The digitalisation of financial services has transformed wholesale and retail banking. Efficiency, speed and transparency are commonly cited advantages of this transformation, led by the innovation of FinTech companies.
The increasing online presence of digital data also poses a new host of challenges, namely the risk of such information being hacked and exploited by criminals.
In an increasingly digitalising world, It is estimated that cyberattacks cost the global economy $6 trillion, a figure which could increase to $10.5 trillion by 2025 should current trends continue. Financial services and FinTech companies are prime industry targets for such activities, with criminals seeking to target and exploit financial data.
Cybersecurity threats are evolving to identify and exploit weaknesses in security systems. This is particularly prevalent in the financial services – established banks and challenger institutions are embracing new technologies including automation and open banking. Yet these real benefits are accompanied by new risks, made all the more complicated by the growing interconnectedness.
In response, central regulatory bodies are also setting new standards for financial institutions to meet when protecting customer data and maintaining privacy. In the US, a new proposal from the Securities and Exchange Commision will put in place new measures for greater cybersecurity transparency and accountability for publicly held companies. The move means relevant operating financial firms will have to disclose cybersecurity incidents. It is likely we could see a similar move in the UK.
At a retail customer level, consumers are also readily benefiting from online banking. A new report by CRIF revealed that UK consumers are twice as likely to apply for financial products and services via online channels when compared to their European counterparts. The same report also revealed that two in three UK consumers are still concerned that sharing their financial data makes them more likely to be a victim of fraud. It shows that while the market will continue to embrace new FinTech applications, there are still genuine anxieties about their data being exploited through cyber crime.
As a result of this, we are now seeing an overlap between two sub-sectors of the tech industry – FinTech and cybersecurity. And it is this overlap which is set to lead to new innovations.
Available figures demonstrate this potential. The Department for Digital, Culture, Media and Sport revealed earlier in the year that the sector contributed over £5 billion to the UK economy in 2021 – a 33% increase on the figure recorded in 2020 and the largest increase since the Department first began tracking the industry.
This column also regularly highlights standout FinTech funding rounds in the UK covered by BusinessCloud. Recent standouts include Ryft raising £1.2 million in seed funding for its merchant payments system, and micro-investment platform Wombat raising £4.2 million in a Series A funding round led by Fuel Ventures.
Over the coming months, we are likely to witness greater integration between FinTech and cybersecurity. Like the recent appointment of ECOMMPAY’s new head of financial crimes and payments digital transformation, this could be through new hires or internal company restructuring so that adequate resources are allocated to online security and protection.
With an increasing government focus on cybersecurity, there is also an opportunity for a new generation of cybersecurity companies to rise up and address the security issues commonly faced by financial companies.