Financial technology, or FinTech, for short, is thriving through its innovative melding of technology and innovation within the financial sector. But unlike other industries whose main commodity is solely data, FinTech has an additional commodity, one that is of interest to just about everyone on a global level: money. This dynamic – coupled with strict operating and governmental regulations – creates unique challenges that must be addressed to safeguard assets in this industry, as well as myriad others.
What is FinTech?
Defined as a word used to describe the use of technology and advanced software to power financial systems and the services they provide. This intersection of hardware, software and the Internet enable the services that drive not only the financial sector, but the other sectors that rely on them.
For example, a banking app that lets its users manage their accounts from the comfort of their iPhone is a direct example of FinTech in action. A merchant processing card payments from shoppers using a payment service, like Apple Pay, is another such example. Below are a few more modern examples of the bleeding edge technology that is being used to propel financial technology onwards and upwards:
- Mobile payment systems (Apple Pay)
- Cryptocurrency (Bitcoin, Ethereum, etc.)
- Online payment gateways (PayPal, Venmo, etc.)
- Stock market trading apps
- Wealth management apps (Kabbage, Lending Tree, etc.)
- Shopping apps (Amazon, eBay, etc.)
- Other unlikely examples (Uber, Google, etc.)
Simply put: if you’ve used technology to buy, sell, trade and/or manage items, services or finances online, then you have used some form of FinTech.
What makes FinTech so special?
As explained above, FinTech is everywhere. Which means Personally Identifiable Information (PII) and financial details – among other pertinent data – could be anywhere. This leads to regulations that govern the following points about these data types:
- What data may be collected?
- Where is data stored?
- Who has access to this data?
- How is data to be handled?
- How should the data be stored?
- How long is this data viable?
- What rights do consumers have to this data?
- What procedures must organizations take if data is leaked?
At its core, strict regulations are subject to laws of the regions and nations in which the organizations operate in. While there is quite a bit of overlap between the specifics of regulation, it is important to note that they may vary from one country to another – and before you ask – yes, organizations are responsible for adhering to all laws within the countries in which they operate.
Compliance is not optional. Many times, registering with regulatory bodies is mandatory for any organization looking to establish a company that provides financial services. This is an important requirement due to the need to protect information from the cybersecurity challenges specifically related to FinTech.
What are some of the challenges unique to FinTech?
As mentioned prior, FinTech is a part of the larger information technology ecosystem, albeit amalgamated with the financial services sector to form something of a hybrid where finance management and technology intersect.
While many IT and information security best practices apply to the overall management of FinTech data, the high-risk nature of the data, relative newness of the industry and highly regulated finance sector yield hurdles that pose significant operational and security risks that FinTech is trying to overcome and one that service providers should be proactive in addressing.
Below are some of the most common challenges FinTech firms and partners actively work on to mitigate risk as technology continues to move at break-neck speeds:
- Data security: Keeping data secured is tantamount to success. As technology advances for FinTech, it does so for threat actors as well. Staying ahead of attacks is an ongoing struggle.
- Early adoption of technologies: Early adoption isn’t so much a “challenge” and certainly isn’t limited to FinTech. But seeing as new technologies can often help to mitigate issues, the finance sector is often quick to adopt the latest yet-to-be-proven tech which could prove troublesome if not properly vetted or implemented, like Blockchain and Ai.
- Regulatory compliance: With the current number (and growing) of regulations by region and/or country that FinTech organizations must abide by, the increasing complexities of complying with each regulation in each country your company does business in can be a bear to manage.
- Shortage of IT and Cybersecurity expertise: Again, while the foundations of IT can help to cover the majority of concerns through best practices, cybersecurity is altogether a different beast. Shortages often equate to companies not having the proper support or needing to outsource to mitigate risks.
- Scalability: The demands placed on FinTech services today are expected to pale in comparison to the influx of new, specialized services that will be offered globally. Furthermore, this increase also applies to new and existing users, of which mobile device technology is being used to drive adoption.
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