November 5, 2021

What is FINTECH and how does it work

Fintech is one of the most fastest growing industries leaving many to ask what is fintech and how does it work? The technology is amazing, and the security measures are even more impressive.

Fintech in simple terms is software and other modern technologies used by organizations that provide automated secure financial services.

In comparison to traditional banks, FinTech startups are more flexible and faster when it comes to implement new financial technology services based on the ever-changing demands of the world market.

Fintech is becoming a broad term as it now includes everything from mobile banking, insurance, cryptocurrency, and many different investment applications for organizations and users.

According to CB Insights, 41 Venture Capital (VC) fintech companies have a combined $154.1 billion. CB Insights is an industry leading market intelligence platform that analyzes millions of data points to give real-time information on startups.

The major driving factor behind this is that many traditional banks are proactive supporters of Fintech technology. They are investing, acquiring, and partnering with industry leaders such as fintech startups. This opens up the market to digitally-minded clients while keeping them relevant in the financial sector.

What is a FINTECH company?

Fintech companies integrate the latest technology including blockchain, Artificial Intelligence (AI), data mining, and data science into traditional financial sectors. This makes them safer, faster, secure, and more efficient. Fintech is one of the fastest-growing tech sectors as they are innovating area of finance including payments, loans, credit scoring, and stock trading.

How does FINTECH work?

Fintech is not a new industry, but it has evolved quickly by enabling technology for the financial world. This varies depending on the application of the technology and services. This includes utilizing machine learning algorithms, blockchain, data mining, and data science to handle everything from process credit risks to run hedge funds.

What is an example of FINTECH?

FinTech come from a combination of the words “financial” and “technology” and it applies to emerging technology that helps consumers or financial institutions deliver financial services using new methods that are faster and more secure than traditionally available. A good example of fintech is the old method of walking into a bank to request your balance versus the ability to pull up that information in real-time on your phone.

Fintech includes everything from the ability to go online and see their financial transactions to apps that allow you to pay friends. It also includes financial tools that allow financial institutions to make lending decisions or give investors the ability to do their own research, select stocks, or review their portfolio performance in real time.

What are examples of FINTECH?

What are FINTECH Technologies?

FINTECH Artificial Intelligence (AI)

FINTECH uses artificial intelligence (AI) including machine learning (ML) as some to the most popular technologies as they offer as much larger landscape for advancements in the finance industry as developments continue. Some of the fintech applications include credit scoring, fraud detection, regulatory compliance, and wealth management.

FINTECH Big Data and Data Analytics

FINTECH big data and data analytics allow large datasets including consumer preferences, spending habits, and investment behavior to be extracted and used to develop predictive analytics. The big data and data analytics helps formulating financial strategies for marketing and fraud detection algorithms.

FINTECH Robotic Process Automation (RPA)

FINTECH robotic process automation (RPA) is the financial process of assigning manual and repetitive tasks to robotics to streamline workflows in financial institutions including:

Statistics and data collection
Regulatory compliance management
Communication and marketing
Transaction management

FINTECH Blockchain

FINTECH blockchain technology is being adopted in the financial industry due to its capability to securely store transaction records and other sensitive financial data. Every transaction is encrypted to reduce the chances of a successful cyberattack as it is the backbone of many cryptocurrencies.

What is the difference between FINTECH and traditional banking?

Traditional banking is focused on the interests of their shareholders while FINTECH promotes the needs of its end user. According to a recent Business Insider survey, 89 percent said they used mobile banking while millennials are at 97 percent.

FINTECH has gained a lot of market recognition in the financial services sectors including payments, lending, investment, insurance and real estate. In the United States, FINTECH services offered payment processing for online retailers valued at $22.5 billion, $8 billion in cryptocurrency exchange services, and $4 billion in personal finance services such as credit scores.

What cyber security risks for FINTECH?

The FINTECH industry is growing at a rapid pace and disrupting the financial sector with new technology and billions in investment globally.

These FINTECH technology-led financial services are increasing transparency and efficiency by reducing costs of services as well as providing the most vulnerable access to financial products and services. These FINTECH organizations have a unique combination of cyber security exposures that need to be proactively handled.

What is FINTECH Managed IT Services?

