Financial sector innovation and cybersecurity risks
Financial sector innovation and cybersecurity risksJune 21, 2021 •
Cenfri, with support from GIZ and in collaboration with On Think Tanks, is hosting a series of digital dialogues to explore issues at the intersection of digital governance, digital financial services (DFS) and the Sustainable Development Goals (SDGs) across emerging economies. This note puts the spotlight on the second topic, namely financial sector innovation and cybersecurity risks.
Innovation in the development and roll-out of DFS in emerging markets, including Africa, has substantially unlocked financial inclusion, with 515 million new adults opening accounts in the three years leading up to the latest Global Findex survey. However, challenges persist. Poor digital literacy, limited trust in financial institutions, infrastructure constraints, capacity gaps and budgetary shortfalls all challenge the scale of innovation, as well as the ultimate impact on consumers’ lives.
To this is added the significant threat of fraud and breaches in consumer data due to cybercrime. Security has always been one of the major pillars of financial institutions and this is even more relevant in the digital age. Cybercrime is exposing DFS providers to a range of risks, such as the risk of social engineering, where people are tricked into revealing sensitive information.
Criminals also use malware to hold institutions to ransom, or launch denial of service attacks – overwhelming the DFS provider with requests until the system crashes – to damage the reputation of the business, deny customers access to their accounts or to distract from an attempt to gain access to the system. The threat is real: for example, in 2020, a credit bureau attack in South Africa compromised the personal information of an estimated 24 million South African individuals and 800,000 businesses. These security breaches directly undermine consumer trust in DFS.
How can one manage cybersecurity risks while facilitating innovation, so that more customers are included, through better services, without compromising the protection of customers or financial institutions?
These are some of the questions that will be important to consider to strike the balance between innovation and protection that is needed at the frontier of DFS in emerging markets. The New Nexus digital meetup on financial sector innovation and cybersecurity risks will bring together development partners, researchers and technology, regulatory and policy experts to consider what this means in practice.
The convening is hosted in collaboration with the Africa Digital Financial Inclusion Facility (ADFI) established by the African Development Bank. ADFI is establishing the Africa Cybersecurity Resource Centre (ACRC), for more information, please visit www.adfi.org. To participate in exploring the topic of financial innovation and cybersecurity, follow and contribute to the digital board or contact email@example.com.