Fintech innovations are transforming how we manage money and make transactions. But, with innovation comes risk—ensuring data privacy compliance and security is critical for financial services firms to safeguard their customers’ trust.
However, meeting imperatives for security and privacy pose significant challenges for many organizations, with a significant percentage of firms missing key security measures. For example, data from one survey reveals that 92% of the most popular apps from banks and other related businesses contain exposed credentials like application programming interface (API) keys. This represents an alarming vulnerability, one that could be exploited by malicious scripts and bots to attack APIs and steal data, with disastrous consequences for businesses owners, consumers, and investors.
In this blog post, we will explore how security challenges are putting fintech firms and customers at risk for identity theft, cyber fraud, and account takeovers. In addition, we’ll also provide guidance on what secure practices need to be employed to boost security and privacy.
Fintech Security Challenges
The most common security challenges faced by fintech companies and financial institutions include data breaches, phishing attacks, identity theft, ransomware attacks, and regulatory compliance. Cybercriminals view fintech companies as high-value targets, making them particularly susceptible to sophisticated attacks. Here are some of the most significant risks:
- Data breaches remain a significant threat to companies holding sensitive financial information, which can lead to reputational damage, legal ramifications, and financial losses.
- Phishing attacks often take the form of fraudulent emails or fake websites that trick users into providing login credentials, personal information, or financial data.
- Identity theft can occur as a result of data breaches or phishing attacks, resulting in substantial financial losses for both companies and individuals.
- Ransomware attacks involve cybercriminals taking control of a company’s systems and demanding payment in exchange for releasing them.
- API vulnerabilities, including insufficient authentication, lack of restrictions on resource consumption, and inadequate control over user permissions, can expose sensitive fintech data and services.
- Regulatory compliance challenges arise due to ongoing changes to financial regulations globally, and fintech firms must continually monitor and comply with these regulations to maintain their market presence.
How Fintech Companies Can Protect Themselves
Hire an Experienced App Development Team
Investing in skilled development resources is critical to ensuring the security and precision of fintech applications. A professional team can design security measures into the app at every stage of its development and throughout its lifecycle. However, relying solely on development teams is not enough to safeguard against modern cyber threats.
Use a Shift Left Approach
A Shift Left approach emphasizes security testing early in the development process and intends to identify and resolve bugs as early as possible. To ensure comprehensive protection, fintech companies must incorporate a Shift Left approach. This includes a combination of penetration testing (pen testing) to identify vulnerabilities that could be exploited by malicious actors and automated mobile app security testing (MAST) to continuously monitor and address issues across multiple app versions.
Testing uncovers hidden vulnerabilities, ensuring the app remains secure as it evolves. A layered testing approach is key:
- Static Application Security Testing (SAST): Analyze the source code early to catch vulnerabilities before they’re embedded in the app. This reduces risks and costs by allowing developers to address issues early in development.
- Dynamic Application Security Testing (DAST): Evaluate the app during runtime to discover vulnerabilities that only surface under real-world conditions, like specific user interactions or external communications.
- Interactive Application Security Testing (IAST): Combine SAST and DAST by monitoring the app in real-time during testing, offering deeper insights and enabling targeted remediation.
Integrating these tools into CI/CD pipelines automates security checks as new code is written and deployed, ensuring continuous protection.
Use Code Obfuscation for Enhanced App Security
Cybercriminals often create clone apps that mimic legitimate ones, tricking unsuspecting users into providing personal details that can be exploited for fraudulent activities. To counter this threat, fintech development teams can leverage code obfuscation techniques in their apps, such as encryption, metadata removal, false tags, and meaningless code insertion. These tactics can help distract attackers from the relevant content and protect users’ sensitive data.
Secure Third-Party Libraries & APIs
Mobile apps rely heavily on third-party libraries and APIs, but improper management can introduce vulnerabilities. To mitigate risks:
- Verify Source and Security: Only integrate libraries from trusted sources and ensure they’re free from known vulnerabilities.
