The digital payment sector will expand at 9.52% annually from 2024 to 2028 to $16.59 trillion, according to Statista. As a result, our financial lives are moving to our phone screens—if they aren’t there already.
As digital payments grow, so do security threats. Cybercriminals are ever-changing, and fraud prevention is a top priority for fintech companies. While established companies invest heavily in in-house security operations, startups don’t have the resources to do so. So how can fintech companies—big and small—develop secure mobile apps that protect users and stay ahead of threats?
Key Fintech Security Challenges 2025
2025 has its own unique set of security challenges that must be addressed by app developers in order to protect users and maintain their trust. Some of the key challenges include:
1. API Attacks
Fintech apps use APIs (Application Programming Interfaces) to communicate with banks, payment processors, and other services. If an API is not implemented securely, hackers can utilize it to steal data or take over accounts.
In 2023, this happened to Revolut. Hackers exploited an API vulnerability, gaining access to personal data from over 50 million users, including names, addresses, and phone numbers.
2. Phishing
Hackers often trick users into revealing login details by sending fake emails, messages, or app notifications that look authentic. This is called phishing, and it’s the easiest method for cybercriminals to get away with money.
Usually, it goes this way: a user gets a message that appears to be from their banking app, asking them to click on a link and enter their password. The link takes them to a phishing website that steals their credentials, which are used to instantly drain accounts. Lately, this strategy is much more effective and can impact even the most cautious user. Deepfakes make it possible to steal identity, fake voices on phone calls, and bypass authentication.
3. 3rd Party Provider Attacks
The majority of fintech apps make use of third-party services, like cloud providers or payment gateways. If any of these partners do not have adequate security, hackers can use them to get into the fintech system. They infiltrate a third-party software provider, inserting malware into an app update that is used by thousands of clients.
4. Apps Clones and Mobile Malware
Attackers create fake versions of popular fintech apps to trick users into downloading them. The fake apps steal login credentials and financial data. This is like the old trick with wrong banking websites, where you don’t notice the typo in the domain name, until it’s too late. Some malware can also quietly install itself on a user’s phone and steal sensitive information.
For example, a user can download what they think is a budgeting app, but it’s malware that records keystrokes and banking passwords.
5. Data Breaches and Weak Encryption
If sensitive data isn’t strongly encrypted, it’s easy for hackers to take during a cyberattack. Fintech companies handle enormous amounts of financial data, so they’re high-reward targets for breaches.
Maybe you’ve heard of the Capital One Data Breach (2019) – one of the largest financial data breaches in history, exposing the sensitive data of over 100 million U.S. and 6 million Canadian customers. A hacker exploited a misconfigured firewall at Amazon Web Services (AWS), gaining access to personal information, including names, addresses, credit scores, and Social Security numbers. The breach cost Capital One $190 million in settlements, and much more in reputation. But it’s hard to put a price on the damage inflicted upon the victims.
6. Legacy Systems
Many fintech firms continue to use old technology, referred to as legacy systems. These systems tend to be more vulnerable compared to modern systems, as they lack advanced security features. Moreover, as technology advances, it becomes harder to find professionals who understand these old systems, which can result in security lapses. For example, legacy systems might not be compatible with new encryption standards, making sensitive information an easy target.
7. Compliance Failures
Fintech companies are required to adhere to tough regulations designed to protect user data. Non-compliance with these regulations is punishable by substantial fines and reputational damage. It can also create security vulnerabilities that cybercriminals can exploit. For example, inadequate anti-money laundering measures can allow criminal conduct to go undetected, as in cases where banks were fined for poor compliance programs.
Sounds overwhelming, especially considering that it’s nearly impossible to ensure 100% security. As well as banks were always being robbed despite evolving security measures, the same fate awaits the financial apps. Hackers might get creative and come up with a new way to get what they want. What you can and should focus on, however, is to cover all the known areas, and keep your hand on the pulse. So, what can you do?
Top Security Solutions in Fintech Applications
If you’re a fan of Pareto rule, here are the 3 non-negotiables that will take up 20% of your efforts, while bringing 80% of results security-wise:
1. Evaluate Third-Party Security
As a fintech app, you’ll have to work with vendors and partners. It doesn’t matter how secure your app is if you have to share some of its data with insufficient software. You should always properly vet third-party vendors, frequently check their security, and scan for vulnerabilities to prevent supply chain attacks.
