The FinTech industry is booming today because of developing technologies and the widespread use of mobile devices, which allow them to be applied easily and reach every person. More and more finance industry providers are coming, launching their products and services to cover emerging opportunities rapidly. In contrast, old finance providers might face additional challenges in adapting to new realities.

Protecting valuable data from sophisticated hackers is crucial to ensure the safety and integrity of financial information.

Old providers are still superior to new ones because they already have established business processes and technical environments and comply with industry standards. New providers have a chance that old ones don’t—to build processes and infrastructure from scratch using the latest and brightest solutions without additional financial and human resources on the legacy elements. 

However, both operate with sensitive financial information, with additional information security and data privacy regulatory compliance requirements that they must adhere to. So, financial data security policies and controls need to be the most advanced and effective for both to stand against the increasing number of cyber-attacks and evolving cyber-attack techniques. This includes developing a robust access management strategy tailored to the actual risks and threats and building cybersecurity architecture using the latest but trusted technologies to protect critical assets.

Understand Financial Institutions Security Challenges

All FinTech security challenges are connected, but when ensuring secure financial data, we can divide them into three main ones: reputational, financial, and legal. 

Reputational Losses

When a company becomes a victim of cybercriminals, it damages its reputation in many ways, taking away opportunities for sustainable development and further scalability.

Companies can lose partners’ trust and need to look for new ones who might not provide previous scalability perspectives or strategic advantages.

Also, companies can lose customers’ trust due to gaps in protection of customer data, experiencing lower revenue, which could lead to cutting research & development budgets or even operating budgets for day-to-day functioning.

Companies can leave competitive advantages in the short term, missing the best opportunities to launch new products and services or scale existing ones. Or worse, a company can leave a competitive advantage for the long term and lose an entire market segment for a long time with the uncertain chance of gaining ground again.

Financial Losses

All previous reputation losses lead to financial ones; let’s look at the most direct ones.

Talking about the numbers, we see the growth rate of cyber attacks on financial organizations. According to Statista, the financial industry is the second most targeted industry after healthcare. You can read more about this in our latest article about How PAM Enhances Telehealth Security in Healthcare.

Another Statista report shows that the number of cases of data violation due to cyber attacks is rapidly increasing yearly. We had 138 cases in 2020, 279 in 2021, 268 in 2023, and a record 744 in 2023.

These numbers can be interpreted in an obvious way: in 2021, with the AI boom, attacks have become multiples cheaper, therefore much more numerous, and, in professional hands, much more sophisticated. The financial industry was unprepared for such events, neither the large and experienced financial institutions nor startups.

Then, we see a decline in attacks in 2023 because the industry has adopted broader implementation and adjustment of classical security solutions and the integration of AI on the defense side.

However, in 2023, we will see a record 744 cases because AI development is leaps and bounds. LLMs are becoming multiples more advanced with each new version. So, it becomes even easier and cheaper to organize even more sophisticated attacks. And financial institutions need even more advanced and effective solutions to stand up to them.

According to an IBM report, the average cost for breaches of 50 million records or more is $300 million. Another Statista report shows that large companies can lose tens to hundreds of millions of financial records in a data breach, such as First American Financial Corporation in the U.S., which experienced a breach of 885 million financial and personal records. Thus, the cost of data breaches today may not even be hundreds of millions but up to billions of dollars.

In these records can be a lot of sensitive financial data, including:

• Cardholder data, such as customer identity governance, driver’s license, etc.
• Other customer account numbers and credit card numbers
• Credit rating data and other credit information, such as debt owed
• Payment card information, transaction data, and purchase history

It is crucial to protect sales data alongside other types of financial information, such as customer account numbers, credit card numbers, transaction data, purchase history, and credit information, from unauthorized access to ensure compliance with legal requirements.

That’s why, with the growing digitalization, finance institutions became even more of a prime target for bad actors. Even if we talk about small financial startups that do not operate with hundreds of millions of financial records, it is worth remembering that the approximate average cost of a single record leak is ~$6, plus the possible legal penalties.

Legal Sanctions

Official financial regulations not only help to keep security policies robust, relevant, and updated but also push to adhere to them, providing sanctions for their violations or non compliance.

General Data Protection Regulation (GDPR)

Up to €10 million or 2% of the company’s global annual revenue for less severe violations.

Up to €20 million or 4% of the company’s global annual revenue for more severe or systematic violations.

Payment Services Directive 2 (PSD2)

Up to 4% of annual revenue, depending on the type of violation.

Payment Card Industry Data Security Standard (PCI DSS)

Between $5,000 and $100,000 per month, depending on the organization’s size and the violations’ severity. 

FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA), Anti-Money Laundering (AML), and  Gramm-Leach-Bliley Act (GLBA)

FINRA, AML, and GLBA can be even more than financial but law issues. Violations of their rules can include both civil and criminal penalties, and fines can range from thousands to millions of dollars. Also, individuals involved in a violation may face criminal prosecution and imprisonment.

Top Strategies for Implementing PAM in Fintech Startups

The best access management strategy for financial startups comes down to a principle: build a strong, flexible, and effective foundation for secure systems and protect the company’s assets and customers’ sensitive data from the perspective of rapid business scaling. Of course, updating the foundation and making it more effective and advanced to protect enormous intellectual property and ensure further sustainable development is also a good practice for established, large financial institutions and enterprises.

