What Makes FinTech a Prime Cyber Target

Sensitive financial data, transactions, assets, and money—fintech companies are prime targets for cybercriminals. From standard phishing and poorly configured security protocols to undetected third-party vulnerabilities and AI tools, fraudulent actors leverage a wide range of methods to bypass cybersecurity measures and gain access to fintech organizations' systems and infrastructure.

Even worse, cyberattacks and security breaches often aren't the result of highly sophisticated and multi-layered actions by bad actors. Companies, especially startups, often leave loopholes open for exploitation. This isn't just human error, but mainly the sacrifice of security for development speed, which increases the attack surface in the cybersecurity posture. That's why we see the same cyber incidents year after year. The only exception is that something new emerges from time to time, such as exploiting AI and machine learning capabilities to gain even faster access to sensitive data. 

Implement Strong Cybersecurity Measures. Protect Your Data & Apps by Partnering with Fintech Cybersecurity Experts.

Common Cybersecurity Risks in FinTech

Let's look at the most popular fintech cybersecurity risks. Fixing them can help avoid most issues, and even if they do arise, it allows for a quick response without critical damage to customer trust or regulatory fines.

Phishing & Credential Theft

Phishing emails and social engineering remain among the top causes of data breaches. Malicious actors impersonate banks or executives to fraudulently obtain login credentials, thereby introducing ransomware or causing massive data breaches by controlling KYC data, API keys, or payments.

In the fintech industry, phishing victims include not only company employees but also clients who receive fake emails, SMS messages, or login pages. Support teams are also targeted, as hackers can bypass multi-factor authentication procedures and even initiate account recovery.

The best way to combat phishing is by training employees on cybersecurity threats and educating clients about the risks.

Over 90% of cyberattacks begin with phishing, making it the leading method used by threat actors to breach networks

Insider Threats

Insider attacks are among the most common cybersecurity risks. The problem is that this type of attack is often the result of carelessness. Fintech firms may partner with contractors or hire temporary employees, providing excessive access controls, and then forget to review them. Thus, the lack of properly configured access controls and their updates, as well as poor visibility within the infrastructure, leads to insider attacks that security teams notice too late.

59% of employees who either resign or are asked to leave, subsequently take confidential business information with them

Third-Party Vendor Breaches

Fintech companies heavily rely on third-party vendors, which is the result of a complex infrastructure that includes KYC procedures, gateways, cloud platforms, support, and analytical tools. Creating or maintaining such infrastructure in-house is extremely expensive.

This poses multiple potential threats. If a provider has an unpatched vulnerability, hackers will inevitably exploit it and launch a supply chain attack. 

API integrations, endpoints, security controls, downstream applications, and user data are all prone to exploitation, with one vulnerability becoming the entry point for the entire infrastructure.

Fintech firms must audit providers and check dependencies, as well as conduct vulnerability scans after each code change.

41.8% of breaches could be linked to third-party attack vectors. Fourth-party vulnerabilities accounted for an added 11.9%

Data Leaks & Cloud Misconfigurations

Many leaks occur due to poor data protection, specifically misconfigurations, including the use of default settings. The most common issues include open S3 buckets and IAM overpermissions.

A significant source of fintech cybersecurity risks is also the lack of or infrequent security reviews, which typically occurs when startups chase speedy deliveries, neglecting security above all else. Due to this rush, many configuration errors go unnoticed, leading to leaks and, ultimately, fines and reputational damage.

It's essential to conduct reviews and configure access and cloud policies to prevent breaches.

45% of data breaches occur in the cloud while common causes feature misconfigurations at 23% of incidents

Ransomware & Malware Targeting Payment Systems

Ransomware targets payment processors and financial APIs, leading to operational failures and the disruption of onboarding, settlement systems, and internal accounting. 

APIs are a common entry point for malware deployment. Compromised endpoints allow malicious payloads through file upload APIs and webhook integrations, allowing attackers to exfiltrate data before encrypting systems.

Strict input validation on all endpoints accepting files and monitoring API traffic are among the best fintech cybersecurity practices in this regard.

In 31% of financial services cyberattacks involving ransomware, the attackers also stole data in addition to encrypting it 

Fraud & Synthetic Identity Attacks

Fraud and synthetic identity theft are among the main headaches in the cyber threats landscape today. With the development of artificial intelligence, hackers have begun using generated documents and exploiting deepfake verification and synthetic identities, thereby bypassing KYC checks.

