We’ve witnessed an increase in attacks against fintech companies in 2022. At the same time, startups are often easy targets for hackers. For that reason, following cybersecurity compliance for fintech companies is a must. So, what’s the best way to tackle cybersecurity compliance in 2023?

Cybersecurity compliance requires learning the rules and regulations of the places you want to do business with. Knowing about the issues companies face, such as ransomware and insider threats, is essential. A cybersecurity policy includes doing regular training and researching regulatory updates.

Compliance and cybersecurity are two things that often overlap – and have equal importance for companies that want to survive without having issues with law enforcement or criminals. Learning about cybersecurity, compliance, and policies (in that order) is a must.

Why Is Cybersecurity a Must for Fintech and Startups?

Fintech companies and tech startups handle a lot of sensitive data from users. From personal information to banking information and everything in between, these companies have to make an effort to avoid threat actors from penetrating their defenses.

Investing money in cybersecurity often accomplishes that goal.

Of course, having the strongest cyber defense in the world doesn’t solve all your problems. You’ll keep criminals at bay by doing that – but you also have to take care of the opposite side of the aisle, law enforcement and regulatory bodies. You do so by complying with their norms.

How Does Compliance Play a Part in Cybersecurity?

You’ll have to comply with different rules on regulations depending on where your company resides and where it does business. For example, residing in the United Kingdom and doing business with Japan forces you to listen to different regulatory bodies and policies.

Most of these regulatory bodies often deal with cybersecurity. Since fintech companies and tech startups handle a lot of data, government agencies have to ensure these businesses are not playing fast and loose with their citizens’ information.

Learning about the main rules and regulatory bodies around the world will help you understand who you have to talk to if you want to avoid legal trouble.

Easy Roadmap to Fintech Compliance

• APPI. The Act on the Protection of Personal Information applies to vendors who handle the data of Japanese residents. It’s extraterritorial regulation (similar to GDPR listed below) that only applies to your fintech company if you’re doing business with Japan from overseas.
• EIDAS. The Electronic Identification and Trust Services comes from the European Union and rules over electronic transactions that happen across multiple borders. It provides a common framework for secure transactions among fintech companies, users, and government agencies.
• FCA. The Financial Conduct Authority ensures consumer protection and market integrity in the United Kingdom. Companies that want to do business in the United Kingdom have to register under the FCA.
• GPG13. The Good Practice Guide is another British framework that rules over outsourcing companies and service providers working with/for the government. It focuses on cybersecurity and intrusion detection systems.
• GDPR. The General Data Protection Regulation is one of the most important regulations in the European Union. It deals with the information of EU residents – but isn’t limited to the European Union alone: anyone who plans to do business with most of Western Europe has to comply.
• PCI DSS. The Payment Card Industry has a Data Security Standard that applies to anyone working with credit card information. Do you take Visa or AMEX? You probably have to comply with this standard.
• PIPA. Those who want to do business in South Korea have to abide by the Personal Information Protection Act. It regulates the private data security of private and governmental organizations. Disregarding PIPA often results in severe fines and criminal liability.
• PSD2. The second installment of the Payment Services Directive rules over electronic payments in the European Union. More often than not, this regulation and GDPR overlap.
• ISO/IEC 27001. One of the biggest standards for information security. It has frameworks and policies organizations should follow all over the world to protect data. It tackles access control, clear screen, cryptography, and more.

4 Common Security Issues for Fintechs and Startups

1. Forever Catching Up to New Regulations

We’re living in a fast-paced world – and those working in financial and technology markets live at a faster pace than most. That’s why companies often fall behind when complying with rules and regulations.

However, that’s no excuse. You have to make an effort to be aware of the latest compliance updates so you know how to defend your company and steer clear of having trouble with the law.

Doing so has its rewards, though you won’t be able to reap any if you’re not making an effort to protect your customer data.

2. Not Defending Customer Data Properly

There are one too many ways to leave customer data unprotected: untrained employees falling for phishing scams, having your network infected with malware, using faulty APIs as a part of your ecosystem, and more.

Threat actors know countless ways to infiltrate your company and exploit vulnerabilities. There’s no need to make their job easier. In fact, you have to do everything you can to defend yourself – and your users.

Proper cybersecurity compliance helps you achieve that goal. Doing so takes time – so you can’t rush it.

3. Wanting To Be the First on the Market

Fintech companies often feel like they’re in a race to be the first on the market. It’s no mystery why that happens: whoever gets there first often takes a bigger market share and a larger profit.

For that reason, these companies scramble to set the stage and take action before their competitors. Unfortunately, that puts you in the dangerous position of releasing buggy software ridden with vulnerabilities.

In other words, you’ll be the first to release your product – and the first to fall after a cyberattack.

4. Being Under Cyber Siege

Threat actors know fintech companies and tech startups have a lot of valuable data they could sell to the highest bidder. They also know these companies protect their users’ money.

In other words, these businesses have a target on their backs. It should come as no surprise fintech companies see an increase in attacks every year.

Fortunately, the situation is far from hopeless. Following compliance guidelines and structuring your cybersecurity the right way is the key to fending off any attacks.

Knowing what hackers will try to do to attack your company is a must.

5 Cybersecurity Issues Startups and Fintechs Face

1. Data Breaches

Data breaches are devastating blows for companies of any kind. However, fintech companies are often extremely vulnerable to this problem – because they handle too much sensitive banking information in a fast-paced tech environment, a place where vulnerabilities thrive.