- Update Components Regularly: Keep libraries and APIs up-to-date to benefit from security patches.
- Conduct API Audits: Regularly assess APIs to ensure encryption, authentication, and overall security.
- Maintain a Software Bill of Materials (SBOM): Track all third-party components for quick identification of vulnerabilities and effective response.
Secure Cloud Servers
Ensuring a secure infrastructure is critical for the security of any fintech application. Cyber attackers frequently target cloud servers as potential weak links. By implementing back-end security measures that safeguard these assets, you can prevent data breaches. To mitigate risks, it’s important to select reputable partners and vendors for advanced functions to reduce the likelihood of supply chain risks.
Employ Advanced Data Encryption Standards
These days, leaving sensitive data and transmissions unencrypted or employing weak encryption leaves users and fintech organizations vulnerable to data breaches, malware attacks, and other malicious activities. Use end-to-end encryption for data in transit and at rest, ensuring sensitive information stays secure even if intercepted. Ensure that your mobile apps secure data at rest and use the latest TLS standards.
In addition, the security of encryption keys is also critical. Fundamentally, if keys are vulnerable, so is the encrypted data, which means the strength of your encryption is only as strong as the protection of your encryption keys. If an attacker gains access to the keys, they can decrypt the data, regardless of how strong the encryption algorithm is. Too often however, keys are not handled securely. For example, some vendors will hard code encryption keys within their system binaries. Since hackers can download the APK or binary image of apps, they can reverse engineer the code. It is vital to ensure not only that data is stored in an encrypted, secure fashion, but that sensitive assets like credentials and secret keys are never stored in clear text.
Leverage Multi-Factor Authentication (MFA) and Biometrics
In the fintech sector, where hackers continuously seek to exploit vulnerabilities, protecting sensitive data requires a Zero Trust approach—never trust, always verify. A password alone is no longer sufficient to safeguard online accounts or prevent privilege escalation.
It is vital for fintech organizations to implement multi-factor authentication (MFA) and biometrics, such as fingerprint or facial recognition, to prevent unauthorized access to sensitive data and services. Employ industry-standard authentication and authorization mechanisms like OpenID Connect, SAML, or the latest Google passkeys. This will offer an added layer of defense that helps protect against pervasive cyberattacks.
Conduct Continuous Security Audits and Compliance Checks
Fintech environments, and the techniques malicious actors use to infiltrate those environments, continue to evolve at a rapid pace. Consequently, regularly testing your app’s security and quickly patching any vulnerabilities is key to staying secure. This involves static and dynamic analysis, plus penetration testing to mimic real-world attacks. In addition, it may be advisable to establish a bounty program so that there is a good incentive for ethical hackers to look for gaps in your app’s security. Finally, it is also vital to conduct regular audits of all APIs the app interacts with to identify potential weaknesses.
Establish Real-Time Monitoring and Threat Detection
In cybersecurity, early detection is key. Identifying unusual patterns early can mean the difference between thwarting a breach and dealing with its fallout. By leveraging machine learning engines for behavioral-based detection, fintech organizations can pinpoint malicious and privacy-compromising behaviors that differ subtly from normal user activity.
Real-time monitoring powered by machine learning can uncover anomalies such as unauthorized logins, irregular transaction patterns, or suspicious access attempts. These tools continuously analyze behavior to flag deviations and predict potential threats before they escalate. When anomalies are detected, immediate alerts enable security teams to investigate and respond swiftly, minimizing damage and ensuring customer trust.
Educate Employees on Cybersecurity Best Practices
Employee behavior is often the first line of defense against cyber threats, especially when staff use personal devices to access corporate resources. To prevent security vulnerabilities, it’s essential to train employees on best practices for safeguarding sensitive data while working across mobile applications.
This includes using strong, unique passwords, ensuring apps are only downloaded from trusted sources, and keeping all software updated to the latest versions. Employees should also be equipped to recognize and respond to evolving risks, such as phishing attempts, malware tactics, and suspicious application behavior. Regular training ensures that everyone in your organization is prepared to protect corporate resources, even when accessed from personal devices.
