Data Security in Fintech

Sergey Kondratenko: Data Security in Fintech – Protecting Against Fraud and Scams at All Levels

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Fintech expert Sergey Kondratenko believes that information security is one of the important directions in the industry. This is especially crucial in the context of financial technologies, which handle vast volumes of confidential data.

Financial scams have been a serious problem for many years. According to a composite report from the Association of Certified Fraud Examiners (ACFE), up to 5% of corporate revenues disappear due to fraud annually — this is estimated at $4.7 trillion worldwide.

Sergey Kondratenko proposes strategies that financial institutions can employ to curb the growth of financial fraud (scams) through the network and ensure data security:

  • Advanced Technologies. Financial institutions can implement cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and big data analytics to detect anomalies and prevent fraud at early stages.
  • Monitoring and Detection Systems. The expert is convinced that financial institutions need to strengthen monitoring systems to timely detect suspicious transactions and activities.
  • Multi-level Authentication. Using multi-factor authentication can enhance the security of accessing financial accounts and reduce the risk of unauthorised network intrusion.
  • Training of Staff and Clients. Financial institutions should conduct regular training programs for staff and clients to raise awareness about fraud methods and protection measures.
  • Strict Security Policies and Procedures. Implementing strict security policies and procedures, including data encryption, regular auditing, and access control, can reduce vulnerabilities and risks of financial fraud.

Applying these strategies can help financial institutions contain fraud threats, comply with regulatory requirements, and protect the interests of their clients.

Digital Security: Effective Strategies Against Fraud in the Fintech Sector – Sergey Kondratenko

The transition to digitalisation in the banking world plays a decisive role in predicting and combating fraud patterns. Specifically, this involves the theft of user personal data and using this data to steal money. According to Sergey Kondratenko, criminals are increasingly using digital methods to breach data systems. For example, 71% of financial institutions reported security breaches caused by business email compromise (BEC) last year. This poses a demand for financial service providers to deploy robust software to reduce the likelihood of fraud and protect clients.

Basic Level of Client Security Includes:

  1. Implementation of a robust client authentication system.
  2. Implementation of two-factor authentication.

The Role of Identification and Authentication in Protection Against Fraud

According to Sergey Kondratenko, one of the most effective methods of securing client data is using two-factor authentication, also known as 2FA. How does it work?

Two-factor authentication is a procedure where the user must provide two confirming elements to prove their identity. These can be basic data such as a username and password or more complex, for example, security token or biometric data: this can be a fingerprint or facial scan. 

“This mechanism plays a key role in financial technologies as it adds an extra layer of protection,” explains Sergey Kondratenko. “Even if a criminal manages to access user data, without the one-time code, they cannot enter the account.”

The expert adds that two-factor authentication has become a mandatory standard in financial technologies. It provides protection for accounts and personal information from unauthorised access and can significantly reduce the risk of fraud.

Client authentication is a crucial aspect of data security in using financial resources.

“Strict Client Authentication (SCA) is a procedure aimed at verifying the authenticity of a person’s identity to prevent potential fraud. This process is an integral part of the Second European Union Directive on Payment Services (PSD2), which came into effect in January 2018,” says Sergey Kondratenko.

Banking institutions play a key role in financial technologies and possess the necessary resources to ensure compliance with SCA PSD2 requirements. Therefore, fintech companies should actively collaborate with banks. By working together, they can provide their data security and protect clients from potential fraud cases.

Sergey Kondratenko: Risk Management and Protection Against Scams

According to the Association of Certified Fraud Examiners, organisations lose approximately 5% of their revenues to fraud or scams. The average cost of each case of financial crime is $117,000. 

Sergey Kondratenko once again emphasises that the problem of online fraud cannot be ignored. It will not disappear on its own. Risk management and protection against scams become priority tasks for fintech companies, affecting both small startups and large corporations. Let’s consider what methods and technologies are used in the industry to minimise risks of hacking, fraud, and scams.

  1. Enhanced User Authentication

One of the key aspects of protection is strengthening user authentication and authorisation processes. The use of multi-factor authentication (MFA), which includes not only passwords but also biometric data (fingerprint recognition, facial recognition) and one-time passwords (OTP), significantly increases account security.

  1. Use of Artificial Intelligence and Machine Learning

Modern fintech companies actively implement artificial intelligence and machine learning algorithms to analyse transactions in real-time. This allows for detecting unusual behaviour patterns that may indicate fraud or scam attempts. Systems can automatically block suspicious transactions and require additional confirmation from the user.

  1. Data Encryption

Fintech companies use modern encryption methods to protect user data confidentiality and prevent data leaks. This applies to data stored on servers and data transmitted over the Internet. Using security protocols such as TLS (Transport Layer Security) is a standard in the industry.

  1. Continuous Updating and Security Testing

Security of fintech applications is impossible without regular software updates and the use of patches to address known vulnerabilities. Companies also conduct regular penetration tests to identify potential weaknesses in their security systems.

  1. Training Employees and Users

Informing employees and clients about potential risks and methods of protection against scams plays a crucial role. Regular training and seminars help raise awareness about new methods of fraud and ways to prevent them.

  1. Collaboration with Other Organisations

Fintech companies often join associations and partnerships with other organisations in their industry to share information about new threats and best security practices. This collaboration allows companies to stay one step ahead of fraudsters.

  1. Compliance and Adherence to Regulatory Requirements

Compliance with legislative and regulatory requirements such as GDPR in Europe or the Dodd-Frank Act in the USA is also important for fintech companies. This not only helps avoid fines and sanctions but also maintains user trust in the company.

To combat rising risks, organisations must strategically approach the problem. Expert Sergey Kondratenko asserts that a foundational factor is the formation of a unified culture of combating fraud, minimising fragmentation, and encouraging openness. Fintech companies are more likely to prevent fraud or protect their clients if they are proactive, take the issue seriously, and invest resources in innovative solutions.

Also Read: Digital Asset Protection: Strategies for Business Security 



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