Building a secure future by locking down your fintech

Hank Boughner, CEO, Dynamo Software

It’s not surprising that financial services is heavily targeted by cyber-criminals. In fact, according to VMware’s Modern Bank Heists 5.0 report from 2022, 74% of the surveyed financial firms were targeted by ransomware attacks, and 65% ended up paying the ransom. The losses compound when you consider the collective costs of a data breach in financial services, which averages more than $5 million, according to the IBM Cost of a Data Breach Report 2021.

As fund managers, institutional investors, and service providers scale and expand their businesses globally, exposure and cyber-risk grow exponentially. The impact of cyber-attacks on financial and banking institutions parallels the damage seen in government sectors. The bad guys have set their sights on an industry filled with private, confidential information on deals, investments, banking transactions, and myriad other areas. 

As such, investors and regulators demand that firms strengthen all aspects of their cyber-security programs. Now, having a strong cyber-security program is a critical competitive differentiator. 

Most investment firms work with different security providers and fintech companies to augment their internal security efforts and enhance operational efficiency. But when investment firms are evaluating fintech providers, they shouldn’t view security as a separate responsibility. Every fintech partner must follow best practices for security, privacy, and compliance.

Here are four pillars of security investment firms should drill into with their fintech providers:

Executive or senior sponsorship: Is there a response plan in place? Are firms fully prepared to mitigate against the worst?

Holistic approach: Cookie-cutter plans don’t cut it in financial services. A fintech provider’s cyber-security plan must be up to the task of protecting sensitive financial data with redundancies throughout.  You understand too how your fintech providers are positioned to continuously enhance their security posture.

Security at every stage: Security must be embedded into every stage of software development. Do your fintech providers have the right protocols in place to ensure your data is secure from end to end? Ask your fintech provider about secure coding practices that ensure that their software is free from vulnerabilities and how they implement secure APIs, data encryption, and two-factor authentication to protect against cyber-threats.

Regulatory and compliance: The fintech industry is highly regulated, and it’s essential to comply with relevant regulations and standards. Do you know how your fintech providers remain compliant and what processes they have in place to keep standards and regulations fresh and at the forefront of their security posture? For investment firms, it’s also important to conduct regular security audits and penetration testing to identify and mitigate security risks within fintech systems.

When thinking about security holistically, larger investment firms with more resources are sometimes heavily burdened by past technology decisions. Often, these firms need to update their security footprint with a phased approach—but this leaves older technologies in place and can create opportunities for criminals to target known vulnerabilities.

Smaller firms can be more nimble, but often they prioritize building the business first. Security comes at the end of the list of “must-haves”, and is often overlooked until an incident happens.

Ultimately, security has to be a top priority for established and growing firms alike. 

US-based Dynamo Software, headquartered in Watertown, MA with offices throughout North America, EMEA, APAC, and UAE, has established its own Trust Center. It creates a level of visibility for both existing clients and firms evaluating its alternative investments software platform to see how serious it takes security, compliance, and privacy. Dynamo’s Trust Center showcases the leading organizations it partners with to maintain the integrity of its cloud-based infrastructure.

When it comes to compliance, Dynamo remains aligned with numerous regulatory demands, such as GDPR, for data protection and other gold-standard data protection schemes. Then, there’s governance, which sets forth the right policies and procedures for each activity. This is vital for managing operations effectively and transparently, ensuring everything runs smoothly and securely.

Risk management is another area where Dynamo focuses intently. In the financial sector, the risks are both diverse and serious, from cyber-threats to operational challenges. Dynamo uses sophisticated software to identify and mitigate these risks, ensuring we stay in front of any potential issues.

Resilience is not just about handling present risks, but being prepared to mitigate future disruptions, whether they’re technological, financial, or even forces of nature. Having robust systems and contingency plans in place ensures Dynamo can maintain business continuity, no matter what comes up.

Dynamo’s approach to security is comprehensive and multifaceted. It tackles the complexity of being an end-to-end fintech solution, for which security and compliance are critically important.

Learn more about 5 Essential Areas for Evaluating ALTS FinTech. Click here to download.