By Stuart Jubb, head of consulting at Crossword Cybersecurity, looks at how fintech start-ups can maintain their agility while reducing risk with supplier assurance
The bar of entry to becoming an operator in the financial services industry is understandably high as it is necessarily heavily regulated. The UK financial sector has evolved rapidly over the last five years with the growth of fintech businesses looking to drive innovation into the banking industry. As well as developing technology, new entrants must pay great attention to meeting the requirements of the regulators as well as ensuring that a ‘privacy by design’ approach is taken from the outset. There is a risk that founders might focus all of their energy into the development of innovative and cutting-edge technology offerings, but at the detriment of meeting the demands of the regulator and broader privacy requirements.
Exciting growth that must be regulated
One of the key catalysts for the growth in the Fintech industry has been the Payment Services Directive 2 (PSD2), also known as Open Banking. PSD2 regulations ensure that banks create mechanisms to enable third-party providers to work securely, reliably and rapidly with the bank’s services and data on behalf and with the consent of their customers.
The FCA has been pioneering in encouraging the growth of the fintech sector in London through their regulatory sandbox programme. Since its launch in 2016, 89 firms have so far been accepted to test innovative products and services. The combination of this programme with the PSD2 legislation has seen huge growth in the UK’s fintech sector with investments growing 38% from 2018 to 2019 to a massive $4.9 billion of investments. The development of new and innovative applications and services is great for consumers, businesses and the banking sector as a whole, but each of those groups must protected with the same gusto that the sector is known for. Regulation and legislation in the sector remains far reaching and for new entrants can be complicated to navigate, particularly as they are typically fast-moving start-ups used to working with agile methodologies and utilising a range of open source and third party technology providers to bring their service to market rapidly. This kind of technology supply chain comes with risks that need closely managed, and as we’ll come on to supplier assurance has a key role to play here.
FinTech’s and cyber security
Unsurprisingly, information and cyber security feature heavily across much of the existing legislation that firms will need to consider. Legislation exists in all jurisdictions and the more regions a firm operates in, the more legislation they will need to comply with. In the UK the FCA’s handbook raises security in the section focussed on Processes and Systems (13.7) that in turn is concerned with operational risk. Generally, there is an ongoing focus on Operational Resilience in the UK financial regulatory environment also seen in the Operational Resilience consultation launched by the Prudential Regulatory Authority (PRA) in December 2019.
The services a fintech business is offering and where it operates will define the security regulations it will be required to meet. PSD2, for example, has robust security measures within the legislation. Controls are mandated with organisations having to implement “an effective operational and security risk management framework” and the “framework should focus on security measures to mitigate operational and security risks.” The framework must also encompass outsourcing arrangements where appropriate so if a company outsources any of their service provision to a third party – this supply chain risk must be understood and monitored as well. The framework needs to cover a broad range of security considerations including Risk Assessment, Protection (including Data Systems Integrity, Access Control, Physical Security), Detection, Business Continuity and Testing of Security Measures.
The security themes that we have spoken about so far are part of a number of regulatory standards including, the Payment Card Industry Data Security Standard (PCI DSS) if card data is processed, stored or transmitted by the service. FintTech startups, as well as established firms, must also consider local differences in legislation. For example, those operating out of New York State, must consider the New York State Department of Financial Services 500 series on Cyber Security (NYDFS 500).
There are common themes across all of these requirements because after all, their intent is much the same, to ensure that firms operating in the financial services industry are taking the right approach to reduce the risks of doing business. Firms should look at adopting an industry standard as a baseline to begin to satisfy all the areas of legislation that may apply to them. Many of these regulations draw upon standards such as ISO27001 and if this is used as a baseline, the controls in ISO27002 can be mapped across all the requirements that are applicable to the firm. Fintech businesses are often building APIs and as such must enter the market with the European Union General Data Protection Regulation (GDPR) ‘Privacy by Design’ principle at the heart of what they do.
As an example, from the cyber security specialist perspective, they typically approach these responsibilities as short-term, single-moment-in-time, instant assessments – often required on top of their day job of protecting the organisation’s IT assets and systems. It’s also common that technical cyber specialists are asked about assessing standards, cyber controls and governance – an area in which they may well have no experience. They’ll carry out these tasks as best they can, but won’t always see them as strategically important.
FinTech needs supplier assurance
The key point is that firms need to be thinking about how they build in supplier assurance as part of meeting these security and broader regulatory requirements from the outset, because the problem gets bigger and harder as companies increase their involvement with third parties up- and down-stream in the supply chain.
