Despite being on the cutting edge of digital financial products, young fintech companies are at a disadvantage in a wildly important arena: data security.
According to Market Research Future (MRFR), the worldwide application security market is expected to reach a staggering $9.64 billion by 2023 - up from just $2.56 billion in 2017. That’s an annual growth rate (CAGR) of 24.95%.
Within this market, SMEs are estimated to be the fastest growing investors in application security, when broken down by type of organization.
Unfortunately, when it comes to data privacy and protecting sensitive information, fintech startups face a unique set of challenges that make growing their core business an even more difficult endeavor than it already is. Why is that so
1. Reliance on sensitive user information
These days, fintech and data analytics go hand-in-hand. From robo advisors to AI-powered saving apps, data-driven technologies have been at the heart of the fintech revolution.
With fintech products deeply intertwined in modern retail banking, asset and wealth management, capital markets and insurance, organizations in this space are inevitably going to have to handle and store sensitive information from your users.
From ID verification to processing credit card payments, large volumes of sensitive data will make its way onto the databases of fintech organizations. The mere possession of such sensitive consumer information puts them both at risk of sensitive data exposure and places them within the scope of any number of data privacy laws.
2. New, updating and evolving data privacy laws
The nature of how fintech startups do business make it so that a lot of sensitive data hits their systems, which attracts the interest of government regulators - who are increasingly focused on protecting consumer data.
In the last few years, governmental regulatory institutions around the globe have started to take greater steps in protecting the rights of consumers when it comes to their personal information.
From Europe’s General Data Protection Regulation (GDPR), effective since 2018, to the soon-to-be-implemented California Consumer Protection Act (CCPA), businesses are suddenly needing to juggle compliance certifications for new regulatory frameworks.
Not only that, but fintech companies that accept or process credit card transactions have already been saddled with the burden of needing to maintain compliance with PCI DSS - a set of requirements that are aimed at preventing credit card fraud.
3. Limited resources for securing personal data
To successfully prevent data breaches and - simultaneously - meet the complex requirements set forth by legal frameworks like the GDPR, the CCPA and PCI DSS, you’re going to need a team of information security experts and compliance specialists that can create data flow maps, secure your networks and sensitive data storage solutions, ensure that you’re meeting regularly compliance rules… the list goes on.
Conglomerates have the resources to put towards a large-scale data security effort, but fintech startups have much less at their disposal.
4. Increasingly sophisticated cyber threats
As mentioned above, even some of the most widely-recognized tech brands have suffered from data breaches. From increasingly sneaky malware to highly-targeted phishing attacks, which skyrocketed 250% higher last year, there are simply too many ways for threat actors to gain access.
It just takes one team member on the wrong end of a phishing campaign to trigger a sensitive data exposure event - which can ruin a startup-stage business overnight.
And it’s not just unauthorized malicious actors that fintech startups need to be worried about, as there are threats coming from all angles - even some unexpected ones.
According to Verizon’s Insider Threat Report, 57% of database breaches involved some kind of insider threat from within an organization. Add that to the possibility of accidental sensitive data sharing and ransomware attacks, and covering all your bases becomes a costly and complex endeavor.
Trends & Innovation to solve data security issues
From tokenization to data encryption, fintechs have employed a number of tried-and-true data security methods. Even with innovative approaches like these, however, data breaches are still a probable threat.
If sensitive data is stored in your database, there is a chance it will be exposed, and there are several avenues through which this could happen.
Fortunately, VGS has been securing fintech startups’ sensitive data for years using a next-generation data security approach that enables businesses to evade storing sensitive information on their systems altogether - while still enabling businesses to reap all the benefits of the original data.
This approach is called data aliasing, which is a technique that redacts sensitive information in real-time and replaces it with a synthetic data alias, enabling organizations to offload their data security responsibilities entirely by keeping the original data off their systems.
Businesses simply put their data security burden in the hands of VGS, which takes care of all sensitive data collection, storage and transfer on their behalf.