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Security Best Practices in Fintech Application Development
Financial applications play an essential role in the cost management of millions of individuals and companies worldwide. From everyday transactions to large-scale investments and account management, a fintech app has become irreplaceable for all in recent years.
According to the forecast by Globe Newswire, the global market size of the fintech industry is expected to hit $699.5 billion by 2030, with an impressive CAGR of 20.5%. The rising popularity of digital payments and eCommerce, as well as the growing use of smartphone usage, have created a wide range of opportunities for developing custom software to serve different clients.
However, launching a secure fintech app solution is a challenging process that requires considerable time, resources, and financial investments. Of course, you need a team of dedicated engineers with the corresponding expertise in fintech security and app development to ensure your application is safe, functional, and fully covers your expectations and consumer needs.
What is more, your fintech application should also be well-secured: with about nine out of 10 breaches motivated financially, this industry has become a true “tidbit” for attackers across the globe.
According to Statista, the average cost of a data breach for 2022 in the financial industry worldwide was $5.97 million, growing by 4.4% from 2021. As the attacks become more frequent and extensive, companies start prioritizing the security of their financial applications to reduce their vulnerability and minimize the potential losses from breaches.
In this article, dedicated development experts from Devox Software will share the key principles of fintech cybersecurity, explaining the regulations, challenges, and main industry trends for the upcoming years. After learning the security basics of fintech app development, you’ll be able to better understand the specifics of this type of software and how to find the right software vendor within the current niche focus.
Risks Associated with Fintech Applications
Before getting into dozens of different app development regulations, it’s essential to understand the key risks and challenges in fintech cybersecurity faced by thousands of organizations worldwide. Below we’ve reviewed some of the most common difficulties in fintech security, with general insights for their efficient resolving.
- Identity Management – creating clear mechanisms for identification, authentication and authorization aimed to protect the application from third-party intrusion or suspicious activity
- Data Ownership – setting up the rules for various data management procedures to meet the standards in technical and legal fields.
- Security Concerns – timely identify the system weaknesses and stay proactive in the app security, ensuring its high resistance to malware and attackers.
- Involvement of Third-Party Services – ensuring all the components applied to fintech software, such as payment gateways, social networks, analytics systems, or chatbots, cannot compromise its security.
- Cloud Migration – reaccessing cloud solutions’ security, monitoring and uncovering their vulnerabilities, and optimizing paths.
- Human Error – consistently increases the awareness regarding different attacks among the employees and how to properly react upon the cyberattack discovery.
Knowing the key fintech app security solutions can reduce security compromising risks. However, to meet the current market requirements and standards, it’s essential to understand the basic fintech regulations and policies.
FinTech Regulations and Policies
When developing fintech app products, developers must also follow numerous regulations in the financial services industry that are valid in a particular location and operation segment. Otherwise, the product will be removed from the market’s listings at best or even result in heavy penalties and financial and reputational damages.
Below are the most common standards and regulations you’re likely to deal with when developing a custom fintech software solution.
General Data Protection Regulations (GDPR) is the EU-based legal framework that sets guidelines aimed at data protection and privacy, ensuring its safe collection, storage, and processing within the union itself and beyond its borders. Though this law was initially aimed at EU residents and businesses, this standard has become one of the essential principles for nearly any software development.
The revised second edition of the Payment Services Directive (PSD2) is a piece of legislation aimed at forcing banking service providers to improve customer authentication processes and to also set clear rules for third-party involvement.
Electronic Identification and Trust Services (eIDAS) regulation is another EU regulation that refers to a range of services that include verifying the identity of users and businesses online and verifying the authenticity of electronic documents. In fintech development, this law is targeted at ensuring that electronic interactions in B2B and B2C segments are safer, faster, and more efficient.
Financial Conduct Authority (FCA) is a UK-based regulation focused on the security of consumers and market integrity in the financial industry. In other words, this law sets the list of standards for the service providers and outlines the rules for banking and insurance entities to follow, to offer consumers a fair experience.