Technology can automate the supplier assurance process, making it much easier to regularly review that all parties meet the necessary requirements and demonstrate due diligence. Doing so, means companies are not only compliant, but mitigate security risks. It also proves to parties, that systems and data can be connected, to either expand the service, in the case of a technology provider or as a customer of the service. Additionally, when raising funds for expansion and growth, investors are highly likely to undertake due diligence, and an established third-party assurance process can greatly simplify this.
Remember too that good software assurance practices do not just allow you to ensure that your suppliers meet the requirements set by you and your industry. They make it possible for other companies to rapidly have confidence in your organisation, when they are considering a partnership that will make you part of their supply chain.
Third-party assurance matters, and it’s better to start while small using processes and tools that will scale with your fintech aspirations. Growth can be rapid in the sector, with small companies far more agile and able to jump on new opportunity. The trick is to may sure that the processes are in place to ensure that ability to ride the wave does not become your undoing.
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Shining a spotlight on operational resilience and cyber-risk in financial services
By Miles Tappin, VP of EMEA for ThreatConnect, explores why the financial services industry must build a cyber security strategy in 2020
The new digital landscape has welcomed financial institutions with open arms. Emerging technology such as Artificial intelligence (AI), crypto-currencies and big data have shown widespread benefits throughout the years, particularly how they have driven innovation and change. When it comes to retail banking, fintech providers have quickly taken the chance to offer personalised services to ensure they remain relevant to their target market and stand out among their competitors.
This has been particularly evident with Klarna, now Europe’s most valued fintech firm. Providing payment solutions for online storefronts, consumers are now able to shop and pay later with top retailers including the likes of H&M, Ikea and Zara. This is just one example of how easy it has become to successfully and strategically disrupt the payments sector.
With several new players entering the banking scene, traditional financial institutions are making sure that they stay one step ahead and are developing robust digital ecosystems that deliver omnichannel service models. However, this comes at a price. As technological change becomes part and parcel to remaining relevant in the sector, the industry needs to be aware of the cyber security challenges that may present themselves and how to overcome them.
2020: The year for cybercriminals targeting financial services
2020 has become a definitive year for cybersecurity in the financial services industry. Financial institutions are a lucrative target – they hold highly sensitive information and have a mandate to protect the personal information of their customers. It started with an unprecedented attack against Travelex where hackers successfully took some of the currency providers offline for nearly a month. Then came Coronavirus which sparked a new wave of malware and phishing threats. Research from VMware Carbon Black Cloud revealed that threats against financial institutions have surged by 238% since the start of the pandemic.
The renewed interest from cyber criminals comes at a time when regulators are paying close attention to the resilience of the sector. After a string of IT failures and breaches, financial organisations in the UK have been given a mandate from regulators to improve operational resilience. This means ensuring business models can withstand disruptive events from hackers or adversaries and quickly recover to protect the stability of financial systems.
In December 2019, the UK’s financial regulators published a series of consultation papers outlining their proposed approach to achieving greater operational resilience. The proposals suggested that financial institutions will be required to map out the systems and processes that support business services in order to identify any potential vulnerabilities that would pose a risk to the stability of the UK financial system or the firm’s standing.
Working together in tandem
Where cybersecurity used to be a classic back-office concern, it’s now a central part of digital strategies and a key pillar of both reputation and customer retention – financial legislation leaves no room for failure. All financial institutions need to ensure they have full visibility of their systems and can detect any potential threats.
The challenge for financial institutions is making the security tools they have purchased separately work together in tandem. Security teams buy a firewall, an email filter, threat intelligence feeds, antivirus software or enhanced endpoint protection, and whatever else they need individually. Each of them does a good job but they don’t talk to each other and valuable time is lost tending to individual systems that become a burden to run. At the same time, running multiple security systems is expensive. The more systems you have, the more highly skilled staff you need to manage them, and they’re few and far between.
The importance of sharing across communities
To reduce complexity and simplify decision making, financial organisations need to unify processes and technology to harness the security intelligence that comes from across their own security programmes and external sources to drive down risk. However, no financial institution can tackle the problem alone. Experienced threat actors using advanced techniques are constantly targeting the financial sector. The industry needs to come together as a whole to foster a sense of collaboration and data sharing.
In the same way that financial institutions have introduced open banking to deliver a fairer service to customers, the same needs to apply to security – all parts of the financial ecosystem need to unite and share information to learn from one another and succeed in the fight against adversaries that operate across borders.
By sharing alerts on cyber hazards and risk across financial institutions and with law enforcement, government agencies and other relevant authorities, it’s possible to build industry specific insights into cyber security threats and quickly pivot to gain more information on those specific threats and threat actors. By working together, a picture can be painted on threats coming from all manner of malicious activity, from malware to ransomware, to phishing and software vulnerabilities.