Handling Your Security Plan

The first thing you need to ensure your access management strategy is ready to withstand evolving cybersecurity risks and threats is to develop or evaluate your security plan thoroughly. If you lack expertise or want to avoid bias, it is a good practice to seek the help of specialized security auditors, especially those with knowledge of finance, to get a reliable and objective result.

The security plan will include the following components (or be assessed in the case of an established company with an existing plan):

Security Policies. These are the main guidelines and provide your security plan’s strategic risks, scope, objectives, and limitations. To do this, you need to clearly answer the questions of what types of data we are protecting, who we are protecting them from, how we will prove it, and what resources we have to protect it. The answers to these questions depend largely on your business’s specific activities, services, products, and jurisdiction.

Security Standards. The next step is to research and select relevant standards, such as the NIST Risk Management Framework and NIST Cyber Security Framework, as well as regulators like PCI-DSS. These provide specific security principles, measures, and control requirements and serve as a blueprint for establishing security policies.

Security Procedures. Then you can move on to a specific set of potential incidents for which you should have particular steps prescribed in line with the previously defined policies and standards. All of them need to be documented with playbooks for the security team so they have a clear picture of how to detect, respond, recover, identify, and protect in different security incidents.

Handling Your Hardware and Software Security Solutions

Evaluate the system architecture and proprietary code. First, you need to evaluate your system architecture and proprietary code for vulnerabilities that could allow attackers to gain unauthorized access to data.

Evaluate physical devices, integrations, and network configuration. Also, assess the reliability of the third-party services you use in your data operations and how properly and securely they are configured on your network. You may need other hardware, such as switches, routers, Firewalls, Proxy servers, VPNs, etc., to meet your security plan and standards.

Check the cryptography. Check how strong the encryption you use for data at rest and in transit, whether encryption protocols need to be updated, and whether it meets the requirements of your chosen regulators.

Check MFA. Also, check whether you are using sufficient Multi-Factor Authorization tools, which services you are implementing them through, and whether they are properly configured in your system.

Evaluate your security monitoring solutions. Now, if the system itself is in order, you can evaluate or select the technical solutions that will implement or adjust your security controls and best align with your security plan. Among them, you may need SIEM, IPS, IDS, or PAM to detect, prevent, and analyze traffic, activity, and anomalies.

Implementing Privileged Access Management Solutions for Financial Data Security

Choosing the right PAM solution plays a crucial role in protecting data. According to the same IBM report, 48% of attacks on financial organizations start with the attackers themselves, while 33% result from human error. More specifically, phishing attacks lead the way with 16% and compromised credentials 15%.

PAM solutions provide a single place for multiple individual security access controls and often include many pre-installed security features to make implementation and configuration more manageable and smoother.

Role-based Access Management. PAM systems include features for consistent implementation of various models of access management and account management controls, including RBAC.

Tip: Fudo Security PAM solutions provide built-in capabilities to simply and reliably implement fundamental security principles such as Least Privilege, as well as privileged account management and privileged access management controls tailored to your organization’s needs and goals. 

Strong Authentication. PAM systems offer built-in identity authentication features or properly configured integrations to reduce additional risks from third-party vendors.

Tip: Fudo Security PAM solutions also offer convenient built-in features for security principles such as Zero Trust and secure authentication methods to choose from or combine for an individual user or groups of users. You will find Static passwords, Public Key, CERB, RADIUS, LDAP, Active Directory, OATH, SMS, DUO, and Certificates among them. 

Secure Remote Access. They also often provide integrated, easily customizable tools to protect data and traffic on the network when a user logs on, including secure data transfer protocols.

Tip: Fudo Security PAM solutions provide a wide range of secure remote access and a simple way to use and configure them on your network. These include TCP, HTTP, Telnet 3270, Telnet 5250, SSH, RDP, VNC, X11, Secret Checkout, Modbus MS SQL (TDS), MySQL, and LDAP Server.

Moreover, our solutions allow you to encrypt traffic on your network and conveniently set configurations with your proprietary hardware, cloud services, or Fudo security hardware for even more advanced data protection and smooth operations.

Monitoring Access Activity. PAM solutions also allow you to monitor request and access activity, identify suspicious behavior, and take proactive action regarding specific users and sessions.

Tip: Fudo Security PAM solutions have extensive capabilities to ensure that any activity on your network is immediately detected and you can take action instantly. Both regular expressions and AI-based features are available to you to detect suspicious activity and prevent unauthorized access throughout the entire user session, limit access for specific sessions, or restrict access from a particular user manually or automatically. This way, you retain complete control over actions and process transparency but are also one step ahead in detecting non-obvious and hidden patterns.

Ensuring Compliance with Financial Regulations. They also often have a built-in set of controls that are required by various standards and regulators.

Tip: Our solutions are built from the ground up with a focus on ensuring compliance with multiple industry standards such as NIST, ISO, regulatory requirements for GDPR, PCI DSS compliance, and others. You will find the already listed and many additional built-in features to easily implement and maintain the required security controls in the most effective and advanced way.