The Good Practice Guide 13 (GPG13) is a British protective monitoring law for all the UK’s government systems and networks, service providers, and outsourcing companies. This regulation is a crucial component of the Security Policy Framework, which describes the standards, best-practice guidelines, and approaches required to protect UK government assets.
The Act on the Protection of Personal Information (APPI) is a Japanese alternative to GDPR – one of the first data protection regulations in Asia, designed to protect the personal information of Japanese citizens. The fintech providers planning to operate with the personal data of Japanese residents must comply with the current industry standard.
The Personal Information Protection Act (PIPA) is the law that regulates the private data security measures for private and governmental organizations in South Korea.
Payment Card Industry Data Security Standard (PCI DSS) is an international regulation for fintech that applies to all the entities that collect, process, or use credit card information. In other words, this standard ensures that companies that deal with consumer credit card data and information maintain a secure environment. The larger number of transactions processed, the more requirements companies need to follow.
Also known as ISO/IEC 27001:2005 – the security standard for an information security management system (ISMS) covers all legal, physical, and technical controls involved in an organization’s information risk management processes. This regulation outlines the documentation and formal procedures required for fintech security compliance, including Information security policies, Organization of information security, Human resource security, Asset management, Cryptography, and many more.
However, as this standard is not specific about the requirements and documentation, compliance with ISO/IEC 27001 becomes even more challenging, especially for developers with little expertise in the target field.
Best Practices in the Fintech App Security Solutions Development
So far, we’ve explored the challenges of security fintech development and the most common regulations, essential for launching software on the market. Now, let’s go deeper into the security best practices for fintech application development, which will help you create a functional product with high resistance to cyberattacks of different types.
Data Encryption & Tokenization
Building any software for the financial industry requires dealing with client data. The latter must be secured across all stages of development. For this reason, you should consider data encryption and tokenization practices to protect sensitive files from third-party access.
Encryption is transforming the data into a code that is impossible to read without a specific key. So, if the attackers manage to breach the system, they will gain no profit from stealing the encrypted files.
Some of the most popular encryption algorithms for fintech are RSA, Twofish, and 3DES.
Tokenization is transforming the data into specialized generated identification symbols (tokens) that retain all the information about the data without compromising. Such tokens are decrypted only with unique databases, known as token vaults.
This approach ensures the shared responsibility for security between development, security, and operations teams. Therefore, the production of the fintech software becomes a result of a collaborative process.
The specialists of all the departments work together to integrate the security into the CI/CD pipeline, searching for various vulnerabilities and bugs in the product across all the stages of its development, as well as the components applied in the process.
Product testing is another essential aspect that helps to better understand the weak sides of your prototype in different phases of the fintech application delivery. Thus, developers can ensure the performance of the final version of your software is stable and secure, and less vulnerable to third-party attacks.
The key aspects which will help you to maximize the efficiency of security testing are:
- Expert testers. With a professional team of security specialists, such as Devox Software, you’re sure to get an expert opinion on the potential threats and analyze current security challenges and possible solutions that will help you to launch a functional application with the highest security concerns.
- Regular penetration testing. By simulating different hacking attacks, testers can uncover the vulnerabilities of your fintech application yet provide the most efficient ways of their elimination. If performed consistently, these self-simulated attacks can significantly reduce the possibility of being hacked and minimize the potential reputational and financial losses.
- Comprehensive security audits. A security audit of your application will help you to reveal the current problems, as well as potential threats that might hit the app’s security in the future. Performed by experts, such an audit will help you to get a better awareness of what aspects to prioritize, as well as maintain the system security protected from attacks of any type and level.
Enhanced Code Security
Code is the backbone of your application, so it’s where your security should come from. Here are some proven ways how to ensure your code’s robust performance from the first lines:
- Deny by default. Ensure all the app control mechanisms and functions are secured from third parties and make them accessible based on need.
- Access control policy. Grant access to authenticated and authorized users only, and deny it for suspicious IDs, unauthorized parties, etc.
