Financial technology (Fintech) innovation has changed the lending perspective by offering faster, easier, and more accessible credit. However, one unintended consequence of all this digital transformation is cybercrime. Cybercriminals target Fintech lenders due to the large amounts of personal information they collect and because of how interdependent the financial system is, a compromise at one institution can cause damage throughout the industry.

Hence, setting up strong cybersecurity measures in Fintech lending requires collective effort. This article will discuss the threats and common attacks that Fintech lenders could encounter and also show the benefit of collaborating with regulators and borrowers within the industry.

What is Cybersecurity?

Cybersecurity refers to protecting systems, networks, and programs from digital attacks. These cyber-attacks usually aim to access, change, or destroy sensitive lender-borrower information, extort money from users, or interrupt normal business processes. 

Due to the heavy use of sensitive data in the digital environment that lenders, borrowers, and other parties operate in, which includes loan applications, account access, and third-party ecosystem services, cybersecurity is a must for Fintech lenders to stay afloat. Implementing effective cybersecurity measures is particularly challenging today because there are more devices than people, and attackers are becoming more innovative.

As the lending industry broadens, so does the exposure to cybersecurity risks. Cybersecurity has various types: Network security, endpoint security, cloud security, application security, mobile security, Internet of Things (IoT) security, security operation centre (SOC), and identity and access management (IAM). Each type has its peculiarities.

6 Ways Lenders Are Vulnerable to Attacks

Fintech lenders operate in a complex digital environment filled with confidential information. Threat actors are attracted to this valuable resource and use diverse methods to acquire it for their activities. 

Below are a few vulnerabilities:

1. Data Breaches: Hackers can use stolen personal information to apply for false loans, destroy borrowers’ financial lives, and expose confidential financial data, including bank account details, social security numbers, and borrower names in data breaches. These breaches can occur due to malware exploiting software flaws, phishing scams enticing users to reveal login credentials, or systems that are not secure.
2. Account Takeover (ATO): Fraudsters can gain access to lender or borrower accounts in various ways. Potential entry points include malware that infects devices, phishing emails that aim to obtain login credentials, and improperly implemented authentication systems. After gaining control, intruders can steal funds, alter loan terms, or launch attacks inside the lender’s network.
3. Third-Party Risk: Using third-party providers for payment processing, data verification, or credit checks introduces additional security risks. If criminals can exploit a weakness in a third party’s security system, they might potentially access the entire lending system.
4. Data Storage and Transmission: Most Fintech lenders handle large volumes of sensitive financial data. Inadequate encryption during data storage or transmission can make it easy for cybercriminals to intercept and misuse this data, harming both the lender and the borrowers.
5. Employee Vulnerability: Employees can unintentionally become weak links if they are not trained on cybersecurity best practices. This includes recognizing phishing attempts and safely handling customer information.
6. Mobile and Remote Access Vulnerabilities: With increasing mobile access and remote work scenarios, attackers have more entry points, especially if secure access technologies are not employed.

Common Cyber Threats

Cybercriminals are always improving their strategies; therefore, being vigilant and proactive is essential. The below threats need to be taken seriously:

1. Ransomware: This malware essentially holds a victim’s data captive until a ransom is paid after encrypting it. When a lender is hit by ransomware, their capacity to process loans and assist customers is greatly compromised.
2. Phishing: It is a type of social engineering that occurs when fake messages are sent via email or text message and seem to be from trusted or well-known sources. This malicious email can be sent to an employee or an unsuspecting customer. The goal of phishing emails, which are often sent at random, is to obtain personal information like login credentials or credit card numbers. When a lender is not careful, the sensitive information of borrowers can be exposed through this method.
3. SQL Injection: Attackers can use SQL injection to manipulate a site’s database and access customers’ confidential data by inserting malicious code into a query.
4. Denial of Service (DoS) and Distributed Denial of Service (DDoS) Attacks: These involve attackers overwhelming a system’s resources to render it inoperable, disrupting users’ service.
5. Supply Chain Attacks: While targeting Fintech lenders, cybercriminals can gain access to numerous institutions at once through software suppliers and cloud service providers.

4 Effective Ways of Building a Collaborative Cybersecurity Fortress

To strengthen the Fintech lending system, fostering an attitude of collaboration among various players is needed. The following measures can be considered:

1. Fintech Industry Collaboration: Sharing threat intelligence across Fintech companies is a quick approach to spotting and countering new risks. Collaboration also allows for the development of company-wide security standards and best practices.
2. Shared Cybersecurity Resources: Smaller fintech firms often need more resources to invest in high-level cybersecurity measures. Companies can share access to advanced security technologies and dedicated cybersecurity teams through collaboration.
3. Public-Private Partnerships: Cooperation between Fintech lenders, law enforcement, and regulatory bodies improves information sharing and increases the ability to detect and apprehend cybercriminals. There is an urgent need for regulatory frameworks that promote collaboration and information exchange without constraining innovation within the lending industry so lenders can work together to protect their customers.
4. Knowledge for Borrowers: It is of high importance that regular training be conducted to educate borrowers about cybersecurity. By doing so, borrowers can protect themselves from phishing, keep their login information secure, and report suspicious behavior.

Benefits of Collaboration as a Lender

Fintech lending benefits greatly from a cooperative cybersecurity strategy in many ways:

1. Improved Threat Detection and Response: By sharing threat intelligence, it is possible to identify new threats more quickly and create more effective countermeasures.
2. Standardized Security Procedures: The system’s defenses can be strengthened and harmonized if the sector as a whole works together to establish standardized security practices.
3. Regulatory Compliance: Collaboration helps ensure all parties adhere to the latest regulatory requirements, avoiding penalties and legal issues.
4. Enhanced Public Trust: Borrowers and other stakeholders will trust the Fintech lending system more if the company demonstrates a strong commitment to cybersecurity.

Conclusion

Cybersecurity is a necessity in the fintech lending industry. However, Fintech, regulators, and borrowers can create a safer lending environment. Lenders should consider software like Configure that heavily invest in security.

Furthermore, the industry may better manage evolving risks, protect sensitive data, and ensure that the Fintech revolution elevates financial services without compromising financial security. If the companies work together, we can transform the financial industry, where good cybersecurity is the standard.