Fintech is the next phase of evolution in the world of finance. It combines the latest technological innovations with the financial sector to provide a new world of opportunities. The fintech ecosystem has fueled a paradigm shift from traditional modes of payments like bank transfers to faster, more secure, and more convenient approaches opening up new opportunities.

It is possible to use electronic wallets, cryptocurrencies, and other methods to carry out cross-border transactions in minutes, boycotting the bureaucracy that is often the challenge of traditional payment systems. However, with these benefits come challenges and a growing concern plaguing the industry.

Fintech companies deal with a lot of data and are often a significant target for cyber-attacks. According to a report by Statista, the finance and insurance sectors were the primary target sectors between October 2021 and September 2022 by malware attackers. This alone accounted for an estimated 40% of global attacks indicating the high prevalence in the fintech sector. What is the cost implication of these attacks?

In 2022, an estimated $4.35 million represents the average data breach cost, as Statista reported. Furthermore, forecasts show that the resulting cost of different cybercrime attacks will grow 23% from what it already is, translating to a cost implication of $23.84 trillion by 2027. How do cyber attackers make their move?

Identity Theft

Identity theft is, as the name suggests, stealing someone’s identity without their consent to perpetrate fraudulent activities using that identity. In today’s world of increasing internet usage, the prevalence of identity theft is growing exponentially. Cyber attackers can quickly obtain user information like name and credit card details from social media in different ways like skimming, phishing, and social engineering.

The FinTech industry has been at the forefront of these attacks considering that they deal with massive data from millions of customers. Single identity theft can cost colossal damage, as in the case of Equifax in 2017, resulting in the exposure of sensitive data belonging to over 147 million customers. Credit card details of an estimated 209,000 users were reportedly exposed at the time, making it one of the most significant identity theft reported. The cost implications in terms of compensation were enormous, with over $700 million paid to the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPD) in fines.

While the affected individuals received the necessary compensation for the incident, it explains that users must be careful about where and how they share sensitive information. Whether shopping on Amazon or playing your favorite best Australian pokies online, ensuring the platform meets all the regulatory compliance is crucial. That way, you can be assured of data protection and possible compensation in the event of any breach.

Insider Threats

As much as most FinTech companies employ the latest security measures to ensure maximum protection against cyberattacks, insider threats are often not a part of the considerations. Unfortunately, it is a major concern for many companies and poses a severe threat. Sometimes, employees may knowingly or unknowingly expose sensitive data that could lead to a security breach.

A typical example was the Capital One data breach in 2019. Paige Thompson, a former software engineer for the cloud hosting company used by Capital One, Amazon Web Services, had used her insider knowledge to gain access to more than 100 million customer information. Although the bank claimed that login credentials and account numbers were not exposed in the hack, over 80,000 accounts and 140,000 social security numbers were affected. It was considered one of the biggest data breaches, costing the company $190 million in settlement to affected customers and another $80 million in fines.

Advanced Persistent Threats (APTs)

APTs are characterized by a persistent, sophisticated, and stealthy attack on a system or network for long-term access. Usually, this class of cyber threats comes from highly organized, heavily funded, and skilled cybercriminal cabals employing different tools like malware and backdoors to gain unauthorized access to the target account. APTs take years of planning to understand the target security system, explore loopholes, and gather intelligence and vulnerabilities before planning the attack, which could be in multiple stages.

The 2017 WannaCry ransomware attack is a typical example of an Advanced Persistent Threat. It was a global cyberattack affecting hundreds of thousands of computers in over 150 countries. The approach was such that malware was used to encrypt the data on the affected PC. In exchange for the decryption key, the user is expected to pay a ransom, usually around $300.

The threat specifically targeted Microsoft Windows after the team had discovered a vulnerability in the operating system named “EternalBlue”.

Phishing and Social Engineering

Phishing and Social engineering are among the most common and less sophisticated tools employed by cybercriminals in attacking FinTech companies to obtain data. Phishing involves sending fraudulent emails or creating deceptive websites to trick users into revealing sensitive information. When done via email, the attacker impersonates a corporate or trusted organization pretending to offer similar services. Today, there are different types like phone phishing (vishing), spear phishing, pretexting, and baiting.

On the other hand, social engineering involves a series of human interactions and psychological manipulation. It exploits the human tendency to trust and display emotions, affection, and empathy. The fraudster, who already has a bad intention, uses that weakness to caress the user to divulge sensitive information like login credentials, credit card details, social security number, and personal details.

Conclusion

FinTech industries are continuously faced with multiple and complex cyber threats. As these companies continue to advance and integrate state-of-the-art cybersecurity tools, cybercriminals also employ different strategies to find loopholes. The cost implications are enormous, as we have seen in the case of Capital One and Equifax. FinTech companies must always provide regular audits, software updates, security patches, and employee training as proactive measures.

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• Source: https://www.fintechnews.org/popular-cybersecurity-challenges-in-fintech/