The finance sector is the number one target of cyber threat actors with 65% of organisations hit by ransomware in 2024, according to recent research by Sophos. As the financial technology (Fintech) sector continues to revolutionise the way we handle money, the stakes for cyber security have never been higher.
The integration of innovative digital solutions, from AI-driven financial services to blockchain technology, has opened up new opportunities for growth, but it has also expanded the threat landscape.
This blog explores the current cyber security challenges facing the financial technology industry, the impact of these threats, and the best practices that companies can adopt to safeguard their operations and customer trust.
The Rising Threats in Fintech: A Snapshot of Today’s Cyber Security Landscape
The Fintech industry, characterised by its rapid adoption of cutting-edge technologies, is a prime target for cybercriminals. According to recent reports, the financial services sector experiences cyber-attacks 300 times more frequently than other industries, with Fintech companies being particularly vulnerable due to their digital-first nature. The rise of AI and machine learning in Fintech has further complicated the threat landscape, as these technologies can be both a tool for defence and an instrument for sophisticated attacks.
Key Threats Facing Fintech Today:
- Data Breaches: With vast amounts of sensitive financial data at stake, data breaches remain one of the most significant risks for Fintech and financial services firms. 65% of surveyed organisations having been targeted by ransomware in 2024, according to recent research by Sophos. Recent breaches, such as the SolarWinds attack, have highlighted the vulnerabilities in supply chains and third-party providers, making it clear that no organisation is immune.
- AI-Driven Cyber Attacks: The same AI technologies that enable personalised financial services are also being used by cybercriminals to automate attacks, enhance phishing campaigns, and exploit vulnerabilities faster than traditional methods. For instance, AI can create highly convincing deepfake videos and emails, making it easier to deceive even the most vigilant employees.
One of the most alarming examples occurred in earlier this year, when cybercriminals targeted a Hong Kong-based financial services firm in a first-of-its-kind heist. Using advanced deepfake technology, the attackers impersonated the firm’s Chief Financial Officer (CFO) during a video conference call. They convincingly replicated the CFO’s voice and appearance, deceiving an employee into transferring nearly £20 million to a fraudulent account. [source: Ars Technica]
- Regulatory Challenges: With evolving regulations such as GDPR and PSD2 in Europe, and new guidelines from the FCA and other financial authorities worldwide, Fintech companies must navigate a complex web of compliance requirements. Failure to comply not only risks legal substantial penalties, but also damages brand reputation.
The Future of Fintech Security: Quantum Computing
The Fintech industry faces a significant challenge with the advent of quantum computing, particularly regarding encryption. As quantum technology advances, traditional cryptographic methods could become obsolete, necessitating a costly overhaul of encryption standards. The transition to quantum-resistant encryption is crucial for maintaining data security but will require significant investment and regulatory adjustments across the global Fintech sector. According to a recent report by Moody’s Ratings “Quantum computing’s threat to asymmetric encryption is currently mitigated by challenges in error correction, scalability, talent shortages and limited computing power…” However, quantum computing could break asymmetric encryption within 5 to 30 years. [source: Fintech Magazine]
The Global Treasurer predicts that quantum computing will revolutionise the Financial Services and Fintech industries, particularly in financial modelling, analysis, payment systems and cyber security. Financial institutions will need to adopt quantum-resistant algorithms, shifting towards more dynamic and adaptive security strategies. This evolution will require collaborative efforts across the global financial sector, including international cooperation, to build resilient global payment systems, enforce standardised regulations, and ensure a secure, efficient future leveraging quantum technology.
Compliance and regulations in quantum computing is not just becoming central to cyber security in Financial Services, but also to ensuring market viability. The Director of Quantum at KPMG, Michael Egan states that “While quantum technologies are rapidly developing, the threat of ‘Harvest now, Decrypt later’ is real and immediate. With increasing legislation, together with long procurement and mitigation cycles, there is a need to act now.” [source: KPMG]
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The Role of Compliance and Regulatory Standards in Strengthening Cyber Defences
Compliance with industry standards is not just a legal obligation; it is a critical component of a robust cyber security strategy. Frameworks such as ISO/IEC 27001 and guidelines from regulatory bodies like the FCA in the UK provide a structured approach to managing sensitive data and mitigating risks.
Key Compliance Measures for Fintech:
- Data Protection Compliance: Ensuring adherence to FCA, GDPR and other data privacy and financial authority regulations is essential for protecting customer data, and arguably the integrity of Fintech and Financial Services industries. This includes implementing robust data encryption, conducting regular audits, and maintaining clear data governance policies.
- PSD2 and Open Banking: With the advent of open banking, Fintech companies must ensure that their APIs are secure, and that customer consent is properly managed. Compliance with PSD2 not only protects consumer data but also enhances trust in digital financial services.
- Adoption of Cyber Security Frameworks: Leveraging established cyber security frameworks like NIST, ISO/IEC 27001 or the Cyber Essentials scheme in the UK can help Fintech firms standardise their security practices and stay ahead of emerging threats.
Best Practices for Cyber Security in Fintech
To navigate the complex cyber security landscape, Fintech companies must adopt a proactive approach. Here are some best practices that should be integral to any Fintech firm’s cyber security strategy:
- Regular Penetration Testing and Red Teaming: Penetration testing and red teaming exercises are crucial for identifying vulnerabilities before attackers can exploit them. By simulating real-world attacks, these practices allow Fintech companies to evaluate their security posture and improve their defences.
- Managed Detection and Response (MDR): MDR services provide continuous monitoring and analysis of an organisation’s security environment. By outsourcing to experts, Fintech firms can ensure that threats are detected and mitigated in real-time, reducing the risk of a successful attack.
- Incident Response and Recovery: Having a robust incident response plan is essential for mitigating the damage caused by cyber incidents. Fintech companies should invest in both in-house and outsourced incident response teams to ensure a swift and effective reaction to breaches.
- Employee Training and Awareness: Employees are often the first line of defence against cyber threats. Regular training sessions on phishing, social engineering, and secure data handling can significantly reduce the risk of human error leading to a security breach.
- Vulnerability Management: Regularly updating and patching software, coupled with continuous vulnerability assessments, is vital for maintaining a secure infrastructure. Cyber security as a Service (CSaaS) solutions, such as CyberLab Control, can help Fintech companies manage vulnerabilities effectively without overburdening internal teams.
Building a Resilient Cyber Security Strategy in Fintech
As Fintech continues to reshape the financial services landscape, the importance of cyber security cannot be overstated. By understanding the current threats, complying with regulatory standards, and implementing best practices, Fintech companies can build a resilient security posture that not only protects their operations but also fosters trust with their customers.
Take the first step to improving your cyber security posture, looking at ten key areas you and your organisation should focus on, backed by NCSC guidance. Book your free 30-minute guided posture assessment with a CyberLab expert.