2. Comply with Industry Standards
To create a solid security foundation, fintech companies need to adhere to established security standards, such as those issued by the New York Department of Financial Services (NYDFS). Or here is a good cheat sheet by OWASP that will keep you in check while planning your security measures. Generally, just make it a habit to regularly go through their website to see what’s new. These guidelines center on leading practices and can provide insight into the latest threats.
3. Upgrade Old Systems
First of all, if your team is focused on endlessly patching your legacy system, they might overlook important issues. Secondly, as we mentioned earlier, the older the system, the less likely it is to integrate with the latest tech. Bad actors know the ins and outs of older versions of most widespread software, that’s why they specifically target the companies that visibly underinvest in innovation. Companies that are obsessed with upgrading to the latest versions (within limits) also invest in their peace of mind, knowing that hackers still don’t know their ways around new tech.
Now, following are some of the best available security solutions today, along with their advantages and disadvantages:
Data Encryption
Data encryption turns sensitive information into unreadable form, so only the intended individuals can access it.
Pros:
- With data encryption, even if unauthorized users look at it, they cannot read or take advantage of the information.
- Many financial regulations necessitate data encryption, which ensures lawful compliance.
Cons:
- Encryption will slow down data processing performance because of the additional computational overhead.
- It is difficult to manage encryption keys securely with sophisticated systems and protocols.
Multi-Factor Authentication (MFA)
MFA requires users to provide more than one form of verification before accessing an account, offering security in addition to a password.
Pros:
- MFA adds more layers of verification, reducing the risk of unauthorized access.
- MFA has the ability to increase user trust in platform security.
Cons:
- Additional authentication processes can be cumbersome, affecting user experience.
- MFA solution implementation can include heavy technology and infrastructure investment.
Secure API Integration
Securing Application Programming Interfaces (APIs) ensures data exchanged between services is secure from unauthorized access and manipulation.
Pros:
- Safe APIs ensure data exchanged across services remains sound and secure.
- APIs enhance seamless integration of third-party services, adding to functionality.
Cons:
- Securing APIs carelessly makes the doorway open to hackers.
- Constant upgrading and scanning for threats are essential to combat increasingly evolving vulnerabilities.
Security Audits and Penetration Testing on Regular Basis
Regular testing of security controls ensures that vulnerabilities may be identified and addressed before their exploitation.
Pros:
- Regular testing allows for early identification and mitigation of security exposures.
- Indicates adherence to industry standards and regulatory requirements.
Cons:
- Testing and auditing take time, necessitating experienced experts and financial investment.
- Testing can cause interruptions in normal operations if not managed correctly.
Tokenization
Tokenization replaces sensitive data with proprietary tokens or identifiers that reduce the exposure of risk in data breaches.
Pros:
- Replaces sensitive data with tokens, reducing the likelihood of exposure during transactions.
- Simplifies compliance operations by decreasing the amount of stored sensitive data.
Cons:
- Tokenization on current systems is complicated to achieve.
- Tokenization processing requires additional resources and infrastructure.
Biometric Authentication
Utilizing unique biological traits, e.g., fingerprints or facial features, to verify user identities.
Pros:
- Biometric data is unique to each user, and it is difficult for impostors to obtain access.
- Facilitates quick and easy authentication without the need to remember passwords.
Cons:
- Storage of biometric data raises questions about the privacy of users and data protection.
- Biometric systems sometimes misidentify users, leading to access issues.
Behavioral Analytics
Monitoring user behavioral patterns to determine anomalies that may indicate fraudulent activity. Basically, an advanced version of your bank calling you when you use a credit card abroad.
Pros:
- Scans for malicious activities in real-time, facilitating instant response to potential threats.
- Provides ongoing monitoring without disrupting the user experience.
Cons:
- Ongoing monitoring may raise privacy issues among users.
- Requires sophisticated algorithms and infrastructure for effective monitoring of behavior.
Wrapping Up
Basics such as strong authentication, encryption of data, and secure APIs already go a long way to safeguard your fintech app. Nevertheless, there’s always some aspect that needs improving as threats emerge and security practices evolve. The key is being proactive and ensuring your system remains safe.
If you do have questions regarding how to build a secure financial app, reach out to us. We are technology transformation experts and can keep your system up to date. Feel free to query us for other questions on application development too.
Take a look at our case studies and discover how we’ve helped companies like yours improve security and grow with confidence.
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