Best Practices on Securing Your FinTech Application

While the term “FinTech” seems to have sprung into focus only recently, in fact, it has been around for some time already. In a very broad sense, FinTech is any application of technology for handling financial matters. Online and mobile banking, trading and investment applications, cryptocurrencies – all these are use cases of FinTech.

In the last few years, FinTech has received an increased share of attention, due, on the one hand, to the growing popularity of crypto-finance projects – cryptocurrencies, ICOs, crypto trading platforms – and, on the other hand, to the increasing frequency of cyber attacks on financial institutions. In 2017, SWIFT, the global network for communication and transfers between banks, issued an official warning about attack threats, requesting they revise their security mechanisms and strengthen their protection.

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Another security issue that we will briefly mention is the growing gap between the regulatory authorities and FinTech startups. While traditional banks and exchanges operate in strict compliance with the laws and government regulations, cryptocurrency apps, trading platforms, and crowdfunding initiatives are in a “twilight zone” where the laws of any jurisdiction do not apply fully.

While governments are trying to bring the ever-spreading crypto market into the framework of the applicable laws, we are still too far away from full compliance. As a result, we see ICO scams and currency thefts with very little promise of being solved.

In crypto apps, the security of both the owners’ and the users’ data is the responsibility of the app developers. For the sake of fairness, in other FinTech apps, the security also depends on the app development, but traditional finance companies can appeal to law enforcement or insurance agencies in the event of a breach.

For hackers, FinTech applications are a true honeypot, as, by compromising a FinTech app, they can steal both the money and the identities of their users. While security and data protection are important for any kind of application, for those in the FinTech industry, they are the top priority. Needless to say, in any case of a security breach, the company loses its most valuable thing – its reputation.

In this post, we are going to discuss the best practices for a FinTech app security that can ensure adequate protection both for the app owner and their customers. We base our research on our experience of building apps with the focus on guaranteeing the FinTech app’s security, so you may get the idea of the methods and mechanisms DA-14 uses in creating applications.

How to secure your FinTech app

In our discussion of the methods for securing your FinTech application, we will touch upon several aspects of dealing with FinTech app security issues at different stages of app creation and maintenance.

Write a secure code

Your app security begins with the code and the protection mechanisms built into it. While different development frameworks and environments have inherent security measures, there are some common practices that we recommend and use in our daily work:

  • Include security policies in your software architecture. This point includes several practical steps, such as implementing a multi-level access management system with the possibility of quick revocation, providing authentication mechanisms, etc.
  • Perform input validation. Include a mechanism for validating any data received from other sources, especially untrusted ones.
  • Check the data sent to external systems and networks. Send only what is absolutely necessary and verify that the data you are sending does not contain any sensitive information or allow injecting a malicious command.
  • Deny by default. Close access to all app functions and allow it only on a need-to-know basis.
  • Pay attention to your framework messages. As we have said, most development tools and frameworks include security mechanisms; therefore, they can detect flaws in your code. Note the warnings that your framework sends and alter your code accordingly.

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Test your app

Everybody tests their software product – this goes without saying for all development companies. True, there are lots of testing practices and methodologies verifying all aspects of an app. However, to create a fully secure Fintech application, you also need to specifically test it for security.

Security testing is a multi-component task. During the creation of an app, include the following testing stages:

  • Network security testing. Verify that the network infrastructure has no vulnerabilities. System software security testing. At this stage, check the operating system, the database, the storages, and other components for flaws and breach possibilities.
  • Client-side security testing. Here, check that no breach can occur during the application running in the browser.
  • Server-side security testing. Make sure you are using reliable frameworks and tools on the server side and that their security mechanisms are adequate.

Also, use penetration testing to verify the security of your application. Penetration testing is a simulation of an attack on your app to reveal vulnerabilities.

Use data encryption

Encryption is the way to protect data “in transit”, that is, during sending between different entities. When the data is being sent, it is rather easy to snatch. Encryption turns your data into a meaningless scramble that is of no use to hackers. At the same time, the intended recipient will be able to view it in its original form.

