Ensuring Cybersecurity In Fintech: Key Trends And Solutions

August 25, 2016

Exciting things are happening these days at the intersection of digital technology and financial services. The fintech startup ecosystem is thriving, thanks in part to an infusion of $14.5 billion globally in venture funding in 2015, up from $7.3 billion in 2014. Fintech companies are creating and rolling out a wide range of solutions that promise to impact nearly everyone, dramatically broadening the reach, flexibility, and level of innovation in financial services. In addition, technology is helping enable enormous progress in bringing financial services to the many people who have previously been excluded from the formal financial system.

But there is a key challenge that could threaten this momentum: cybersecurity. Simply put, given the growth, dynamism, and complexity of the digital financial ecosystem, it is inevitable that some solutions will be insufficiently secure against cyberattacks. And, it’s highly likely that those vulnerabilities will be found and exploited. In addition to causing immediate financial losses, breaches can undermine longer term confidence in new solutions, leading to lower adoption rates—particularly among users with less experience engaging with digital services.

Here are some key trends impacting the cybersecurity landscape in the context of digital financial services, and some approaches that can help improve the security of emerging financial products and services in light of those trends:

The number of companies offering digital financial services is proliferating

According to data from “The Pulse of Fintech, Q2 2016” report from KPMG and CB Insights, there were 560 fintech venture funding deals in 2013, 710 in 2014, and 807 in 2015 (and 416 deals in the first half of 2016). Those investments will correspond to a large number of new market entrants. Undoubtedly, some of these companies will make cybersecurity a core focus and design solutions that are extremely robust. But with so many companies in the mix, it’s also statistically inevitable that some of them will fall short on security. One step that would help: Entrepreneurs in this space should take a step back from the “all that matters is getting to market fast” mentality that is so common at startups, and take the extra the time to do extensive testing before launch.

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