By Raghav Iyer*, Exclusive to Finsiders
Think of it as an online clothing store. The business is thriving and you can see how the number of loyal customers is increasing. To promote customer retention, you decide to issue personal credit cards, offering financial benefits such as incentives to reinvest in your business. However, when doing research, you will find that to issue such a tool, you need a valid bank license. Getting a banking license is not easy. So how do other brands do it? This is where banking as a service (BaaS) comes in.
BaaS allows non-financial companies to provide financial services to consumers by integrating with banks using cloud-based APIs. The merger must be done in order to carry out legal financial transactions, as long as one of the parties has a valid banking license.
This “plug and play” approach to banking has made it easier for non-financial companies to gain a competitive advantage by providing financial benefits to customers.
For banks and nonprofits, using a BaaS approach is a way to increase brand awareness and improve perceived value. From a bank’s perspective, this will also help them increase profits, while non-banking companies can accelerate growth by attracting more customers.
However, from a security point of view, using BaaS can lead to serious financial loss if not implemented properly. Attackers can exploit the API or cloud infrastructure, exploiting the flaws they discover for profit.
According to data recently released by the Central Bank (BC), a single security incident with the leak of personal data from 160,147 Pix keys, which are under the care and responsibility of a payment company, has been reported within two days, between 3 to 5 December 2021. Information such as full name, CPF, school, membership number and account is leaked.
Appropriate security policies
The cyber world is evolving and cybercriminals are doing more. Over the years, the number of cyber crimes in the financial industry has steadily increased. Banks are an ideal target for attackers considering the amount of money they make compared to other businesses.
This is why financial institutions must ensure that security policies are integrated into the core of their business. When it comes to BaaS, there are many levels of risk, due to the following factors:
Security APIs: APIs are one of the most visible elements of a company’s website. Attackers will look for unprotected APIs that allow them to access sensitive data or launch a DDoS attack – a form of “denial of service”, a type of attack that attempt to create a website or website resources that do not exist by streaming maliciously. travel The reason is to stop receiving the service.
Problematic websites: Webhooks are widely used in BaaS because of their ability to allow multiple software systems to coordinate and share information. However, webhooks are often the target of phishing requests, redirects, and other threats that give hackers access to a website.
Open System: In order for non-banking companies to take advantage of banking capabilities, a bank must open new doors. If not properly secured, these entries can be used by hackers and lead to data breaches.
These important security factors emphasize the need for specific security policies in any organization that intends to adopt BaaS.
Fix security holes
One of the most important things to look at when building a specific security plan for BaaS is that security becomes a responsibility.
In addition, while the financial industry is complex and the market regulations are important, there is no policy designed to facilitate the creation of BaaS in a safe and risk-free manner.
Companies need to improve security standards to meet the necessary security requirements. The following steps can help BaaS organizations secure their servers:
Effective API security: The cyber landscape is constantly evolving. For an organization to be secure, it must adopt an adaptive security strategy. Financial institutions and BaaS organizations should improve API authentication to ensure data security.
Predictive analytics using AI: BaaS allows parties to share sensitive information like customer details, credit card information etc. This data must be stored in a secure location to prevent leakage. Using artificial intelligence, organizations can quickly detect malicious activity, helping to contain threats such as DDoS or ransomware.
Protect the cloud: Establishing security systems such as a cloud access broker (CASB) or a security services tool (SASE) can go a long way when it comes to protecting an organization’s cloud systems.
These actions can help BaaS parties establish security systems. Additionally, various compliance requirements require organizations to protect sensitive information and establish the necessary security policies to detect and prevent cyberattacks.
With the rapid growth of the BaaS industry, it is important that banks and non-profits pay more attention to security when developing APIs.
* Raghav Iyer is a product consultant for ManageEnginethe IT management division of Zoho Company.
Opinions in this area reflect the opinions of market experts and executives, not Finsiders.
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