In the midst of digital transformation and the adoption of emerging technologies such as Cloud, cybersecurity challenges continue to grow in the fintech & BFSI space. To address this, it’s important to consider certain risks and adopt best practices to mitigate them.
Like most industries, the BFSI and fintech industries have embraced the cloud and other advanced technologies for scalability and growth. A report by PWC reveals that rapid digitalization and emerging technologies in the BFSI sector will bring inevitable challenges. There are concerns around security threats, data protection, and regulatory compliance.
As financial institutions grapple with security regulations and compliances, there are several challenges that are inevitable.
Prominent Challenges in the BFSI & fintech Space
- Cloud Related Vulnerabilities
With changing customer demands and the need for modernization of offerings, most banks have undertaken digital transformation initiatives, embracing cloud technologies. Cloud technologies come with their own share of risk. This is especially when it comes to safeguarding critical data such as PII.
On the fintech front, since they are more technology-driven and have fewer compliance constraints, the focus for them is on delivering solutions as soon as possible in line with customer requirements. They leverage a lot of backend databases such as CIBIL etc. and use APIs extensively to interact with these web applications. This makes them vulnerable to attacks since they often fail to place adequate emphasis on security.
- Legacy Systems
As technology advances, banks have reached a tipping point where they must rethink their business strategy in terms of operations. Today, customers demand applications and services built around real-time offerings and capabilities. The latest technologies offer better data management and customer support using real-time chatbots and the cloud. The speed and computing power of cloud providers is unmatchable.
However, while the shift is underway, some financial institutions still rely on legacy systems with unsecured protocols. This puts their internal and customer data at risk.
- Regulatory compliance
While financial institutions are bound by government regulations and protocols to ensure cyber-risk-free systems, there might be instances where they fail to understand them or comply. Most institutions lack a cyber-audit mechanism where regular penetration test is performed using various protocols. Inadequate testing and the absence of a cyber security team typically lead to non-compliance. The aftermath of this leads to cyber thefts, data breaches, and sometimes business closure.
Compliance requirements often cover the geographical location of the data versus the customers served. For example, GDPR protects the security and privacy of data belonging to the citizens of the EU.
GDPR is a set of legislation set by the EU, defines personal data broadly, and puts the individual at the center of data protection. Similarly, we have Australia’s ARPA, Malaysia’s BNM-RMIT, Singapore’s MAS-TRM. Therefore adhering to norms around the geographical location of data is important as a part of compliance.
Some security standards for BFSI:
- ISO 27001
The International Organization for Standardization (ISO) 27001 is considered the gold standard in information security and compliance. The prime aim of ISO 27001 is to assist bankers in protecting their information as per best practices. Cloud providers that adhere to ISO 27001 guarantee point to point governance from asset management and access control to cryptography and operations security.
- SOC 1 and SOC 2
As auditing procedures that entail security measures, these are deployed by companies to protect customer data. Created specifically for SaaS solution providers, the SOC 2 framework is built on five major philosophies – security, availability, processing, integrity, confidentiality, and privacy.
On the other hand, SOC 1 focuses on finances. It basically covers the service organization’s controls that are relevant to an audit of a customer’s financial statements. Control objectives are related to both business processes and information technology.
Mainly created for financial services such as the BFSI industry. Payment processors and other financial service providers must comply with the Payment Card Industry Data Security Standard (PCI-DSS) to prevent credit card fraud, phishing and ensure financial data protection.
Security Best Practices
As the fintech & BFSI industries adopt emerging technologies rapidly, it’s important to understand industry-specific regulations. Here are some best practices to keep in mind:
Evaluating the Cloud Vendor
Before migrating to the cloud, certain initial steps must be taken. Given that cloud provides a long list of built-in product features to deploy applications, financial institutions should make the right choices for their service deployments and configure these in the context of their local environment.
Evaluating the product, creating an initial high-level design, assessing the vendor (based on services and location) are some of the criteria that they should consider.
Performing security audits both internally and externally will help understand the extent of vulnerability. Further, partnering with a security auditor who understands CERT-IN to conduct thorough risk assessments involving Information Security is key. These could include VAPT Services, Penetration Testing Services, Vulnerability Assessment Services, among others. Deploying a competent cyber security team or auditors will help provide a realistic view of the security levels inside out, helping identify errors and codes that could malfunction. With in-depth scrutiny, organizations can be sure of being compliant and working in a risk-free atmosphere.
While most leading cloud service providers are likely to be up to date on security compliance for their physical data centers, they cannot guarantee the security of applications that leverage their infrastructure. The responsibility of maintaining the security of applications lies with the BFSI organization. Therefore, performing internal security audits and checking for vulnerabilities is important.
In the midst of digital transformation and the adoption of emerging technologies, cybersecurity challenges continue to grow in the fintech & BFSI space. Commercial Banks, Credit Unions, Stock Brokerage Firms, Asset Management Firms, and Insurance Companies that support digital transactions through mobile apps are increasingly being targeted and exploited by malicious criminals. Collaborating with regulators and security providers such as Entersoft help these organizations stay abreast of compliance developments, change regulations and protect customer data.