Cyber security and fintech are two massive industries that go hand in hand. In 2023, fraud losses for financial institutions in America amounted to $21 million. And 25% of financial organizations experienced $1 million in fraud losses, and consumers accumulated a collective $10 billion in losses.
Those are big numbers, and cyber security innovation is the answer to reducing them. Read on to find out more.
MSSPs and MDR for Incident Response
Managed Security Service Providers (MSSPs) and Managed Detection and Response (MDR) solutions have become a part of the core strategy for the defenses of the fintech industry. Now, we wouldn’t exactly call these innovations as such – they’ve been around for years – but it’s how they’re evolving to the current threat landscape that’s exciting.
MSSPs are cybersecurity services outsourced and Security Operations Centre (SOC) management. And specifically for fintech companies, this essentially means that a company can have protection around the clock without hiring a team internally.
Managed Detection and Response services take threat management a step further by using proactive threat hunting combined with real-time response. In 2024, these services take advantage of advanced analytics and machine learning to detect anomalies in the financial systems before the situation gets out of control.
For example, an MDR service may prevent an external payment processing system from accessing and automatically take defensive measures within seconds if an unauthorized attempt is spotted. These are vital services for fintech start-ups that don’t have sufficient resources to create a fully fledged cybersecurity department.
AI Revolution for Threat Detection
AI has significant capabilities for threat detection in fintech.
Conventional security practices, for example, those that operated on a rigid low number of rules and would respond to threats once detected, no longer work. As you’d expect, AI-enabled programs resolve this problem by processing a massive amount of different information in real time, spotting oddities, and forecasting possible outcomes.
A case in point is how AI algorithms can help detect billions of financial transactions daily, including abnormal ones, like cross-border payments made without authorization or abnormal patterns during login. There’s no human capable of doing what AI can.
In 2024, new advanced machine learning models detect zero-day vulnerabilities remotely, meaning flaws that security staff had not been aware of, enabling fintech organizations to resolve weaknesses before they take advantage of a system.
Powerful data removal services also use automation to remove vulnerable consumer data at scale, requesting takedowns of personal information to prevent identity theft.
Dynamic Identification for Fraud Prevention
Fraud is at the top of the list of concerns for companies that lose billions annually.
The real-time analysis of data and the use of dynamic identification systems are emerging as solutions. Dynamic identification systems are more resilient than traditional methods, like PINs or passwords, because they evolve according to user and behavioral context, making them difficult to compromise.
For example, fintech apps can use behavioral biometrics by analyzing how the user types through their device: how long it takes to type, how hard they press the screen, and their swipe angle. It’s revolutionary, although many fintech companies still need to work on implementing it.
We’ll soon be looking at the 2025 innovations, and if 2024 is anything to go by, it’ll be a massive year for cybersecurity and fintech. Protecting consumer data and preventing fraud is definitely at the top of the list.
Impact on the Fintech Industry
These cybersecurity innovations have had a profound impact on the fintech industry in 2024:
Increased Trust and Confidence: By implementing robust cybersecurity measures, fintech companies are building trust with customers and investors. This is essential for the continued growth and adoption of fintech services.
Improved Operational Efficiency: Automation and AI are streamlining cybersecurity operations, freeing up resources and improving efficiency.
Greater Resilience: By proactively addressing cybersecurity threats, fintech companies are becoming more resilient and better equipped to withstand attacks.
Challenges and Future Outlook
While cybersecurity innovations have significantly strengthened the fintech industry’s defenses, challenges remain:
- Evolving Threat Landscape: Cybercriminals are constantly developing new tactics and techniques. Fintech companies must remain vigilant and adapt their security strategies accordingly.
- Skills Gap: There is a shortage of skilled cybersecurity professionals. Fintech companies need to invest in training and development to address this gap.
- Cost of Implementation: Implementing advanced cybersecurity solutions can be expensive. Fintech companies need to carefully evaluate their security needs and budget accordingly.
Looking ahead, the future of cybersecurity in fintech is likely to be shaped by:
- Increased use of AI and machine learning: AI will play an even greater role in threat detection, prevention, and response.
- Rise of quantum computing: Fintech companies will need to prepare for the potential impact of quantum computing on cryptography.
- Focus on collaboration: Information sharing and collaboration between fintech companies and security experts will be crucial in combating cyber threats.
In conclusion, cybersecurity innovations have been instrumental in securing the fintech industry in 2024. By embracing these advancements, fintech companies can protect their customers, safeguard their assets, and continue to drive innovation in the financial sector.
