Of all the modern business ecosystems, the Fintech sector is one of the most volatile landscapes that is teeming with industry and technological disruptions. And, adding to the pre-existing list is Neobanking.
Currently, there are 246 neo banks in the world, and the market projections suggest an annual average growth rate (CAGR) of 47.7 percent until 2028, amounting to 722.6 billion U.S. dollars.
While they aim at making banking easier and razor-speed fast, they open more attack avenues for the attackers. Their digital channels are an open invitation to money-motivated cyber criminals and this adds to the concerns of all the stakeholders in the ecosystem.
Here, we discuss the neo banking system in the light of security challenges and explore the best security practices they can adopt to minimize their vulnerability and threat exposure.
Neo Banking Threat Landscape and Compliance
With the rapid evolution and a highly flexible digital services portfolio, neo banking is an attractive target for cybercriminals and fraudsters. Further, the attacks and phishing practices are becoming smarter and more sophisticated as they are evolving along the lines of security techniques.
However, the challenge gets intensified for the neo banks, as the customers' need for digital services is increasing side by side with the failure points and vulnerability.
A recent Gartner report mentioned that 30% of banks and digital commerce business setups will have dedicated trust and security teams by 2023. This will protect the integrity of online interactions between the brands and customers.
Similarly, the increasing cloud-based compliances aimed to offer more flexibility and seamless experiences via 24X7 availability also have increased the vulnerability for attacks.
While sharing the attack data and threat landscape mapping will surely make way for better protection policies.
Before we move on to discuss the solutions for these challenges, let us have a brief overview of the various security challenges neo banking institutions currently face.
Security Challenges Faced by Neo Banks
The neo bank security challenges are diverse, and most of them stem from the fact that they are autonomous firms that mostly rely on third-party security providers. They are generally not able to invest in full-time security professionals to create and configure full-fledged on-premise security systems.
As the third parties are responsible for the security controls for neo banks, a number of security concerns weigh these banks down.
In neo banking, all the processes are online and powered by digital channels and the cloud. So, there is a huge thoroughfare of sensitive data across the entire network and devices. Networks and digital devices are highly vulnerable to malware attacks unless secured appropriately against breaches.
A bot or worm in a single device or network entity can bring down the entire ecosystem and can cause significant monetary and reputation harm.
2) Spoofing and Phishing
Spoofing refers to the process where the cybercriminals impersonate the URL of the bank's website. As the page looks entirely similar and offers similar functionalities, the user is unable to detect the malicious intent and logs in normally. This results in data theft and unauthorized access.
Phishing, on the other hand, refers to a hacker's attempt to gain access to confidential information such as Card details. This is done by assuming a trustworthy disguise over the network.
Spoofing and Phishing have led to many notorious scams and theft incidents, and neo banking is even more vulnerable to them because of its entire online operations.
Being an entirely online financial institution means that the neo banks have to comply with a ton of regulatory standards, both local and standard ones, such as PCI DSS.
These compliances make the financial strain on the neo banks even worse and are certainly a security challenge.
4) Data Privacy
In times when legacy security solution providers are faltering in the light of highly innovative and sophisticated security attacks, neo banks, that rely on third parties for security are even more vulnerable. Most of the neo banks are standalone firms that lack the financial bandwidth to support full-fledged security teams and have on-premise industry-grade security solutions.
Hence, data privacy becomes more questionable and challenging.
5) Third-Party Dependency
Neo bank security is heavily dependent on the 3rd party security providers. This translates into high-risk exposure and reliance on third-party vendors that might not even have quality cybersecurity measures in place.
Apart from leading to data breaches, this can amount to major consequences, such as heavy ransom.
Top 4 Security Best Practices for Neo Banking
1) Compliance With Security Standards
While it might seem like a financial overhead, staying compliant with security standards ensures safety in many ways. Security compliances need periodic reports on Vulnerability assessment and penetration testing assessment in order to stay compliant with the existing compliances.
The neo banks have to test the networks, web apps, and endpoints for security and conduct tests for authorized and unauthorized access.
So, compliances keep the neo banks well aware of their security status and ensure that the security measures are in place.
Related Topic: What are Mobile App Security Standards?
2) Use Automated Mobile App Security Solution
Automated mobile app security solutions like Appknox will allow the neo banks to conduct a variety of security tests like SAST, DAST, and API testing. These solutions also offer manual app security testing that allows neo banks to ensure app security without investing huge amounts of money in full-fledged teams.
These security solutions also allow for better and more stringent security management and monitoring by uncovering hidden vulnerabilities and threats that can escalate to risks.
3) Get Regular Manual Assessments Done
When it comes to the security best practices for neo banks, regular manual assessments are of extreme importance. They help the banks to stay warned of any signs of impending doom, such as any flaws in their security system or any vulnerabilities their networks have.
4) Adopt Advanced Authentication Techniques
While the traditional authentication is one-step or one-vector authentication, the advanced authentication process relies on multi-step verification. Every activity ranging from data access to account login and transaction comes with multi-step authentication.
This offers additional layers of protection to neo bank security against attacks and data breaches.
Next, we address some core banking concerns in the neo banking security realm, that are a must-ask for every stakeholder before joining in!
5 Security Questions for Neo Banking Institutes
1. How are the security vendors staying abreast of the latest threat and vulnerability information?
Answer: Ask the neo banking security vendors about the measures being taken for staying updated with the latest developments in the vulnerability and threat landscape.
2. Are we doing a thorough vulnerability assessment to protect customers’ information?
Answer: It is important to keep every customer-related information and data safe and confidential. From passwords to hashes and keys to online interactions, everything must be encrypted for every entity on the neo banking network and enterprise.
3. Do the neo banks have an integrated information security strategy?
Answer: Having an integrated security system in place means:
- Lesser loopholes
- Fewer endpoints to secure
- The universal view of security measures, vulnerabilities, and threats
All this amounts to a better grasp of the security controls for the neo bank ecosystem.
4. Do we have an incident response plan set up in case of a data breach?
Answer: Having a proper incident response plan and risk mitigation policy will enable neo banks to minimize their losses and curb the cyberattack with minimal damage. It also ensures that all the stakeholders are well-informed at all times and there are no information lags amounting to confusion.
5. Are we educating our customers about information security risks and best practices?
Answer: Security in any place and at any time is a shared responsibility of every entity in a network, a system, or an enterprise. So, when neo banking customers are educated and trained about the various risks, attacks, and ways hackers can leverage them, they become more alert.
The customers must also be taught the best practices for using neo banking securely and without divulging any confidential information and using the trusted and official channels.
This reduces spoofing and phishing risk as well.
Solving the Neo Banking Security Puzzle: Appknox Is One Key
Neo bank security is a challenging puzzle that is going to evolve as time passes, just like the constant ongoing battle between security professionals and attackers. While solving this puzzle for once and all is impossible because of the obvious reasons, having reliable keys that make the challenge easier is nothing short of a boon.
Automated security solutions with robust, intuitive, and impeccable security functionalities, like Appknox are one of the best bets for every neo bank.
Appknox offers a two-way route to a more secure and safer banking ecosystem - Vulnerability Assessment (VA) and Penetration Testing (PT).
Apart from digging out the code and process vulnerabilities from neo banking security systems, Appknox also performs highly extensive penetration tests to check the resilience and robustness of the entire security framework.