In An Evolving Fintech Landscape, There Are Security Challenges to be Faced

Jan 29, 2022
6 min read

Increased cryptocurrency-related scams, data breaches, and more widespread frauds and identity thefts are among Palo Alto Network's top cybersecurity predictions for 2022.

Defining Fintech as the next stage of financial service innovation combines financial and technology. There are two main components of Fintech: technical breakthroughs in the traditional banking sector and the advent of new financial service delivery models. Fintech has disrupted all industry-banking, capital markets, investment, insurance, and funds transfer and payments. In addition to impacting start-ups, Fintech has disrupted the way traditional banks offer their services, as banks look to integrate multiple digital channels into an omnichannel customer experience.

Financial services firms deal with sensitive information related to individuals and businesses. With Fintech, more data is available in digital format, making it easier to analyze and generate insights and more vulnerable to security breaches. In light of the growing number of services offered online, data ubiquity and data security are proving to be major challenges for Fintech. Outsourcing IT services and data to fintech firms present governance and control challenges and security risks. By 2022, the global information security market is expected to grow by 8.5% CAGR. (Gartner)

Self-learning malware and artificial intelligence (AI) increase cyberattacks' sophistication, allowing cybercriminals to change how they strike. Notably, these hackers use increased phishing and malicious insiders to leverage the human layer—the weakest link—as a gateway to attack systems. In addition, other methods, such as those used by nation-states to target commercial businesses, are altering the nature of recovery, with insurance companies attempting to categorize cyberattacks as an "act of war" issue.

Ever since COVID, fintech providers have become torchbearers in the world of digital financial services. However, the phenomenal rise in financial transactions has significantly increased UPI breaches and credit and debit card frauds.

This article delves into the several types of cybersecurity risks in FinTech and the categories and individuals responsible for them.

Cybercrime on the rise - how do banks counter it?

In February 2016, hackers successfully stole approximately USD 100 million from Bangladesh's central bank. Since then, fears of future cyber attacks on banks have grown. Russian Central bank officials confirmed hackers had stolen more than USD 31 million (two billion roubles) from commercial and central banks following the incident.

Banks face increasing expenditures due to rising cybercrime rates since they are under pressure to reimburse their deceived consumers in bulk. Unfortunately, most consumers believe that their bank will cover the cost of successful scams regardless of the overall amount lost.

Banks are now reimbursing authorized push payment (APP) fraud at a rate of 46 percent on average, but measures endorsed by the government will soon oblige them to repay everyone. This is just one reason why, in 2022, banks must prioritize cybersecurity to protect consumers.

Banks will need to collaborate with governments and industry organizations to share practical tactics. There must also be continuing efforts to educate the public about preventative measures. Still, the banks must ultimately ensure that security models are implemented that offer maximum protection for themselves and their customers.

Nuance Communications: Biometrics and Security

This year, financial services firms are turning to current AI-powered technologies, e.g., biometrics, to safeguard their consumers while providing them with a human-like experience.

Speech biometrics helps determine a person's identity by identifying over 1,000 voice features, from pronunciation to the shape and size of the nasal passage.

FS organizations can use technologies to verify that people are who they claim to be based on how people sound. In addition, authentication and personalization are possible with biometric engines in just a fraction of a second. This implies that agents may instantly recognize a customer and begin personalizing the engagement.

Biometrics will also help financial services firms improve security. Customers don't have to remember anything specific or be concerned about their data being taken.

Bettering the Onboarding process

Financial institutions need to perform holistic data checks during account opening and monitor customers throughout their lifecycle to combat this.

While money mules may appear respectable on the surface during the onboarding process, they transfer the money to money launderers as soon as they access the account. Therefore, financial institutions and banks should use technology to verify that the customer is the account holder in a customer's lifetime.

In addition, GDPR is the global norm for privacy regulation. Therefore, banks must choose a partner who can manage sensitive data and adhere to high standards to meet the requirements. Consequently, it is more attractive than upgrading procedures and internal systems.

Lastly, society has become increasingly concerned about how technology companies use personal data.  As a result, it will be up to banks to explain how artificial intelligence (AI) is used in fraud and compliance. This is important in vendor onboarding since it necessitates determining whether their vendors and partners entirely control the technology they are providing.

The banks' responsibility will explain their decisions to the general public and regulators.

The future of bots and cryptocurrencies in 2022

Bots will exploit business logic flaws in new sector verticals that were not previously exposed to massive bot attacks, as bots become a more common attack mechanism now.

People interested in NFT profits have increased the demand for bot developers' services. As a result, NFTs are being bought and sold quickly using sniper bots, identical to those used on eBay. As a result, bot attackers will likely diversify more of their attack vectors to boost their revenues.

Meanwhile, cryptocurrency will become a focus area for cyberattacks around the world. This is because large sums of money can be found on cryptocurrency wallets and exchanges, which might entice attackers trying to benefit from their exploits. As a result, cryptocurrency-related attacks have increased in the second half of 2021.

The proliferation of Open Banking

Although the United Kingdom was the first to do so, several other countries are now following suit. In addition, because most Open Banking systems are based on APIs and Web API queries conducted by financial institutions, we can expect more attacks against them.

According to Gartner: "API abuses will move from an infrequent to the most common attack vector, leading to data infringements for enterprise web applications."

On the rise: Mobile Banking Trojans

As a result of the pandemic's widespread acceptance, more mobile banking Trojans for Android, specifically RATs that bypass bank security measures, are likely to emerge. In addition, regional Android implant projects will spread throughout the globe, spreading attacks to Western European nations.

Cybercriminals are increasingly targeting fintech apps due to the increasing volume of financial data they collect

Many critical personal details are saved on mobile devices thanks to online payment systems and fintech applications. However, many cybercrime groups will continue to attack personal mobile phones using advanced methods such as deep fake technologies and advanced malware to steal data from victims.

BNPL

The BNPL (Buy Now Pay Later) services (Clearpay and Klarna) exploded in 2021. Unfortunately, the £4.1 billion some consumers owe these companies may never be repaid. The evil side of BNPL is expected to emerge in 2022, and the trend will be renamed "Buy Now Pay Never." Cash-strapped people are more prone to commit first-party fraud by using the services and collecting the products without paying back the loan.

Ransomware that is aimed at specific regions

As international efforts are being made to crack down on large ransomware groups, we will see small groups originating in regional areas focusing on regional victims.

Dual threats: Deepfakes and Autodialers

Deepfake assaults are predicted to increase. In 2022, employing AI to imitate the signatures of business leaders will become a more common attack vector. Voice analysis has increasingly become a security mechanism for financial institutions that threat actors have started to notice.

This strategy was proven helpful at the end of 2021, with a $35 million theft from a bank in the United Arab Emirates. Banks and multinational investment firms should be aware of this and ensure that their security measures are not overly reliant on a single technological solution.

Threats posed to online payment systems

Due to quarantine and lockdowns, people rely more on internet markets and payment methods while they remain at home. However, adequate security measures do not accompany this rapid transformation, attracting many cybercriminals. This problem is severe in developing countries, and the symptoms will continue for a long time.

Final Words

In 2022, fraud is not seen as a subset of financial crime but rather as a subset of cybercrime alongside phishing, ransomware, and other sorts of cybercrime. As a result, it's been dubbed the spam moment in financial services.

Generally, preeminent banks have developed specialized or tailored cybersecurity technologies that are not interconnected. Now, we're starting to witness a significant change in perception, with banks and other institutions purchasing product licenses and concentrating on integrating them. Rather than constructing everything from scratch, they use commercially available security, identity management, and fraud-related tools.