The financial technology or Fintech market is expanding with new, innovative businesses improving banking and financial services like never before. According to the Market Data Forecast, by the year 2026, the fintech market will reach a market value of $324 billion at a compound annual growth rate of 23.41%.
As the industry continues to grow steadily, the fraudsters are also evolving at the same speed, making it difficult for financial institutions to implement the best tools and protect their company and customers.
Digital Trust and Safety on Fintech Platform
Due to the financial institutions not implementing tools quickly, customers remain skeptical.
As reported in the BIS survey of May 2021, US households state they trust traditional banking institutions more than Fintech to protect their data. Hence, it becomes essential for the FinTech industry to bridge the trust gap and secure people’s data.
Trust: FinTech’s Undeniable Asset
Thinking of Fintech, technologies like Big data, digital ID, and open banking are the first things that come to mind. These tools facilitate new opportunities for digital transformation in the financial sector. But getting people to try out the products designed using these innovations in Fintech requires their trust.
Besides, the trust gap can occur at any level in the digital banking ecosystem, i.e., between users and platform, platform and sectors, or sectors and tech providers. However, and as from the stat mentioned above, it is clear that consumers trust traditional banking more than fintech institutions, making it essential to approach Fintech solutions holistically.
Designing Your Solution in Fintech
Before designing a solution for your Fintech business, you must understand whether the user experience you are offering resonates with people on a rational and emotional level. If the fintech product you provide is meaningful, then how you ensure credibility and functionality, added by your technology partner, will signal trust.
To merge trust into Fintech products, each stage of product development, such as user experience, critical feature development, business analysis, etc., should have a trusted foundation.
Risks in Fintech for Consumers
There are many dangers for customers in the fintech industry. These dangers can be broadly be divided into compromised data security, and the use of non-transparent data to both regulators and consumers.
Undeniable is the loss of privacy, rising fraud and scam risks, discriminatory uses of data analytics, and consumer behavior manipulation.
These situations risk entering the financial regulatory space with bare minimum operational knowledge.
One of the significant risks for consumers will be privacy and data security loss.
The loss of privacy and data security are intertwined and lead to different concerns based on the data that is being accessed and how sensitive the information is.
Banks are already at the risk of data breaches due to siloed IT systems.
The growth of these activities created the phase of “Crime as a Service” that playoff technology built based on SaaS.
Talking about risks in Fintech, apart from cyber-insecurity, some vulnerable consumers have also encountered fraud and scam risks. And the rate of online scams and fraud is increasing day by day and creating fake identities online—currently, fake I.Ds are much easier to do online than build your own real-life identity.
So what are the ways to gain consumers’ trust while providing safety on fintech platforms? Let’s find out.
Ways to Achieve Trust and Safety on Fintech Platform
Despite being the center of cyber criminals’ attention, the fintech industry has strongly opposed it. With the help of the new tools and technologies, Fintech organizations are working towards creating trustworthy foundations for their customers and indulging safety on the platform.
AI Fraud Detection
Artificial Intelligence or AI is a broad range branch of information technology that aims to build smart machines to perform tasks that usually require human intelligence.
For example, in the Fintech industry, AI collects data, analyzes information, secures and facilitates transactions.
The comprehensive purpose of uses that AI has includes customer support, credit risk assessment, decision making, and most importantly, fraud detection.
Blockchain in Supply Chain: A Transparent Prospect for Products
AI and ML systems analyze customer and business data to help the Fintech industry flag vulnerabilities and rank client risks.
As AI can analyze a large volume of transactions, it can be used to reject or flag transactions altogether for further investigation. In addition, an ML model can be used to predict behavior at a granular level across all aspects of a transaction to predict any fraudulent activity.
That’s why FinTech leaders like Visa are advancing towards AI and machine learning strategies to foresee and control financial frauds.
Failing to prioritize cybersecurity within the Fintech space can create critical risks. To build more robust cybersecurity, Fintech organizations should know their assets and implement a layered security strategy so that if one protocol fails, it doesn’t affect other protocols.
To achieve this, one can leverage cloud solutions, multi-factor authentications, and IAM (Identity and Access Management).
Blockchain is a digitally decentralized and distributed ledger that exists across a network. It is a series of immutable blocks. Blockchain distributes transactions across different blocks or nodes that cannot be altered.
Any unauthorized access will change the hash links and create a mismatch between the nodes, making the Blockchain highly secured. Blockchain protects the data of a fintech organization and offers an additional bonus for them.
The decentralized nature of blockchain networks eliminates the costly, unnecessary workflows and processes. Needless to say, Blockchain can restrain data breaches or any other fraudulent activities from reducing fraud and cyber-attacks in fintech services.
Regtech or Regulatory Technology helps financial institutions to comply with regulatory requirements effectively. It relies on AI and ML to automate routine tasks like fraud and risk management, regulations reframing, real-time reporting, data analytics, and decision making.
This technology aims to ensure that Fintech remains compliant with the regulations. Regtech works by automating regulatory changes, monitoring transactions, generating reports, and sending alerts to the compliance staff about potentially fraudulent transactions.
Some of the critical characteristics of RegTech are speed, agility, integration, and analytics.
Secure Access Service Edge (SASE) is a network architecture that converts SD-WAN into cloud service. Put simply, SASE combines the pros of software-defined wide-area networking (SD-WAN) with security to deliver them as a facility.
For fintech organizations, SASE simplifies authentication, increases scalability, supports zero-trust networking, security convergence, and simplified management.
In short, using SASE in the fintech industry can increase the security of their cloud-based infrastructure application and prevent unauthorized access or abuse of the customer’s sensitive data.
Another important factor while developing fintech applications is testing throughout the development cycle.
To test the application security, you will need to build a security testing team that can come up with realistic scenarios of data breaches or other scams and improve the application’s security.
The fintech security testing team will also run penetration tests to detect the potential vulnerabilities and perform a security audit to detect flaws, verify the effectiveness of security measures, and evaluate regulatory compliance.
Fintech can be made safer by keeping an eye on circumstances driving its adoption, breaking free from outdated security transactions that don’t fit its current direction, and taking a new approach to data security by being transparent.
If we learn suitable lessons, commerce, trust, and the digital economy will be even more resilient and trustworthy.
Analyzing user behavior to defeat fraud for Fintech or similar platforms becomes essential for the service in a crowded market. Therefore, it should be stated as transparently as possible for customers’ awareness and consideration.
The Challenges of a Fintech Industrialist
To overcome the challenges of Fintech industrialists, you can use security trends like Machine Learning and AI for faster fraud detection. In addition, use Blockchain to keep data transparent yet secured.
Don’t forget IoT for smarter cybersecurity to develop safe and reliable Fintech products and solutions.
Only after integrating these technologies for security will the Fintech industry show its true potential across the marketplace and win the trust of its customers.
This UrIoTNews article is syndicated fromReadWrite