Data Privacy and Customer Protection in Fintech

Posted on June 9th, 2022

Data privacy in broad terms means the protection and security of data and information regardless of their nature. The internet is an infinite space with the potential to store unimaginable amounts of data. Every time a user conducts a small Google search, every detail of the process is stored in the form of data by the websites that are involved in the process, including Google.

With uncountable opportunities for companies to acquire information, it becomes crucial for the system to be regulated and monitored. Data privacy is the practice of protecting all types of information, especially that which is sensitive in nature, like personal details, financials, and intellectual property data, from becoming mistakenly accessible to any malicious agents.

The most important aspect of the virtual world is data. The majority of cyber activities prevalent in the world today have found their origination and ideation from data. Information can be segregated into different segments like personal information, company information, information related to purchases, employees, stocks, future projections, etc. Anyone having access to restricted information can put the vulnerable party at stake, be it a company, an individual, or even the government.

The importance of data was not so pervasive till a few years back. With the onset of computers and smartphone technology, the amount of data that can be stored and used has led to data becoming one of the most indispensable assets there could be.

The Leverage

Information of all kinds has earned the position of a crucial requisite in recent years. Companies store and use customer and visitor data to analyze trends, behaviors, and habits to get psychological insights, which they can then use to their advantage.

Individuals ordering pizzas every day from a local store would start receiving incentivized communication from either the pizza company, the platform that the individuals use to place the order, or both. Such scenarios directly indicate that companies store and use information about their customers to their advantage.

Using data in similar ways is a common global instance that most of us would have experienced at some point or the other. Sharing information about habits and behavior might not directly have a substantial impact on individuals.

The leverage that information provides to the holder is enormous. Depending on the nature and extent of information and data available, the accessor can cause massive damage if not monitored.

Financial Information

Data about individual and company holdings, expenditures, assets, clients, etc., contains everything the entity is and has. Any access to sensitive data like this can have detrimental consequences. 

The most commonly occurring crimes related to data and information are theft, blackmails, disclosures, and damage to their hardware and software systems. Hackers and malicious agents can break down systems and put the affected parties at colossal risk.

Cyber Security in Fintech

Cyberattacks in the digitalized financial world not only bring financial damage to customers, but they have the potential to completely defile a company’s reputation. Fintech companies are obligated to protect their customers’ data because malicious parties are inclined to misuse this information and they usually intend to get financial gains, by hacking into the company’s firewalls. 

Security Practices Implemented by Fintech Companies

To protect customer information from getting compromised, it is highly imperative for fintech companies to monitor and regulate their system continuously. Other than regulations, fintech firms usually try and nip the bud by exercising extensive authentication protocols like:

One-time Passwords (OTPs)

To conduct any financial activity, small or big, company systems send OTPs to the registered mobile numbers or emails of the account holder, which is to be entered into the system every time the customer intends to complete a transaction. This process provides additional safety to basic passwords and hidden usernames.

Regular Password Changes – Most fintech and online banking companies have mandated a regular change of passwords. Depending on the company, it may set up recurring timelines, which mandatorily prompt the user to change their password, enhancing their security even further.

Timed Login Sessions

This practice is usually used for financial accounts, where customers are only allowed a particular timeframe to stay logged in, after the expiry of which they are compulsorily logged out. This method allows a much smaller window for malicious parties to hack into the customers’ accounts amplifying the security considerably.

Multifactor Authentication – This technology is not restricted to fintech and has gained a lot of popularity on platforms that require users to create accounts containing any personal or financial information. The procedure involved in multifactor authentication mandates the customer to provide two or three kinds of authentication; it could include a combination of security questions, OTPs, and regular passwords.

Final Thoughts

Cyber Security is an essential part of fintech because of the potential impact it could have in case of any lags in this regard. Both companies and their customers should be wary of malpractices involving data and information. Protecting personal and financial information are fundamental steps to securing the identity and financials of customers and safeguarding a company’s reputation.

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