What are the core data security challenges in Fintech and financial services? In this Data Hunters discussion with Paras Shah, founder and CEO of LAMR Group, we discover that it’s about matching the needs of the business with the right security strategy
Fintech, or financial technology, has revolutionized the way the financial industry works and has changed the way that consumers and businesses access their money. It refers to any technology that delivers financial services through software – such as online banking or mobile payment apps. Fintech is a game-changer, challenging the historical dominance of traditional financial services.
Recently, there has been an influx of companies and individuals that are reliant on Fintech due to the pandemic; far more people are managing their money remotely. Although this is great for the industry, it has led to a host of new data security challenges. As it is, the world of financial services comes with core security risks. Although these risks do not differ much depending on the industry, from ransomware to software security, they are far more consequential in Fintech because customer transaction data and similar data points revolve around people’s money. Paras Shah puts it plainly: “Reputational damage for a Fintech start-up can be the difference between success and failure. A security breach for a DeFi start-up can be fatal.” As a result, data security remains top of mind in both Fintech and financial services in general.
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Because Fintech is a data-dependent business, there are critical characteristics to what kind of data is gathered. Shah explains, “Data is the lifeblood of Fintech businesses and applications. Quantity, quality, and accessibility are all critical characteristics – this means data security solutions have to support and promote the business, not impede or restrict in any way. It’s about matching the needs of the business with the right security strategy. The dog wags the tail.”
A big question surrounding data security is whether it is a business issue in addition to a technology issue. How might these security risks impact the business of Fintech? Shah believes that this question is not framed correctly, saying that security is not a business or technology issue: “Information technology IS the business and there is no functional information technology without security. Put differently, security, business, and technology are a singularity.”
Is there a culture of security in financial services organizations? Shah says that there is: “A security culture has already been created and it will be different in each organization. The challenge is to create/ mold a culture that permeates every aspect of the enterprise and makes it obvious what role/ responsibility each employee has in maintaining and strengthening the culture. This can be done the same way enterprises create any other kind of culture – objectives/ metrics/ incentives/ training.”
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According to Shah, there is also a fundamental misunderstanding when it comes to the area of payments. With the amount of data transport involved, people wonder what sort of frameworks need to be developed to ensure an ongoing focus on security, compliance, privacy, and governance. There is a general idea that these frameworks are not yet in place and that the world of Fintech needs to develop them. This might come from the fact that identity data is highly sensitive, so people wonder more about what security measures exist. Shah corrects this idea, saying, “Frameworks already exist – multiple frameworks, in fact. The challenge is not building a new framework. The challenge is making a commitment to a selected framework and diligently increasing enterprise-wide adoption and maturity. Enterprises know what to do – the challenge lies in the execution.”
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