Large numbers of businesses are struggling to stay afloat following the pandemic. While some governmental support was available for certain industries, there are many that have faced too many staff losses, changes in consumer behaviour and attitude, and too many financial losses during restrictions.
The hardest hit were any that could not shift to an online service or deliverable service, so experience-based businesses, which had become increasingly popular over recent years, were devastated.
However, some sectors have seen the opposite effect; incredible growth and increased investment. Some winners are no surprise to anyone, such as online communications companies like Zoom.
Yet perhaps one of the most important growth industries of last year was FinTech. FinTech has seen a 217% increase in investment in 2021 and the sector is expected to triple in size in the next decade.
There are many reasons why the UK environment is so rosy for FinTech. It is partly down to the existing financial sector, local law, favourable regulation, industry talent etc. However, the core reason that the pandemic has been good for FinTech is because FinTech has underpinned many of the solutions that became a necessity in the pandemic.
Payment portals, contactless payments, online banking, and many of the innovative financial and technological solutions that end-users and other companies required to keep the economy going during the pandemic were made possible by smart FinTech.
FinTech will also continue to do well as we move out of the pandemic because the demand for those technologies and solutions were already there, the pandemic just sped up that demand from a want to a need.
Despite this growth and success, the FinTech industry has some considerable challenges ahead and some that have grown more complex since the pandemic.
Common Challenges Facing FinTechs
- Continued compliance with changing UK government regulations.
- International financial regulations/International expansion – International expansion can be slow due to differing financial laws in each country.
- Higher Regulatory standards than other startups – Startups are usually working with less staff and yet finance has some of the highest regulatory standards with many legal and accreditation hoops to jump through. This is a big hurdle for new startups in the industry.
- Big data and AI maintenance – Big data and AI are heralded as the future of FinTech but their maintenance is challenging and expensive.
- The talent pool – Finding the right people with the right mix of knowledge and training is a big issue for FinTech.
- Integrating blockchain technology – Blockchain can provide extra security but can be very difficult to implement.
- Lack of legal know-how in startups – Many FinTech are startups with fantastic innovations and coding knowledge, but they lack the legal knowledge necessary for financial services companies.
- Lack of necessary cross-over knowledge – FinTech requires a lot of programming knowledge, coding knowledge, sometimes engineering knowledge, financial knowledge, and legal knowledge. It can be very difficult to find the right team with the necessary know-how.
- Innovation – Constant innovation to solve new challenges and stand apart from competitors is never easy.
- Competition – With growth comes more competition.
- Tech fear – While FinTech is all about, well, tech, it is a very large sector. Strangely some older, bigger institutions can be nervous about introducing new tech as it can be such a colossal task. Banking is a key example.
- Financial challenges and infrastructure – creating and installing the required (often completely new) infrastructure for FinTech gets expensive very quickly
While all of the above is a continual concern for FinTechs, the issue that has gotten far larger is data security and cybercrime.
Why is Cybersecurity Becoming Harder For FinTechs?
It’s all about opportunity. The pandemic opened up new opportunities for FinTech to solve problems. It also opened up the opportunity for cybercriminals to exploit new weaknesses.
FinTech has always had a challenge with cybersecurity. Any digital business faces this issue and almost every business is digital in some fashion these days. Yet FinTech is especially vulnerable because:
- It deals in finance. By its very nature, it is the handling and movement of people’s money digitally. Whether it be the everyday person with online banking or big investors with peer-to-peer lending or cryptocurrency or whoever. It is dealing with access to people’s finances. It is implicitly trusted, yet bizarrely one of the most vulnerable areas. There is a target on its back when it comes to cybercriminals because the rewards are huge.
- It deals with new complex technologies. FinTech goes beyond traditional banking and often involves new and innovative technology. New can often mean vulnerable because it is untested and initially might not be compatible with existing available protections.
During the pandemic, FinTech was doing well by being agile, innovative, and solving financial and technological hurdles for people and businesses to allow them access to services.
Solutions were often new and usually accessible by people in their own homes, whether they were end-users or businesses since many were working from home. Even those working for FinTech companies were working from home on unsecured networks and unsecured machines.
This created new vulnerabilities at a time when cybercriminals were becoming more aggressive and exploitative as they were aware of this new weak environment.
What Caused The Cybersecurity Vulnerabilities?
- Ransomware – Malware that encrypts files on a machine making them inaccessible then demands money for decryption.
- Riskware – A legitimate program that poses risks to security vulnerabilities on a device.
- Spyware – Software that steals sensitive info once installed on a device.
- Virus – A malicious computer program that changes other programs by inserting its own code.
- Scareware – Encourages people to download malicious apps via scare tactics.
- Phishing – Manipulates people into leaking sensitive data via fraudulent emails.
- Data breach – Leaking sensitive info. It can often be caused intentionally or unintentionally by human error. This is one of the biggest issues for FinTech as it is the hardest to guard against, particularly in the pandemic when staff were using their own vulnerable devices at home.
- Cloud computing vulnerabilities – More and more systems use cloud computing which is public-facing. While it has excellent ease of use for customers, it makes it easier to hack.
- DOS – A targeted attack against a computer system, server, or network so that client cannot use the services.
- DDOS – A lethal targeted attack involving multiple attackers and multiple compromised systems.
There are more malware concerns even than this selection. Data breach is one of the most common and hardest to solve. It grew worse during the pandemic due to the lack of monitoring of home workers and the use of end-user machines with many vulnerabilities.
What Can Solve The Problem Of FinTech Cybersecurity?
- The right devices. FinTech firms must use the latest, up to date hardware with inbuilt security measures at business-standard. Both Apple and PC manufacturers have been developing more secure devices aimed at business level users. Apple’s M1 devices are renowned for being particularly secure. Hardsoft has been working with the leading computer equipment manufacturers for decades and has many FinTech clients. This puts us in the right place to recommend the most secure devices.
- FinTech level security software. Naturally secure devices are not enough. Hardsoft also partners with Sophos, Semantic DLP, Jamf Protect and the best security software companies to ensure FinTech hardware is set up with all the additional security they need to stay safe. We are registered with the Financial Conduct Authority and have experts in Data Leak Protection.
- Specialist solutions. With new FinTech innovation comes the need for specialist security solutions. Our solutions engineers can work with you to develop better protection for your specific needs. Hardsoft is also a registered member of the Apple Consultancy Network. With our in-house solutions engineers and Apple engineers, we can work together to find the right solution for you.