Worst of all, malicious actors are no longer simply using stolen customer data and credentials; they are increasingly trying to gradually build trust in accounts by simulating usual customer behavior, making the standard approach of implementing rule-based systems less effective. At the same time, automated API key rotation policies, OAuth 2.0 with short-lived access tokens, JWT token signing using algorithms like RS256, as well as MFA for sensitive API operations and centralized authentication at the API gateway level, help mitigate these risks.

Synthetic identity fraud accounts for only 4% of fraud frequency yet drives 7% of financial losses, underscoring its high cost and long-duration nature

AI-Driven Financial Manipulation

Among the growing cyber risks in the financial technology sector, AI is a key one. This includes not only the automation of phishing campaigns and the use of deepfakes for account validation or social engineering, but also expanded capabilities in the personalization and scale of attacks. Therefore, even robust cybersecurity measures may sometimes be insufficient. Furthermore, the ability to test different fraud patterns before launching an attack complicates the task of building protection for sensitive financial data, systems, and infrastructure.

The problem of AI fraud is forcing firms to focus more on strong cybersecurity. This includes:

  • Expanding rule-based detection with behavioral analytics

  • Implementing multi-layer verification, especially for high-risk actions

  • Developing AI fraud detection systems

  • Training and increasing awareness against deepfakes

AI-driven fraud constitutes 42.5% of all detected fraud attempts in the financial and payments sector while 29% of those attempts are considered successful

What Industry Risk Reports Reveal About FinTech Security

Security reports show that the prime targets for cyberattacks are API infrastructure, cloud environments, and identity systems. This is because these vectors, when exploited, provide the best entry points for accessing infrastructure and launching supply chain attacks.

Among the main reasons why startups developing fintech applications encounter breaches is often rushed development, putting speed of development above security. As a result, firms end up with a good product, perhaps even innovative, but with a weak security posture, which can easily ruin all efforts, as security and compliance are critical when it comes to finance.

Another concern is a noticeable increase in the use of AI for fraud, which is already applied in half of all cases. In addition to automation and attack testing, which increases the effectiveness of attacks, a problem is the reduced entry into the cybercriminal world. This means that your security posture will face a greater number of attacks, discovering vulnerabilities. As a "bonus," lowering the entry level means more criminals, and while some of them remain unsuccessful hackers, others may succeed, creating headaches for the financial industry.

How to Build a Resilient FinTech Security Posture

Protecting sensitive data and infrastructure is a top priority for fintech companies. Given the specifics of the most common vulnerabilities, attack vectors, and methods, startups should make security a continuous, integral part of their development. It's much faster, cheaper, and easier to prevent a vulnerability from moving to the next stage of development than to release patches after a vulnerability is discovered, or even worse, after a hack.

At Jappware, we develop custom solutions for fintech organizations and implement a DevSecOps approach to development. We help companies build a strong security posture and maintain regulatory compliance.

By collaborating with our team, startups can benefit from:

  • Secure software architecture and SDLC integrations

  • Properly configured access controls

  • Secure and scalable cloud infrastructure

  • Protected APIs and payment gateways

  • Continuous security monitoring in CI/CD

  • Robust incident response and recovery plans

  • Regulatory compliance 

Future of FinTech Cybersecurity — Trends to Watch

  • Rise of AI-powered attacks. The use of AI and ML for phishing, fraud, and identity theft is steadily increasing, making defense against automated attack bots/systems a key vector in the future.

  • Authentication and identity protection. With deepfakes and the capabilities hackers gain through identity theft, strengthening authentication procedures (MFA, behavioral analytics, Zero Trust) and verification will become an even greater priority.

  • API monitoring, cloud hardening, and real-time infrastructure visibility. As a trigger for supply chain attacks, protecting cloud infrastructure, APIs, and third-party integrations will remain critical, necessitating increased investment in monitoring, hardening, and visibility solutions.

  • Behavioral intelligence and analytics. Since rule-based antifraud systems are less effective in detecting AI-powered fraud, one of the main trends in the coming years is the use of behavioral analytics and intelligence to prevent fraud.