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By Doug Macdonald
Partnerships with financial technology (fintech) providers have emerged as effective tools for bringing new products and services to market. By offering convenience and reducing operating costs, fintech partners can offer new ways to process invoices, provide financing, simplify payments and more.
However, the flexibility, functionality and convenience fintech providers offer may come at the expense of effective risk management. Fintechs that lack adequate controls can put your business at risk.
Despite growing awareness of cyber risks, the current regulatory environment for fintech providers is not consistent and adherence to security best practices varies significantly across the sector.
“It doesn’t matter if your supplier is the party at fault in a data breach,” says Danny Timmins, MNP’s national leader for cybersecurity. “Your customers trust
you with their information, and you will ultimately be held accountable.
“If your fintech partner isn’t providing the appropriate assurances or doesn’t understand cybersecurity, you’re putting your business at risk.”
Effective due diligence depends on two key questions:
Who owns the customer data?
Clearly define what each party can do with customer information (e.g., you may be willing to let your fintech provide aggregate customer data for analysis, but you don’t want them selling your clients’ information to a third party).
How is that data being protected?
Understand what controls and processes are in place to prevent your customers’ data from theft or misuse.
Strong fintech providers will understand the need to protect customer information and privacy. Potential partners should be able to confidently explain their security measures and be willing to demonstrate these controls. Providers that fail to demonstrate effective risk management will not be successful – and that is not a relationship you can afford to enter.
What to Look For
The benefits to partnering with a fintech should never take precedence over information security. Before agreeing to any business relationship, you should ensure your partners are compliant with standards and controls such as:
Above and beyond these standards, all parties in a fintech relationship should consult with their advisers to ensure the right controls are in place and the right reports and certifications are used to demonstrate compliance. By building risk management and compliance into your partnerships from the beginning, you’ll ensure your customers are protected and have the peace of mind to focus on growing your business.
The rise of new and innovative technologies is breaking new ground in the financial services sector. But regardless of the benefits new tools and services can offer, the first question you should always ask is, “How are my business and my customers protected?”
Related Topics:FINTRAC; Financial Institutions
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