- Apply the framework messaging options. Throughout the development process, framework messaging can help in creating a robust code structure based on the pre-made templates with a decent security level.
- Protect the app’s SQL. Make sure to test your application for vulnerabilities using diverse penetration testing strategies.
Role-Based Access Control
Role-based access control (RBAC) is a common practice aimed at restricting access to the network based on the user’s relationship with the organization. Its implementation into the fintech software allows setting up different levels of access to corporate information and prevents large-scale data compromising in case of a third-party breach.
Financial organizations can outline which control mechanisms and features can be used for a certain user category: administrator, customer, support staff, developer, etc, thus reducing the internal and external security threats.
Improved Infrastructure Security
Finally, to strengthen the security of your fintech software solution, it’s also recommended to apply improvements to the app infrastructure as well. This practice implies protecting a variety of hardware and software assets, including the development devices, data storage resources, networking systems, and cloud resources that are directly or partially involved in the fintech app development process.
- Implement reliable proxy servers and firewalls. Targeted on restriction, control, and filtering of network requests, these tools can prevent malware and attackers from directly accessing your network from the Internet.
- Use an HTTPS SSL certificate. Servers are the first points that connect with the other digital assets, which is why it’s essential to continually work on strengthening its security. The HTTPS protocol can guarantee the connection’s confidentiality, authenticity, and integrity.
- Inspect the third-party applications. Set up the consistent management routines of the third-party components, as they can become the easiest gateway for the hackers to access the internal system. Ensure you’re using the licensed dev tools and update them to the newest versions with the latest security regulatories.
- Apply VPN. VPN solutions encrypt all the data that comes from the app developer’s computer, which makes it useless to attackers.
- Update your OS in a timely manner. Regardless of the operating system used, make sure you’re using its latest version. The new OS versions are rolled out frequently and mostly aimed at fixing the bugs, design flaws, and vulnerabilities, which are exceptionally important for the security of the entire dev infrastructure.
Top 8 Fintech Cybersecurity Trends for 2023
Now that you know the core risks associated with fintech app development and best practices for launching a product with robust system security. To get yourself fully ready to deliver a competitive, long-term software solution within the target industry, you should also keep an eye on the latest cybersecurity trends for the upcoming years.
Some of the must-have approaches in fintech app development today include:
- Considering the app security in the planning stage, which can help in writing robust codes and creating a functional user interface;
- Data encryption and tokenization practices, aimed at securing the system data from any sort of compromising;
- Multi-factor authentication, which works as an additional security layer and helps to verify the user identity before granting them the corresponding access level;
- Role-based access control, the new access standard in cybersecurity that enables users to only access the data and functionality they are eligible for;
- AI and ML intelligence aimed to evaluate risks through detailed data analysis, detect vulnerabilities, and timely alert organizations to get those fixed.
- Blockchain solutions implementation, which provides data integrity and transparency, speeds up the transaction processing while improving security and reliability.
- Multi-cloud solutions that can facilitate the performance of fintech institutions and improve their transparency and security while ensuring well-protected data management.
- Secure Access Service Edge (SASE) – the framework for a network architecture that consolidates the cloud-native security technologies – SWG, CASB, ZTNA, and FWaaS – with (AN capabilities to securely connect users, systems, and endpoints to applications and services anywhere.
Having prepared to create your app for the financial industry, it’s the right time to start searching for your dedicated fintech experts to bring this project to the market!
Make the Cybersecurity Your Top Priority
Regardless of the fintech application type you’ve decided to launch, systems security is surely one of the most critical development aspects to prioritize accordingly. While you might not know all the specifics of the security concerns in fintech app development, you can ensure getting the best product by hiring an expert team of IT professionals who will help you to succeed.
Are you looking for dedicated cybersecurity experts to launch a functional fintech application with a decent level of system security? At Devox Software, we’re always here to help! Our company has years of working in the IT industry, delivering first-class services in penetration testing, security audit, and app development.
Request a consultation from our experts right away to discover the best cybersecurity solutions that will perfectly meet your project requirements and needs!