Future Trends in Fintech Security
Increasing Regulations and Compliance Requirements
Within the fintech sector, the scope of regulatory mandates, and the burden of complying with those mandates, has continued to grow. Keeping pace with changing requirements and ensuring ongoing compliance will be critical. Meeting these objectives will be paramount in your ability to grow market share, protect your brand, and avoid the costs and other penalties associated with compliance failures.
As a first step, you should review the relevant standards and compliance requirements for your particular market, and how these policies are evolving. For fintech firms, this includes changing rules around data privacy, consumer security, and anti-money laundering (AML). In the US, the Consumer Financial Protection Bureau (CFPB) has expanded its oversight to include fintech firms, and these requirements continue to evolve. These regulations include requirements around how electronic fund transfers are handled and for managing privacy of consumers’ financial information. In addition, international regulations such as the General Data Protection Regulation (GDPR) will have an increasingly significant impact on fintech companies around the world, especially those handling data of EU citizens.
Enhancing User Education on Security Practices
The threats confronting mobile fintech apps today look very different than those of even the not-too-distant past. It’s a safe bet the threats targeting fintech apps in the months ahead will also be very different from those of today. The quickly evolving nature of the threat and security landscape means employee education isn’t a one-and-done proposition.
Given this, educating users about threats and security practices on an ongoing basis is crucial. Education must address evolving best practices in terms of spotting the signs of scams, phishing, and malware attacks. In addition, it should cover ongoing requirements around password hygiene, device security, and data privacy. This continued education is instrumental in helping to protect sensitive financial data from potential threats.
Collaboration Between Fintech Companies and Regulators
Fintech firms must navigate a regulatory framework that spans across state, federal, and international governing bodies. As threats and compliance mandates continue to evolve, it will be vital for leaders at fintech firms to collaborate with regulators. This will help teams keep apprised of changes, and also afford them the opportunity to inform policy making to ensure the development of mandates that best serve consumers and the industry. In the coming months, key topic areas will include continued advancements in data privacy requirements, anti-money laundering and crypto currency, and AI, including both its use within fintech firms and by malicious actors seeking to speed or advance their attacks.
Going forward
Recap of Key Security Issues in Fintech
It’s clear that safeguarding the security and privacy of consumer data and other sensitive assets is a critical imperative for today’s fintech firms. What’s not so clear is how to meet this demand. In this post, we’ve outlined some of the key threats development and security teams in fintech firms face, including data breaches, phishing attacks, identity theft, and ransomware attacks. We’ve also outlined how guarding against these threats and ensuring regulatory compliance represent constantly moving targets.
To rise to the challenges, teams will need to take a comprehensive, holistic, and proactive approach to security. This will demand a range of security defenses, including multi-factor authentication, robust encryption, and real-time monitoring and alerting. It will also require strong development teams and employee training so security best practices continue to be enforced.
Final Thoughts on Protecting Financial Data in Fintech
Make no mistake, fintech firms and their customers have something malicious actors want—money. To counter the threats that face their businesses and customers, it will be vital for fintech firms to establish robust defenses today—and continue to strengthen and adapt those protections to guard against evolving threats.
How Quokka Can Help
Quokka has solutions that provide deep analysis and visibility required to reduce the mobile attack surface. Q-scout is designed for employees’ mobile device security. It uses behavior-driven detection to uncover threats that put your organization at risk. It provides in-depth risk assessments, streamlines app vetting, and enables swift action to secure mobile devices—no matter the OS. Q-mast embeds security directly into your workflow to prevent mobile app users from being exposed to risks posed by insecure apps. From code to supply chain, it performs comprehensive testing to pinpoint vulnerabilities early and ensure secure app releases from the start.
By leveraging tools like these and following these tips, fintechs can maintain a strong security posture, protect their organization, users and employees. Contact us to learn more about how Quokka can help.
