Fintech encompasses a broad range of firms that develop technology-focused products to enhance financial services' functionality, typically offered by incumbent financial institutions.
The financial industry's information security standards consider the specific defined risks and threats that the financial organizations may face, making them the kingpin to ensure business and operational sanctity.
In India, fintech is primarily regulated by the Reserve Bank of India (RBI); in terms of both business and regulations governing this sector, with the focus lying on digital payments as the most advanced Fintech sub-category in India.
However, not all Fintech organizations fall under the RBI jurisdiction, the Insurance and Regulatory Development Authority and Securities and Exchange Board of India also have powers to govern entities specific to their sectors.
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Security and data privacy challenges faced by Fintech companies
The financial service sector handles sensitive information about individuals and enterprises. With the exponential growth of Fintech, more data is now accessible in digital formats, which ensures that data is readily available to analyze and generate insights.
And this makes the data more vulnerable to security breaches. Plus, the increase in mobile banking services has resulted in a tremendous amount of data - such as personally identifiable information, financial and health information - being exposed to third parties.
Need for Security standards in Fintech technology sectors in India
Fintech has led to start-ups' growth and it has also disrupted how traditional banks offer their services to customers. Banks have integrated multiple digital channels to create an omnichannel customer experience.
Improved methods of identifying and quantifying risks, algorithm-based investments, and defined platforms for users to optimize their portfolios have revolutionized the wealth and asset management industry.
In addition, blockchain technology has also evolved unbelievably, disrupting fintech firms by developing cryptocurrencies, including bitcoin. This has considerably transformed the payments and money transfers by eliminating all middlemen and 'smart' contracts development. Global trends, like increasing globalization and the decreasing age of an average workplace, digitization, and disposable incomes, have significantly contributed to this industry's evolution and growth.
All this has put pressure to re-evaluate the security standards currently applicable to the fintech sector.
Fintech Security guidelines in India
There is a misconception among the fintech entities that RBI governs all security guidelines. However, only those Fintech come under its jurisdiction, which falls under the RBI Act, 1934.
The regulations and Fintech entities that do not fall under RBI will come under the Informational Technology Act, 2000 ("IT Act"), with more specific rules issued according to section 43A of the IT Act.
Every qualified Fintech should ensure they possess Information security procedures as mentioned below:
IT governance should be overseen by a senior member of the management, particularly the CEO or CIO. But, to build a stout security infrastructure, the sole decision should not lie on the c-suite, as security is a shared responsibility across all enterprise levels and departments.
Security efforts should get backed by stringent IT policies and procedures developed by the CISOs and their teams.
The policies and procedures should include:
1. Detail operational procedures for IT infrastructure, such as data center operations
2. Consider inter-dependencies between risk elements in the risk assessment process
3. Lay down standards for hardware or software prescribed by the proposed architecture
4. Implement appropriate measures to ensure adherence to customer privacy requirements applicable to relevant jurisdictions
Information security governance
Financial technology companies are a vital source to accelerate innovation-driven improvements. And this, in turn, presses on the need to prioritize information security governance for all Fintech firms.
A comprehensive security governance program needs to include:
1. Development and ongoing maintenance of security policies
2. Sharing of roles, responsibilities, and accountability for information security across the organization
3. Generation of meaningful metrics of security performance
4. Effective identity and access management processes
Critical Components of Information Security in Fintech
Policies and Procedures
The policies and procedures that a company adopts define its overall corporate culture and security framework. The guidelines should be well-defined after proper analysis of existing infrastructure loopholes and requirements.
The most preliminary requirement to maintain enterprise security is to comprehend the business's need to analyze risk efficiently and plan accordingly to combat the risks.
Security depends on controlling the answers to – who, where, what, and when. There has been a boom in the demand for access control solutions across enterprises. Irrespective of the company size, all access control measures' top objective is to protect the physical, IP, and human assets.
To ensure cybersecurity compliances, enterprises need to maintain design controls based on international security mandates and compliances.
Personnel and Physical Security
The productivity of all enterprises depends on its effectiveness in having the required framework and responsible people. Personnel and physical security infrastructure play the most critical role in securing all critical data of firms.
Training and Awareness
To ensure that each employee realizes their contribution to maintaining the company's cyber resilience, firms need to continuously invest in employee cybersecurity training and awareness programs.
The enterprise incident management process should be well-designed to promptly restore normal service operations to the enterprises in case of any breach. By focusing on developing a robust incident management program, the company needs to mitigate the adverse impact of outages to maintain the optimal service quality level.
Data encryption plays an integral part in ensuring cybersecurity. It helps companies maintain a proactive defense against cyber attacks and breaches and allows businesses to meet the industry regulatory compliances like HIPAA, PCI DSS, and EI3PA, among others.
When it comes to data security, enterprises need to focus on striking an optimum balance between security and productivity.
The prerequisite for achieving the required level of enterprise security is effectively assessing the firm's underlying vulnerabilities in business operations.
Ongoing security monitoring process
Developing stringent security policies and training employees will never suffice. The main key to successful security maintenance is a robust ongoing cybersecurity monitoring process to check whether the set requirements are being adhered.
Patch management is the most commonly ignored security topic that does play an immensely crucial role in maintaining the enterprise security plan. Patch management is the process of handling all the company updates on information systems, including routers, servers, operating systems, firewalls, and anti-viruses.
With the continuously evolving market dynamics, change management is one of the most current topics that enterprises need to prioritize and maintain.
Regular auditing also has a pivotal part to play when it comes to enforcing the cybersecurity mandates across enterprises.
Network security is crucial to prevent accidental damage or malicious use to the network's private data, users, and devices, focusing on keeping the system up and running safely for all legitimate users.
With business moving to the new normal of remote working, remote access control forms the backbone of seamless business operations.
The wireless networks have forced firms to completely reimagine enterprises' network and device security to prevent attacks or misuse that exposed critical assets and confidential data.
As the fintech industry continues to mushroom by leaps and bounds, cybersecurity has become a pivotal concern for the c-suite.
It is not hard to foresee the damage a single cybersecurity breach can cause to the business!
Security architectures at fintech organizations need to consider new trends, cybersecurity laws in India, and the exponential growth of the industry which has brought about larger security threats. Looking at the future, security and data privacy will play a key role in winning over consumer confidence and catalyzing innovations and the development of fintech.
1. Which laws govern Fintech?
Fintech that come under the RBI jurisdiction are governed by the RBI Act, 1934.
Fintech that do not fall under RBI come under the Informational Technology Act, 2000 ("IT Act"), with more specific rules issued according to section 43A of the IT Act.
2. What is the biggest risk of data being breached in Fintech?
Currently, the biggest challenge in protecting data lies in mobile banking services. Personally identifiable information, financial, and health information are greatly exposed to third parties.
3. What is the most easily missed security parameter for Fintech?
Patch management plays a crucial role in maintaining the enterprise security plan but often goes ignored. It involves handling all the company updates on information systems, including servers, routers, operating systems, firewalls, anti-viruses.
4. Who is responsible for enterprise IT governance?
IT governance should be handled by a senior member of the management, particularly the CEO or CIO. However, security is a shared responsibility across all enterprise levels and departments.