Creating a single source of intelligence
Having the right intelligence is not enough to ensure that intelligence is turned into action. Breaking down information and process silos across security teams allows financial organisation to analyse and act on the most pertinent information. Everyone has access to the risk and threats that matter most, and orchestration and automation of response helps overwhelmed security teams prioritise response plans and improve efficiencies in their security programme.
Integrating internal security tools and technologies, while also connecting to external sources of intelligence, creates a single source of intelligence that feeds operations and enables organisations to direct action against the threats that matter most. The outcomes of those actions further feed intelligence, providing the ability to further refine the efficacy of the entire security lifecycle.
This approach provides a continuous feedback loop for the people, processes and technologies that make up the security programme. It allows financial institutions to keep up with threat actors that have consistently adapted their methods to profit at the expense of the financial industry. Something that won’t stop anytime soon.
While financial services institutions tend to operate with security front of mind, there is still an opportunity to collaborate more within the industry and increase intelligence sharing, so CSOs and CTOs can understand as much as they can about the threats they are facing. For example, what types or variants of malware have been used to steal, delete, or ransom personal identifiable information or IP specific to financial services? What ransomware has been used in attacks against other organisations within the industry? How does this ransomware work and how does it ransom the targeted data? Ultimately, the more you know, the better and quicker you’ll be able to respond to a new threat and remain protected.
Blackline reveals CEO succession plan
By President & COO Marc Huffman appointed CEO as of Jan. 1st, 2021;
Founder Therese Tucker to serve as executive chair
Accounting automation software leader BlackLine, Inc. (Nasdaq: BL) today announced that the board of directors has elected Marc Huffman as chief executive officer, effective January 1st, 2021. Mr. Huffman currently serves as president and chief operating officer. Therese Tucker, who has served as CEO since founding BlackLine in 2001, will continue to serve on the company’s board as executive chair.
A seasoned SaaS (Software-as-a-Service) executive with more than 25 years of experience driving growth at successful software companies, Huffman joined BlackLine in early 2018 as chief operating officer. He was named president in February 2020, leading the company’s worldwide sales, marketing, technology and all customer-facing organizations. Since Huffman joined, BlackLine has scaled its sales and customer success teams, strategically repositioned its go-to-market plan, completed a global reseller agreement with SAP, established a subsidiary in Japan, and entered into a number of strategic alliances with the world’s leading consulting and advisory firms.
Prior to BlackLine, Huffman served as president of worldwide sales and distribution at NetSuite. During his 14-year tenure, NetSuite grew from $3 million to $1 billion in annual revenue and became recognized as a global SaaS powerhouse.
“I’ve been so pleased with the leadership Marc has demonstrated over the past two and a half years, most recently driving our response to the COVID-19 pandemic – mitigating disruption to the business and our customers. Because of Marc’s leadership, skill set, cultural alignment and stellar performance, BlackLine is in a better position to grow and scale than ever before,” said Ms. Tucker. “I am incredibly proud of what we have achieved at BlackLine and believe Marc is the kind of leader I can trust to take our customer-centric values, vision and growth to the next level. I am also thrilled that in addition to providing strategic oversight as executive chair, I will now have more time to focus on the areas I love most – product innovation and customer success.”
The announced transition is part of a multi-year succession plan that has involved seeking potential successors, bringing the right person on board, seeing that person excel, and Tucker and Huffman working methodically together over several years to build out the leadership team and strategic growth plan and ensure values were aligned.
“I am ready and excited for this next step. BlackLine is a special place with a strong culture and I am looking forward to leading the company through its next phase of growth,” said Huffman. “We’ve got the team, the plan, and now we are focused on execution as we continue to scale the business and make BlackLine an indispensable platform for Finance & Accounting organizations globally.”
Commenting on the CEO and executive chair changes, John Brennan, BlackLine’s chairman of the board, said, “We are excited to announce Marc’s appointment as CEO. His experience successfully expanding and scaling NetSuite into new strategic and geographical markets is invaluable as BlackLine continues to penetrate what we believe is still an untapped market. Coupled with his proven track record at BlackLine we are confident that, under Marc’s leadership, the company’s momentum, growth and success will only accelerate.”
Mr. Brennan added, “Therese has been a strong and inspirational leader since she founded BlackLine just over 19 years ago. Her unwavering determination and commitment to both customers and employees has been the driving force behind the company’s incredible journey from start-up to global market leader. We look forward to having her serve as executive chair, a position in which she will continue to shape the future of the company she has built from the ground up.”
Upon Tucker’s assumption of the executive chair role, Brennan will serve as the board’s lead outside director.
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