Data Privacy Concerns Escalate as Financial Sector Embraces Digital Revolution
Finextra recently published an article discussing the need for regulation and compliance in technology used within the banking and financial industry. In this article, the financial technology (FinTech) newswire discusses how the rapid digital transformation in the sector has changed the way people manage their finances.
It also talks about how the use of technology has introduced new challenges regarding data privacy and cybersecurity. Financial institutions are the top target of phishing attacks, accounting for 23% of all attacks in Q3 2022. This has been attributed to the fact that this industry has sensitive payment information of users. That raises data protection and privacy concerns, especially in light of evolving technologies in the sector, such as blockchain, AI, and cryptocurrencies. To address these, the article claims that forward-thinking FinTech companies are adopting some key strategies.
One of the strategies, according to Finextra, is embedding security into the initial design. “Privacy by Design” is a crucial practice that integrates security and data protection considerations into systems and technologies from the start. FinTech firms can deal with privacy issues, reduce risks, and follow industry-specific regulations like GDPR, LGPD, and CCPA by including privacy as an integral part of their activities.
Privacy-oriented financial organisations are also prioritising risk management and adopting an end-to-end approach, claims the article. This involves creating and documenting a risk framework tailored to regulatory and operational risks. They conduct regular testing to detect and mitigate threats effectively and empower employees to voice concerns related to risk.
According to the article, every FinTech company should strive to develop a culture that embraces and formalises the latest regulations. Some of the industry standards it lists (based on the company’s geographical location) are payment card industry data security standard (PCI DSS), ISO/IEC 27001, GDPR, revised payment services directive (PSD2), and Gramm-Leach-Bliley Act (GLBA). These can be crucial to protect user data and ensure legal and financial security.
Data privacy is very important, especially because new laws are being passed in the United States–and across the world–and more are expected in 2023. Failure to comply with these regulations puts FinTech companies at risk of legal and financial consequences. These consequences could potentially undermine the gains made through technological advancements, asserts Finextra.
At the same time, regulatory monitoring software, RegAsk, raises an important point about manual tracking of regulatory changes, calling the process “time-consuming, inefficient, and costly”. Whilst technology is helping financial companies enter the digital realm, it can also help them automate their compliance monitoring. In fact, there has been a reported increase in the use of governance, compliance, and risk management (GSR) software products across industries.
According to a report by The Business Research Company, the market size for these solutions grew from $38.11 billion in 2022 to $42.72 billion in 2023. GSR platforms automate the process of identifying and reporting any changes in relevant regulations, helping businesses–including MedTech–stay up-to-date with compliance.
With financial companies governed by stricter–and more numerous–regulations, they may find such solutions helpful in protecting their data. By prioritising data privacy, embracing compliance, and leveraging advanced solutions like RegAsk regulatory monitoring software, the FinTech industry can navigate the regulatory landscape effectively, safeguard user data, and foster trust among customers, Finextra concludes.
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