All organizations need proactive IT support and IT management however FINTECH managed IT services have to proactively work to ensure their clients have reduced their risks. With the proper FINTECH managed IT services, organizations will be able to increase productivity with the right technology that aligns to their business goals.

Your managed IT services provider will ensure that nothing goes wrong and ensure nothing grinds to a halt. This is where the benefit of FINTECH managed IT services works to help organizations. The goal of the managed IT services provider is to proactively provide a safe, secure, IT environment supported by a real world knowledgeable technical support staff that can focus on the issue and maximize your organizations potential.

The goal is to eliminate the stress that poor IT service and support with 24/7 monitoring, cyber security, disaster recovery, cloud services, and business-continuity solutions tailored to your business.

Our managed IT services team will help your regulatory environment with the introduction of new technology, new products, and new opportunities that will exceed new regulatory exposures and requirements. FINTECH companies are faced with the constant battle to ensure they keep on top of the IT implementation of suitable and satisfactory risk management systems.

As the FINTECH industry evolves rapidly, so will the regulatory environment and regulatory requirement. These FINTECH companies will be faced with trying to keep pace with the regulations and the latest updates.

What Cyber Security is needed for a FINTECH company?

Given the nature of FINTECH operations, they are top level targets for cyber criminals. Ransomware, network security, data breaches, and denial-of-service attack (DoS attack) should be a major concern for FINTECH companies.

FINTECH companies are based on innovative technology as it is an essential part of the business. Innovative technology is the way that they have disrupted traditional financial services but it is also their biggest vulnerability. If they experience technology failure, it can affect customers as they will not be able to access services resulting in lost income, loss of reputation, and lost customers.

Since FINTECH is an emerging market segment, they are likely not able to address all of their exposures in a single policy. Traditional financial institutions policies do not cover liability. This can include technology failure, contractor liability, or even intellectual property (IP) infringement. Policies related to technology are not likely to cover exposures from the provision of financial services products or advice.

FINTECH organizations need dedicated policies to manage their evolving cyber security risks so they can provide coverage for liability arising from financial and technology services, as well as management liability for possible theft of funds.

What Are the Hidden Cybersecurity Risks for Fintech?

FIINTECH services organizations have helped improve financial products and services for the consumer compared to traditional financial services such as the large banks. The negative side to FINTECH services is that they face many cyber security risks and threats as most of them integrate into existing financial banking infrastructures.

FINTECH Third-Party Security Risks

Internal cyber security is not always enough. Financial institutions face a larger issue as they are larger targets for cyber criminals. When financial institutions leverage the latest FINTECH technology service that is not a trusted partner, there is an opportunity for the financial organization to lose data, experience service failure, as well as loss of reputation. To reduce these cyber security risks, financial institutions need to evaluate the FINTECH organization as part of their risk management assessment to ensure their clients information is protected.

FINTECH Malware Attacks

Cyber criminals look at the SWIFT system. Hackers are constantly testing financial organizations with constant malware cyber security attacks and hacking attempts. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and is the most system used by banks and financial institutions to exchange vital financial information. There have been recent cyberattacks on the SWIFT infrastructure that have shown that banks and financial institutions have vulnerabilities in their processes and policies giving the cybercriminals the advantage to launch malware attacks.

FINTECH Data Breaches

Data is king and this is what cybercriminals want to obtain. For financial institutions, data is of the upmost importance. With the introduction of new financial services, this can increase the chances of more chances of data breaches. If data is accessed, this would give cybercriminals groups access to payment card details and user information.

FINTECH Application Security Risk

FINTECH services and applications are used by banks to access the real-time financial information of their clients. If the software is not secure or using an unsecure infrastructure, it can become prone to cyber security risk, cyber security attacks, or cyber security theft. Hackers try to leverage the weak cyber security of the applications to steal the client data and other vital information used for fraud.

FINTECH Cloud Security Risks

Financial cloud services are a significant aspect of the financial industry including payment gateways, digital wallets, and secure online payments. All organizations must maintain the confidentiality and security of financial data and client data at it is critical. If an organization has a lack of adequate cyber security measures, this can result in the corruption or data leak of sensitive client financial information.

365 iT SOLUTIONS is one of Canada’s first Canadian federally certified CyberSecure Canada organizations.