Artificial intelligence (AI) is being integrated with modern life in a number of ways, and fintech is no exception. However, more digital options mean more cybersecurity vulnerabilities, and as AI introduces intelligent apps and software programs, it opens additional windows for insidious access by cybercriminals.
By nature, fintech handles large amounts of personal and financial data for customers, making it all the more important to protect that information. AI innovators have created new vulnerabilities, but they’ve also begun to offer security solutions. On the one hand, AI can feel like a cybersecurity risk; on the other, security-focused AI can mitigate those risks.
How AI Leaves Fintech Companies Vulnerable
For some fintech startups, taking unlawful risks is all part of the plan, and they often find ways to get around regulations to be profitable. Peer-to-peer (P2P) lending companies, for example, may give loans to money launderers or fictitious businesses without the lender being aware of what their money is being used for. AI makes it possible for lenders and borrowers to move through the lending process faster through quicker approvals, funding and underwriting. In legitimate transactions, this is beneficial. However, that swiftness also makes it harder to catch or recognize a fraudulent transaction before it goes through.
An example of this occurred in 2015, when Syed Rizwan Farook and Tashfeen Malik, the shooters who killed 14 people in San Bernardino, California, transferred $15,000 via P2P company Prosper, which was then left to members of their family.
With P2P lending, money can be transferred easily and difficult to trace. Additionally, it’s easier for someone with a criminal past to get a P2P loan as opposed to a traditional bank loan because there are fewer requirements to adhere to. For example, if you have a low credit rating, you may qualify for a P2P loan, even if a bank denied you.
How AI Can Protect Fintech Companies
The reason why AI is so effective in the world of cybersecurity is that instead of being purely reactive, it’s also proactive (or preventative). AI can discover risks and prevent attacks before they occur. Machine learning can follow the patterns of criminals and tell when an attack is coming. Then, the part of the company’s system or network that is vulnerable can be patched before it’s too late.
Fraud Detection
Software like Feedzai helps data scientists detect financial fraud by integrating with the company’s existing software and analyzing data. The software gives each customer a fraud score and risk profile based on past use, such as whether or not they made a fraudulent transaction at some point. Then, combined with current activity, the software can alert management of high-risk customers. The software can also assess applicants prior to acceptance, flagging those who are high-risk and who require manual review.
Access Control
Controlling who has access to data is one of the biggest considerations when it comes to fintech security. When a cybercriminal can bypass access controls, they can steal information or pose as the individual to engage in phishing schemes. The first defense against unauthorized access is requiring e-signatures to authorize a business transaction. Further, advanced access control is being introduced, such as bio-signatures that require an individual to match their fingerprint or irises to gain access to their account.
Smart Contracts
Smart contracts are contracts that are coded in a programming language and then stored on the blockchain. One way that the blockchain provides protection is that individual contracts aren’t able to be changed. However, new contracts can be created and then linked to existing contracts in case the agreement needs to be expanded.
In addition to being more secure, the contract will also automatically carry out the agreement once both parties have signed ” you don’t need an intermediary to ensure the exchange of goods or services. An example can be seen in the insurance niche: If a natural disaster affects your area, the natural disaster policy in your insurance coverage can be auto-triggered. Then, regulators can opt to analyze each step of the transaction.
Artificial intelligence is now an integral part of fintech, and sticking with traditional banking services isn’t an option for a lot of people. Many traditional banks are even teaming up with fintech companies, blending the two worlds. Some customers rely on fintech when traditional banking isn’t able to offer them the services they need. This is common after customers face loan denials due to poor credit history or when they are in the process of disputing items on their credit report. The best option is to choose fintech companies that are following regulations and best practices, don’t have cyberattacks in their history and utilize a number of cybersecurity precautions.
Fintech Cybersecurity Careers
Technology isn’t replacing the need for human workers. Instead, cybersecurity experts are in demand as more companies realize how important it is to get their systems updated and protected. Tech may be able to do a lot of the data collection and analysis, but human experts are required to program that tech, integrate it with fintech networks, and troubleshoot complex problems that can’t be handled by software.
Blockchain specialists are in demand. The blockchain is notoriously hard to hack, making it appealing to fintech companies. The blockchain is relatively new, though, and there’s still so much that even cybersecurity experts don’t understand about it. This is why there’s such a need for true specialists.
If you’re interested in learning even more about IT, consider continuing your education in the field of business analytics. You’ll learn about things like cybersecurity, data analytics, and network systems, and you can even specialize in something like cryptography or social network analytics. This may be a great option if you’re thinking of changing or advancing your career, or if you run your own business and want to be well-versed in every aspect of managing your online network.
