A sharp fall in the banking sector with Yes Bank being the most recent one taking the hit for non-repayment of loans, the UPI applications associated are also worrisome. PhonePe that was dependent on YES Bank as a partner faced a complete shutdown when the bank was taken into moratorium by the Government. Another conflicted bank, Punjab and Maharashtra Co-operation Bank (PMC) also faced similar issues of fraud committed by the bank’s management which led to a cap on withdrawal amounts.
Read: YES Bank Crisis: PhonePe Comes To A Halt, But Numbers Are Normal Again!
The fintech industry has been one that handles exceedingly huge amounts of data. The customer data directly attaches itself to account details of a customer which makes it easy prey for cybercriminals. As per a report by EY Fintech Adoption Index- Germany’s findings, only 1.8% of people chose ‘trust’ as a reason to opt for fintech services. Unlike traditional banks, fintech is entirely digitized with minimal human interaction.
There is heavy backing to customers by regulatory bodies to take action against fintech frauds and cybercriminals. For India, that body is the Reserve Bank of India. There are a couple of regulations that keep the fintech sector on their toes when it comes to maintaining data security. Most of them move to technology for help.
How do fintech companies ensure safety?
While some companies may not take the extra effort in ensuring the security of data, there are many that include advanced technology in their systems to ensure optimal safety. Most financial institutions now do a Know Your Customer (KYC) checks to avoid identity theft, deploy a two-factor authentication which double-checks your security with OTP along with password and biometric verification to prevent fraud.
“The most likely issue with fintechs as guardians of your money, or providers of mission-critical services – is the “fin” part, not the “tech” part. Whilst the skills needed to build secure and distributed systems are not two-a-penny, the know-how is well established and it is reasonably straightforward to design and implement secure environments. These days, most of what is needed for a secure environment can be embedded simply from the services provided by Microsoft Azure,” says Tim Nicolle, Founder, and CEO of PrimaDollar
The kind of security measures an organization chooses really depends on the nature of work. “Different platforms employ different mechanisms to ensure safety depending on the nature of the business or services offered,” pointed out by Harsh Jain, COO, and Founder, Groww
Data, however, is a common soft spot for every type of fintech business since all their services hover around it. To tackle this, most fintech companies are moving to blockchain technology or distributed ledger which makes the entire process more decentralised rather than highly regulated.
What are some fintech companies’ security measures?
PrimaDollar is a fintech company that connects capital markets investors and credit insurers to importers and exporters via the adoption of their simple, transactional trade finance product.
The founder of PrimaDollar, Tim Nicolle believes that any kind of ‘financial’ business should be run by experienced people and he points out that there is a self-evident culture clash between 20-somethings building great tech, and 50-somethings who know what they are doing. Hence, for the security and success of the company, they should look for partners that come with the right mix of experience and innovation.
Another company would be Groww, an app-based investment platform that is designed to understand millennials with its advanced UI and UX. When asked about their security measures, this was the response-
“We have very stringent checks in place to ensure your data and money are safe during the entire investment journey. All personal information is stored using 256-bit encryption and we do regular vulnerability scans to leave no room for error. At no given point of time do we handle your money directly. Groww is an intermediary and all transactions, be it investing or redemption of investments are routed through BSE,” By Mr. Harsh Jain, Co-founder, and COO, Groww
Summing Up…
As per a report by NASSCOM, the fintech sector is expected to grow twice from $1.2 billion to $2.4 billion in 2020. The reason for this growth in deeper smartphone penetration, an increase in customer expectations and a shift towards e-commerce. With expected growth, one can also expect a higher level of security in fintech companies.