What are the Security Best Practices for Neobanks?
Neobanks are a technologically-advanced and robust solution to provide high-speed, top-quality banking solutions for people in need. But, they don’t come without their issues.
There are over 330 neobanks in the world today, with market projections predicting an annual growth rate of close to 50% by 2028. They aim to make banking easier but, like the fintech sector as a whole, face security challenges, with technological disruptions taking place occasionally. Stakeholders within the fintech ecosystem are worried about neobanks being infiltrated by cybercriminals looking to compromise bank accounts and steal money. However, neobanks like the Turnkey Neobank try to lock down their systems against viable security threats, reducing their vulnerability and improving their compliance simultaneously.
What are some of the main security challenges faced by neobanks? What are the best practices neobanks are taking to mitigate the potential threats trying to stunt the progress of such innovative digital solutions?
Why Do Neobanks Face Security Challenges?
Why do security systems for neobanks get infiltrated?
While neobanks are highly flexible and have rapidly evolved in recent years, cybercriminals are always waiting and looking for an avenue to hack digital banks.
Cyber attackers are smartening up their phishing practices, developing more sophisticated strategies to match enhanced security techniques. Neobanks have to counterattack mischievous cyber activity and match the increased customer demand for digital banking services. It’s expected that more than 65% of people will use digital banking services in 2022, according to one survey.
More digital banks plan to have dedicated security teams in the near future, protecting online integrity and buffering protection for digital banking services. These dedicated teams are vital as the cloud-based compliances that offer more seamlessness and robustness to digital services also make digital services more vulnerable to potential cyber threats. Attack data and landscape mapping should be shared, improving protection policies and providing a counter against cybercriminals.
What are the Security Challenges that Neobanks Face?
The challenges neobanks face are wide-ranging. Most challenges occur because many neobanks are autonomous, relying largely on third-party security providers. They don’t have the resources to invest in full-time security specialists who will form and implement comprehensive, on-premise systems. Given the third-party involvement in the security framework, many security concerns persist that affect the future of digital banking.
One of the most persistent security concerns for digital banking services is malware. In neobanking, every transaction and process is facilitated online and via cloud technology. Plus, decentralized banking ledgers are used to safely house transactions. However, a large amount of thoroughfare exists throughout digital networks. Unless the digital networks are adequately protected against breaches, they are highly susceptible to malware attacks, with a single bot within a network possibly bringing down the technology ecosystem, triggering crippling expenses along the way.
There is also the issue of spoofing where cyber attackers will mimic the neobank’s URL. Such mimicking results in data theft because the pseudo page mirrors the real website, providing the same functionalities and design features. Phishing is another concern, where cybercriminals try to access credit card details and other sensitive, confidential information.
Then, there are compliance and data privacy concerns that neobanks work tirelessly to address. Given they are fully online banking institutions, neobanks must comply with several regulatory requirements, including local and standard regulations, to run efficiently. Such requirements can be a strain for neobanks and require consistent technical savvy to match them. Neobanks also need to be wary of data privacy concerns considering the reliance on third-party solutions, with many legacy security producers faltering to sophisticated security attacks. Several neobanks struggle to adopt full security setups and lack industry-standard on-premise security solutions because they are standalone firms with an insufficient support systems and financial resources.
What are the Best Practices of Neobanks to Counter Cybercriminal Activity?
How can digital banking be made safer for customers?
Firstly, neobanks must upgrade their security standards to meet compliance requirements and tighten up the digital framework.
Though the financial overhead for meeting compliance requirements may seem daunting for neobanks, sharpening compliance helps neobanks a great deal because it allows them to conduct more thorough vulnerability assessments. Periodic assessments for compliance are needed, along with penetration testing, to comply with existing requirements. Furthermore, neobanks must test all parameters of the digital networks, web apps and security endpoints. Plus, neobanks must conduct tests for authorized access as well as unauthorized access.
The more neobanks improve compliance standards and prioritize this element, they become more aware of their status, buffer security measures and have more control over their networks.
Automated mobile app security solutions also help neobanks to conduct several security tests such as API testing. The automated solutions provide manual security testing, ensuring application security without investing money in comprehensive security teams. More stringent security management is achievable using automated solutions, revealing potential and actual vulnerabilities that increase risk exposure to cyberattacks. Because cybercriminals are turning to automation for their unscrupulous activities, it’s important neobanks match such sophisticated measures and use proactive prevention methods centered around automation.
Another best practice for neobanks to adopt is the use of advanced authentication methods. Traditional authentication for bank processes uses one-step/one-vector authentication, while more modern authentication processes use two-step authentication. Neobanks use two-step authentication for every activity within their network, including logins, transactions, and data access, giving them much-needed additional security layers to fight potential cyberattacks and threats.
Neobanks are also making more data-driven decisions, with more focus on the scalability and accuracy of the data being used, successfully ingesting data from multiple sources and gathering insights to properly analyze the fraud landscape. Neobanks need sound, accurate data to produce meaningful output, using machine learning and other advanced technology to strengthen their security frameworks. Using key performance indicators (KPIs) can help neobanks understand how well their security enhancements work and allow them to make adjustments at different times.
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