There are many encryption algorithms that are used to protect sensitive data. AES (Advanced Encryption Standard) is considered to be the most secure and is now the US federal government standard. Most applications running on Android, iOS, and Windows operating systems use this encryption method. At the same time, proper encryption requires not only the choice of the encryption method, but also its professional implementation.

Implement reliable authentication methods

No FinTech app can be secure without proper authentication. By performing the authentication procedure, the user confirms that they are who they claim to be and have the right to access their financial matters. Each user has their personal account where they can see their statuses and perform operations with their finances. It is up to the app developer to set up the authentication procedure so as to prevent user identity interception and unauthorized access.

In 2018, a simple one-step login-password procedure is not enough for a FinTech application. The recommended way is to use multi-factor authentication, where the user not only provides their login and password, but also verifies their identity via their phone number or email. A unique code sent to an email or phone completes the authentication.

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Use payment blocking

If your application supports payments, introduce certain blocking mechanisms that will stop the payment of an unusual amount, of an unusual frequency, or from an unusual place. Many banks use such measures in their applications to prevent money theft from their clients’ accounts.

For example, you may add the geolocation feature to your app to block payments made from a place your client has never visited before. Of course, we do not want to ruin our users’ vacations in exotic places, thus inform them about such a restriction and implement a way to disable blocking if the customer advises you of the places they are planning to visit.

Educate your users

The security measures that you include in your application work only as long as your app users are proactively protecting their data. Therefore, inform your users of the security actions that they should practice. For example, provide clear instructions on what to do if the customer loses their phone – how to block or suspend the account, and how to reactivate it on a new device or phone number.

For FinTech applications, it is important to keep to some basic security principles – never store the login and password in the application, never use the app via unprotected communication channels, such as public Wi-Fi networks, and, especially importantly, never disable the default protection mechanisms implemented by the app provider. When a secure application is used in a secure manner, we may say that the goal has been reached.

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Ensure compliance with security regulations and standards

If you are building FinTech software, compliance with certain security regulations may not even be a matter of choice. If you plan to cooperate with major banks or payment systems, such as Visa or MasterCard, you may be explicitly required to comply. Moreover, if you manifest following the generally accepted security standards, it will be a signal to other banks or financial institutions that you are reliable and safe to work with.

The recommended security measures and mechanisms are listed in the ISO/IEC_27000 standard. Analyzing your application against this standard, you can identify the possible deficiencies and make the necessary improvements.

What if you are outsourcing?

We have outlined the basic practices that should be used to increase the security of a FinTech application. But what if you are not developing it in-house but outsourcing it to a professional development company? How do you make sure that your FinTech application is secure?

The answer is quite straightforward – partner with a professional company that adheres to the common security principles and can prove it. Companies that can be trusted to build a secure FinTech application use development tools and platforms with their own security mechanisms and employ developers who pass security certifications, such as CompTIA.

When you are choosing the development company, ask the candidates about the specific security standards and measures they apply. In addition to the confidence about the security of your app, such information can help you comply with various security regulations and certify your app with the authorities.

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Of course, the more experience in developing FinTech apps the company has, the better. This should be one of the things to find out during the interviews with the candidates. Study their portfolios carefully, especially the projects related to the financial sector.

Plan the security measures as part of the project planning. We have outlined the basic recommendations that you can use to improve the security for your FinTech application – discuss them with the development team to find ways to implement them.

During the development, work closely with the project team, paying special attention to the results of security testing of all components of your app. You will be able to see immediately whether any updates to the initial project design are in order to maintain security.

In most cases, a professional development company will also suggest the measures and mechanisms that should be applied to achieve the maximum security of the app. In addition, they will also monitor the current cybersecurity situation and trends, and prepare patches and security updates for your application to stand up to any emerging threat.

In our practice, we always discuss the security measures with the client and insist on giving priority to security over other less critical functions. We consider the security of our clients’ apps and the safety of their data to be of utmost importance. If you want to know about securing a FinTech app or other software product, contact us for a detailed consultation – we will be glad to share our expertise.

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