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The Digital Trust Ecosystem

Weak Spots of Modern FinTech Infrastructure

Weak Spots of Modern FinTech Infrastructure

Oct 08, 2019

Behind the beautiful interface, the back-end of FinTech app rarely follows the same banking processes. Every transaction made through FinTech payment app, is not going via a “newly built” financial system. Modern financial services usually use the same IT infrastructure, which banks have been using for many years. While the front-end drive the business, the outdated infrastructure makes newly created financial services vulnerable to significant financial and reputational risk. 

Compliance with regulations is an important part FinTech infrastructure to allow customers use not only digital wallet but more typical ways of online payments like using credit cards. That is why it is important to follow requirements for the industry but also it is very challenging. Here are the most challenging areas of the infrastructure for any FinTech startup:

Data Compliance

Since all the  FinTech services are obliged to prevent user data from using by third-parties, according to GDPR or other privacy requirements. The regulations aimed to gain the high level of protection of user sensitive information because the number of personal user data has been constantly increasing within business systems and processes. The real issue for the FinTech companies is that it is very hard for the FinTech company to cover all possible data risks and continue to collect, keep and manage the growing amounts of user data.

Identity Protection

To implement new business processes, FinTech companies must pay great attention to security level within business processes. Encryption and several-factor authentication are highly required: for instance, authentication using only sms is enough for the regulatory requirements. But cybersecurity experts warn: authentication only via sms is not secure enough. So, FinTech applications that use such simple authentication methods like sms, despite being compliant, will become outdated very fast. It is required to start rethinking their security processes to protect identities of their customers within business systems. Learn how HyperSphere, the cybersecure, decentralized cloud offers new ways to protect payments online

KYC Procedures

In order to prevent the potential risks of financially illegal activities, financial companies must verify identities of their users via KYC procedures. They consists of processes for verifying names and addresses of their properties, and sometimes, some more details to define if there is potential risk to onboard the customer. If a FinTech application makes its service available without a KYC process, it will potentially cause a threat for the company and its management to significant criminal penalties. 

On the Way to Transforming the Challenges into Opportunities 

Technologies transforming finances have been existed before. Intention of new services have always been to bring digitalization, accessibility and better customer experience into traditional finance. Nowadays, there are opportunities to move liquidity into a digital world more than ever in history, with minimal dependance on existing physical commercial bank infrastructure. Liquidity can aggregate in different ways not depending on physical branches or ATMs. As result of re-thinking and re-designing financial services, the possibility for something fundamentally new to emerge. So, open, decentralized financial infrastructure, may turn out to be even more disruptive than we expect.