security testers is the quickest and most economical way to complete the task.

2. Conduct penetration testing

False attacks on the app to identify loopholes can help to identify potential vulnerabilities. They can then be repaired with attack-resistant code.

Conduct a computer security audit: Testing is one aspect of a security audit. It can reveal technological flaws, assess FinTech compliance, and confirm the efficacy of the security strategy.

Also Read: Biggest Cybersecurity Threats in the Financial Services Sector

 3. Testing and auditing

Testing and auditing at every stage can help set the right development priorities.

However, for this, a close-knit team of skilled developers and testers must be present. This team needs to be very well coordinated.

Financial institutions must also stay updated on emerging FinTech cybersecurity trends and challenges. They must implement appropriate controls to lessen the risks brought on by these developments.

In addition to regulatory implications, FinTech cyber breaches can impact the larger financial ecosystem.

Financial system disruptions are just one of the serious consequences of cyberattacks on financial institutions. The bigger risks are the company’s and customers’ personal and financial data. FinTech firms need to ensure security because the results could be disastrous if there is a breach. Huge fines, massive penalties, and very expensive lawsuits for breach of privacy could seriously harm the company.

Hence, the regulatory authorities are very strict on compliance. All government agencies are concentrating on ensuring financial institutions implement the necessary safeguards.

It will help defend against cyberattacks and lower their risks and losses.

Swapnil Mishra
Swapnil Mishra
Swapnil Mishra is a global news correspondent at TalkCMO, with over six years of experience in the field. Specializing in marketing technologies, Swapnil has established herself as a trusted voice in the industry. Having collaborated with various media outlets, she has honed her skills in content strategy, executive leadership, business strategy, industry insights, best practices, and thought leadership. As a journalism graduate, Swapnil possesses a keen eye for editorial detail and a mastery of language, enabling her to deliver compelling and informative news stories. She has a keen eye for detail and a knack for breaking down complex technical concepts into easy-to-understand language.

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