Identifying and minimising financial frauds in the age of IoT
Cybersecurity has to be the starting point for any fintech company looking to leverage connected devices
By Sujoy Ghosh
Today, no part of human life is untouched by the digital wave. The internet has opened a universe of opportunities both social and economic, by bringing people closer to each other. While the last decade was about the evolution of social media and instant messaging platforms which made communication and collaboration faster and more user-friendly, the next decade will be about connected devices, which will allow us to be digitally synched, at all times. The proliferation of the Internet of Things (IoT) can be ascertained from a report by Cisco which suggests that in 2008 the number of things connected to the internet was greater than the population of earth. By 2020, the number is expected to reach 50 billion, about seven times the human population. Add the impact of 5G, with an estimated 20 Gbps download speed; IoT could be the biggest revolution that humankind has seen since the telephone was invented.
Slowly but surely, the IoT phenomenon has made its entry into every industry and changed the way it works. Fintech industry presents several use cases where connected devices can make the movement of funds seamless, cost-effective, and reliable. Think of a time where your designer ring also doubles up as a payment mechanism at the checkout point in your favorite store or a toll booth at the highway. In a different case, a health insurance company may assess the data about your current health from your fitness band or phone app to customize an insurance offer for you. There is also a possibility for your car sensors to share data with a vehicle insurance provider who reduces your annual insurance premium because of your good driving habits. Banks could also completely replace ATM/credit cards with smartphone-based solutions, which also double up as a tool for user authentication.
There could be thousands of different use cases on how IoT will lead the way for the fintech industry. However, there will be a new set of challenges as well. Data collection, handling and processing becomes critical with each such use case. The service provider needs to convince and assure consumers about sharing their personal data, such as health metrics. The challenge here is the number of security risks that come with the massive amount of data that gets collected and stored. In 2017, the customer database of a Vegas casino was hacked via a wifi-enabled thermometer on a fish tank. The big question for the industry is – what happens when one weak link fails to protect users against tampering or financial fraud?
A 2017 report by the White House Council of Economic Advisors cites a study by Accenture and the Ponemon Institute to suggest that the annual cost to the US economy due to malicious cyber activity could be between US$ 57 billion and US$109 billion. In India, between 2014- 2017, the banks lost close to INR 252 crore due to cybercrimes. The magnitude of this loss could be understood from the fact that this amount could have paid off 50,400 farm loans of INR 50,000 each.
With IoT, the number of vulnerable spots in the digital ecosystem will increase substantially. To tackle this, financial institutions need to revisit their approach while integrating the connected platforms to their ecosystem. The need of the hour is to continuously evaluate the risks, using a combination of human and artificial intelligence-based audits. Based on insights from here, these institutions should consider the implementation of sophisticated risk management and solutions which not only fill in the vulnerable spots but also predict future threats. Cybersecurity cannot be something as ‘good to have’. It is rather the starting point for any fintech company, looking to leverage IoT.
Apart from technology that enables safety and minimises financial fraud, fintech companies must also strive for greater collaboration with the government, other tech companies, and researchers, in order to stay a step ahead of the cybercriminals. This collaboration will help in knowledge sharing and timely reporting of cyber fraud cases, something that is rarely seen as of now. This will also make the fintech industry truly connected, and future ready.
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