The cyber security challenges in fintech and neobanking’s rise

Aug 02, 2022
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The 2020s is set to see a rapid growth of fintech and neobanking offerings in Australia. Unquestionably, there are many positives to this trend, but there will also be an increase in cybersecurity challenges to accompany it.

While accelerated collaboration and sandboxing between traditional businesses and fintechs will drive innovation and competitive advantage, the start-up culture that underwrites this progress will prioritise growth and enhance capabilities over cybersecurity. Unfortunately, this puts their clients, their companies, and partners at risk.

Senior tech execs gathered recently for a roundtable discussion on the growth of fintechs and neobanks in this country, the opportunities it presents, and the critical trends businesses must be aware of in 2022 when it comes to charting a course for progressing in this sector in a strong but safe way. The conversation was supported by Palo Alto Networks and NTT.

Riccardo Galbiati, CTO at Palo Alto Networks for Australia and New Zealand, says the biggest advantage fintechs and noebanks have over traditional, larger financial services firms in the sector is their agility.

But this often comes at the expense of cyber security, which tends to be left as an afterthought and included too late, says Galbiati.

“The only solution to this dilemma is to make sure that the development lifecycle of applications become ‘secure by design.’ This approach requires a transparent mechanism to embed vulnerability and compliance checks at the same time applications are built. This effectively creates digital ‘guardrails’ for developers to still run fast, but avoid major accidents or weaknesses in the process,” he says.

Galbiati adds that larger financial services organisations have more experience and larger budgets to invest in cyber security.

“They also have larger and more complex environments to secure and are targeted more often. This means that a bigger effort is required in coordinating a strategic approach to cyber security that leaves no gaps and leads to a consistent outcome.

“From one side, larger rivals have an advantage, but from the other, they need to be careful not to fall into the trap of building tactical solutions that fragment their cyber tools and weaken their overall posture,” he says.

John Karabin, director cyber security at NTT, says his organisation also uses the refrain, ‘secure by design’ – which means incorporating best practice cyber security design from the ground up.

But this is a bit like a ‘slip, slop, slap’ campaign as its exact meaning and approach has been washed out by the potential undefined use of the concept, he says.

“Practically, secure by design involves incorporating security and compliance into the early stages of design with regular reviews through to the final release. This should incorporate concepts of people, process and technology focused on a better business and security outcome,” he says.

From a people perspective, says Karabin, this means having a qualified security practitioner as an integral part of the DevOps team, with a good understanding of how the applications will operate in a regulatory environment.

“Process becomes part of a DevOps methodology whereby best practice application security is a defined component of the software development lifecycle. When effective, this becomes ingrained in the culture of the organisation with an improved dividend in security as well as reducing the overall cost of development and speeding up the release of the final product,” he says.

Karabin agrees that larger financial services organisations have the luxury of having dedicated teams to look after the task of security and compliance. They can also attract the limited talent to join their teams with higher pay and other inducements.

“That said, their task is often much larger and more complex, covering a broad spectrum of technologies and geographies. It’s worth noting that most of the breaches publicised have been larger organisations with dedicated security teams,” Karabin says.

“So while good security governance is critically important, it’s the practical implementation of the security policy and how dedicated and diligent each member of the company actually is that really counts. Actions speak louder than words even in the cybersecurity industry.

“Importantly, with the growing number of threats targeting organisations, it’s why we often say that good security culture is the bedrock to a proactive security approach.”

Addressing the cyber talent issue

Fintechs, neobanks and other smaller financial services firms – as well as the big ones – often struggle to find the right cyber security specialists that they need. Recent research has suggested that there’s a pool of only 17,240 cyber specialists available for work in Australia.

Palo Alto’s Galbiati says cyber specialists are going to be in high demand and in short supply for a long time. With technology adoption and digital transformation growing at a fast pace, enabling training the workforce falls behind, he says.

“In fact, in a recent study done by Palo Alto Networks, 20 per cent of Australian businesses that have been in operation for less than 10 years say they have found it difficult to find staff or contractors with cyber security skills they need for their business.

“In most situations, smaller and agile financial organisations can look for immediate help within the partner community, which can offer a plethora of skilled advisors to offer coverage and support,” he says.

In some cases, says Galbiati, a virtual CSO offered by a partner can go a long way in  setting the right direction and help shape a growing cyber security team.

“On another note, when we realise that a major component of the daily tasks performed by security specialists can be completely automated, we can also dedicate ourselves to refocusing staff to solve problems that machines can’t help with.

“As general rule, problems that require large amounts of data to be processed are better assigned to machines, while critical decision making is better suited for humans. By implementing a good balance of process automation and human intervention, we can achieve better security outcomes with less staff, while simultaneously improving their overall happiness and retention,” he says.

Meanwhile, NTT’s Karabin, adds that skills shortages in cyber vary depending on the specific discipline or domain.

“There are a few approaches that we suggest. Firstly, training and developing your own talent in the organisation is important and this can result in great cross-skilling as well as tackling the all-important retention issue,” he says.

Secondly, Karabin agrees with Galbiati that partnering with specialist companies or outsourcing components of the security requirement is often an essential strategy which supplements security areas that are needed, but not available internally.

Thirdly, automation and tooling can help a security team leverage their skills and maximise their efforts, he says.

“The term, ‘security orchestration and automation response’ (SOAR) has become popular and this describes tooling that assists in managing the complexity of the environment, as well as automating security responses where possible,” he says.