The worst fintech data breaches taught us companies must encrypt their data, scan for malware, and train their employees. Unfortunately, many of them overlook these guidelines and fall complacent after a while, making them susceptible to all sorts of attacks, such as ransomware.

2. Ransomware

A data breach happens when a threat actor leaks information to those who are unauthorized to access it – but what happens when they do the opposite? Hackers can infect your network with malware and hold your data hostage until you pay them.

Studies show hackers are more aggressive than ever before: they band together in cartels and join forces to attack companies. In fact, more than 70% of companies in the financial sector face one ransomware attack per year.

If a threat actor is successful, they’ll lock you out of your system until you pay. Of course, that’s not the only issue your company could face.

3. Phishing Attempts

Untrained employees often fall for sophisticated phishing attempts, though that doesn’t stop hackers from trying every trick in the book.

A phishing attempt is simple to understand: a threat actor impersonates an authority figure to try to steal login credentials or critical information from a user.

Silly phishing attempts include the Nigerian Prince scam (someone pretends to be an imprisoned prince from a faraway land and asks for money to be released from prison, offering a hefty sum in return).

More sophisticated phishing attempts include threat actors gathering information via social engineering to impersonate CEOs or managers from the company they target to trick employees.

4. Insider Threats

Sometimes, employees don’t fall for a trap but set them instead. Insider threats could happen in two ways: first, a disgruntled employee harms the company from within; second, a hacker compromises an employee and forces them to do damage.

In the first scenario, someone will abuse their access and authorization levels to steal money or information from the company that hired them.

In the second scenario, a hacker compromises an employee to give away company money or information. It could happen willingly (via extortion) or unwillingly (by compromising their device with malware).

5. Faulty Compliance

Employees are not the only ones who could create issues willingly or otherwise. Those in charge of a company have to draft their cybersecurity policy and work on updating it as need be.

Unfortunately, some decide to become complacent and forget about compliance. In those scenarios, companies are susceptible to attacks and lawsuits.

As soon as you forget about cybersecurity compliance, you become lax in your cyber defense – having law enforcement and threat actors put a target on your back as a consequence.

How To Implement a Compliant Cybersecurity Policy

1. Know Your Compliance

Government agencies don’t want companies to comply with rules and regulations because they have nothing better to do. These rules and regulations help companies streamline their defensive efforts, making it easier to deal with cyber criminals – and protect citizens.

Taking the time to understand compliance and what it entails is a must for that reason. It’ll help you stop criminals in their tracks and, at the same time, avoid having trouble with the law.

Doing so also keeps your users away from trouble – and showing you’re compliant with rules and regulations often drives up your customer base.

2. Build Walls Around Customer Data

You’ll have more data to protect as your customer base grows. That’s a double-edged sword: you make more money – but are more susceptible to costly data breaches if you don’t play your cards right.

For that reason, building up your infrastructure the right way is a must. Having the latest software and hardware running is not only optimal but necessary for cybersecurity reasons: having better defenses today translates to dealing with less trouble later.

3. Test Your Security

Would you bet your entire company on your infrastructure and cybersecurity? You do that every day! For that reason, walking the extra mile and testing your cyber defenses isn’t a bad idea.

How can you do that? Hire a penetration tester to poke around your defenses. They’ll tell you what they find later on. More likely than not, you have a few vulnerabilities you must fix.

You can’t do one pen test today and feel invincible for the rest of your life. New attacks and exploits come up all the time, making routine penetration testing a necessary part of cybersecurity.

4. Educate Your Employees

Your cybersecurity efforts have two pillars: infrastructure and employees.

Having a strong infrastructure is easy. You have to update software and hardware to accomplish that goal. Scanning for vulnerabilities often seals the deal.

However, ensuring your employees are not a weak link isn’t that easy. You have to make cybersecurity training a part of their yearly routine – unless you want them to compromise your network sooner rather than later.

A strong infrastructure plus trained employees create a fortress around your data – and keeps your company safe from attacks.

5. Re-evaluate and Update Your Policy

Cybersecurity and compliance are far from a one-and-done kind of deal. It’s something you have to work on all the time. Threat actors come up with new attacks all the time. In response, government agencies release new regulations.

For example, the last couple of years had an increase in employees working from home, showing how unprepared people were to take cybersecurity into their own hands (and homes).

Government agencies scrambled to create new strategies for companies to use, so they could better protect their employees. You have to be ready to re-evaluate your policy and update it as time goes on.

Can You Wait Until You Implement a Cybersecurity Policy?

Your company must have a cybersecurity policy drafted and ready to go before you hit the market. If you’re branching out to new countries, you need to take the time to research those areas and their regulatory agencies, so you can update your policy accordingly.

Compliance isn’t something to take lightly, especially when we’re talking about cybersecurity and finances. Disregarding cybersecurity could end up in a data breach that may cost millions in damages. Disregarding rules and regulations often results in costly fines.

Taking the time to set up your cybersecurity compliance policy is always the safest bet.

Conclusion

We at U.S. Cybersecurity realize compliance is about being up to date with the latest regulatory trends as well as knowing the latest attacks your company could face. Making an effort to keep data protected is a must, as is training employees to avoid possible breaches. Routine penetration tests also help avoid issues. Please reach out to us if you need any assistance.