Cybersecurity in Fintech: Challenges and prospects
Financial service providers are prime targets for criminals as the financial technology (fintech) sector continues to expand. According to Global FinTech Market 2021, the sector was valued at $7.3bn in 2020 and is projected to grow at a CAGR of 26.87%, reaching $31.5bn by 2026.
Data from IBM Security research showed that finance and insurance topped the list of industries attacked by criminals in 2020. Cybersecurity is key to protecting information.
Craig Goodwin, founder of global cybersecurity firm Cyvatar.ai, told Capital.com more about the importance of cybersecurity, identified the biggest financial cyber risks in the financial sector.
Importance of financial cybersecurity
IBM highlighted that the threat of reputational loss due to sensitive data being leaked has the potential to cause significant damage to a business and its customers, which could lead to legal cases and hefty regulatory fines in addition to the costs of a lengthy recovery.
Experts at Deloitte pointed out that financial crime remains a trillion dollar issue, despite significant investment in detection, prevention and deterrence capabilities.
“Criminals are becoming increasingly sophisticated in their use of technology to perpetrate financial crime, finding and exploiting loopholes in our financial system and leveraging emerging technologies such as new payment platforms and cryptocurrencies to conduct complex, multi-layered transactions that are increasingly difficult to detect and trace,” the consultancy firm said.
Identifying the top fintech trends in 2021, consultants KPMG found that the importance of cyber security is crucial.
Speaking of fintech and cybersecurity, Goodwin added: “As a cybersecurity professional, I will always say that cyber is important for any business but I think the financial services sector is where it really hits home. It is genuine money in people’s pockets ….it is taking money out of people’s pockets… that everyone will feel.”
Cybersecurity in fintech: Top trends
Goodwin also highlighted some key cyber threats based on requests from clients within the fintech cybersecurity sector.
Goodwin said financial related scams like SMS texts are another common cyber threat with more and more of his customers reporting such scams.
IBM’s X-Force Threat Intelligence Index 2021 noted that ransomware attacks are the number one threat, representing 23% of security events:
The top two ransomware types observed by IBM’s X-Force in 2020 included Sodinokibi and Nefilim – both blended data theft with ransomware attacks.
“Additional ransomware types frequently seen by X-Force were RagnarLocker (7%), Netwalker (7%), Maze (7%), Ryuk (7%) and EKANS (4%), while the remaining 42% of ransomware attacks were comprised of small samples of other types such as Egregor, CLOP, Medusa and others,” IBM said.
The report highlighted that data theft had increased 160% since 2019, and server access had increased 233%. It also said that nearly 36% of server access attacks observed in 2020 targeted the finance and insurance sector.
Data from IBM Security research showed that finance and insurance topped the list of industries attacked by criminals in 2020. Cybersecurity is key to protecting information.
Biggest challenges and prospects of cybersecurity solutions
When it comes challenges, Goodwin explained that financial services are prime targets because real money is there:
“It is not just traditional approaches to take personal data, with financial services there’s things like fraud or extortion that allow you to get more bang for your buck if you are a cyber attacker or hacker.
“In the early days, it was really easy to see the reputational damage associated with that. Or the other flip side was that the hackers got incredible notoriety as a result of hacking or getting access or monetary gains from well known financial institutions. On top of that, you have nation states too targeting financial operations for political reasons and commercial espionage reasons.”
Goodwin said the explosion in digitalisation of financial institutions in the last few years has amplified the issue.
He also explained that it’s hard for those trying to protect institutions to keep up with the tools used to carry out hacking attacks. This puts financial institutions on the back foot. They having to spend a lot of money to protect themselves.
Goodwin said that the ability to have solutions based on outcomes is really important:
Investing in cybersecurity: Top IT security stocks by market cap
On the day of writing (15 February 2022), the five largest cybersecurity stocks by market capitalisation included Palo Alto (PANW), Fortinet (FTNT), CrowdStrike (CRWO), Zscaler (ZS) and Cloudflare (NET) according to CompaniesMarketCap.
US-based Palo Alto Networks (PANW) topped the list with a market capitalisation of 51.40bn and a share price of $521.02.
Following Palo Alto was another US company, Fortinet (FTNT). It had a market cap of $50.74bn and share price of $310.35.
Also in the top five cybersecurity stocks was CrowdStrike (CRWD), with a market cap of $41.41bn; cloud-based information security company Zscaler (ZS), with a market cap of $38.44bn; and Cloudflare (NET), with a market cap of $34.16bn.
All the five IT security stocks reached peaks in 2021. The retracement at the beginning of 2022 could be attributed to broader pressure on tech stocks amid rising inflation and growing yields for long-term treasury notes.
Cybersecurity market growth
The global cybersecurity market is anticipated to reach $366.10bn by 2028, according to the Cyber Security Market 2021-2028 report.
In the shorter-term, Statista said revenue in the cybersecurity market is projected to reach $146,324m in 2022, with IT Services as the largest segment, worth an estimated $69,624m in 2022.
Statista also noted that the average spend per employee in the cybersecurity market is projected to reach $42.52 this year. It noted that most revenue will be generated in the United States ($58,650m in 2022).
Fortune Business Insights also noted a report by the European Cybersecurity Organisation, highlighting that the UK government invested nearly $2.30bn in internet and network security projects for defence and research in 2020.
The market research company also noted how the demand for internet security solutions had risen astronomically in the manufacturing, government, and healthcare sectors during the Covid-19 pandemic, bolstering growth.
Despite the growing number of cyber attacks, which trigger demand for cybersecurity solutions, you should perform your own due diligence before making a decision to invest in any cybersecurity stock.
It’s important to do your own research and consider the latest market trends and cybersecurity stock news. Always remember that your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. And you should never invest more than you can afford to lose.
FAQs
What is cybersecurity in fintech?
Cisco summarised cybersecurity within fintech as: “Cybersecurity is the practice of protecting systems, networks, and programs from digital attacks. These cyberattacks are usually aimed at assessing, changing, or destroying sensitive information; extorting money from users; or interrupting normal business processes.”
Why is cybersecurity in fintech important?
Cybersecurity in fintech is key to protecting personal and company data. A growing number of businesses offer mobile banking, electronic payments systems and crypto trading, which all come with security risks.
What are the main cybersecurity threats?
Ransomware, a type of malware that prevents you from accessing your computer or the data stored on it, was noted as the number one threat type in 2020 in a report by IBM, followed by data theft. Server access was the third most common attack type in 2020, accounting for 10% of all attacks remediated. Phishing attacks are also one of the most common cybersecurity threats.
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