Collaboratively written by Danielle Teboul and Ajit Padmanabh on Digilah (Tech Thought Leadership).
In this article Danielle (Financial Investment expert) and Ajit (AR, VR and Web 3 expert) jointly explore:
- Fintech Cyber Security dos and donts
- Investment education on Finance 101
Below is a video by the writers themselves high lighting the key take aways from the writeup. Reach out to them if you want a 101 with them to learn more.
Danielle’s thoughts on Fintech Cyber Security
The need for cyber security has become paramount in today’s modern age, particularly in the fintech and financial space. Being in this industry myself, I handle sensitive client data daily, and have access to their online wealth accounts; it is therefore vital that their information stays safe and inaccessible to fraudsters. Robust security measures must be in place, and I am constantly having to upgrade and refresh my skills to keep my clients safe.
Whilst fintech has allowed for financial services to become more streamlined, convenient, and efficient, it has somewhat opened the floodgates for cyber-attacks and threats. Harvard Business Review reported a 20% increase in data breaches from 2022 to 2023, and this is set to increase further as the years progress. Not only does this mean we have to constantly upgrade our software and infrastructure, but human area can become a massive opportunity for cyber criminals. I truly believe that a two-pronged approach of new regulatory processes, along with using AI in cybersecurity is a dynamic tactic to tackle this ever-evolving problem.
Cyber security is now seeing the same level of regulation as every other type of security, which means that fintech companies in particular must adhere to stringent rules and procedures. Regulations such as the General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI DSS) must be followed. Whilst of course this is best practice to ensure that clients’ data is safe, it therefore adds an extra strain onto the company and its employees; this may lead to delayed admin processes, longer lead time for new business submission and therefore, a time delay in profit for the company. Time is money, and the longer it takes for profit to be made, it essentially means smaller margins for the company.
One way this can be tackled is with Artificial Intelligence. Whilst using manpower takes time and money (not to mention the risk of human error), AI systems can scan masses of data sets, analyse data, spot anomalies, and therefore detect possible cyber risks before they have even happened. This preventative method ensures that risks are managed efficiently, and before they become breaches, which means a safer system for the clients, and mitigates possible reputation risk for the company.
However, AI is not a final solution; with cybercriminals’ techniques ever evolving, it means that AI will have to do the same. Not only that, employees must keep re-training when new systems are introduced, to ensure that human error is kept to a minimum. Moreover, one must ensure that the third-party companies engaged to deliver this AI system, is also compliant, safe, and follows the stringent regulations set in place for fintech companies to adhere to.
But the buck doesn’t just stop with the company- clients and customers must also stay vigilant so that they don’t fall victim to cyber-crime.
For example, being able to spot a phishing email, not clicking on unknown links, and not giving out all your banking details to someone over the phone. In order for an individual to be savvy, particularly when it comes to fintech and online financial transactions, they must be aware of risks and know when and where it is appropriate to give out their financial information. If you engage a professional for your financial planning, of course you will have to make them aware of your personal details and possibly even bank details. But do take note that they should be encrypting or password-protecting any sensitive documents that are being sent to you.
Even if you are planning your finances alone, and are using platforms for your investing, be sure to do your own due diligence; ensure that the apps you are using are regulated and have secure payment systems. Do take note that most will require you to upload some form of identification, as well as declaring your tax residency. Whilst to a layman, this may seem intrusive, this is actually a sign that the platform is doing its part to adhere to compliance and regulations. If they don’t ask of these from you, it could be a sign that the platform is not regulated.
For those that plan their investing and finances alone, cybersecurity becomes an even bigger risk, as this is normally something that a large corporation would have to ensure the safety of first, but now it is being left to the individual investor. If you are considering planning your finances yourself, having basic understanding and knowledge is incredibly important.
Therefore, I often suggest that people understand four main areas before they start investing, which I will explore further in this article.
Over to my co-writer Ajit who introduces how metaverse and block chain technology will probably bring future solutions to curtail fraud in our highly susceptible finance industry.
Ajit’s thoughts on Fintech Cyber Security
Background
When we analyse the extent of online fraud and scams, it’s a bit bewildering! As per FTC in US, online scams tend to harm more young people than the elderly. In 2021, Gen Xers, Millennials, and Gen Z young adults (ages 18-59) were 34% more likely than older adults (ages 60 and over) to report losing money to fraud like online shopping scams as well as job scams. Most of the elderly, on the other hand, are victims of tech support calls duping them of their earnings. The median reported loss was $800 for people 70-79, and a whopping $1,500 for those 80 and over. On the other hand, the median individual reported fraud loss by people 18-59 was $500 in 2021.
As the fastest growing economy in the world, India is no stranger to online frauds. 62% of the frauds affect the age group 18-52 as per data from 2018. With robust infrastructure around UPI, this number is bound to decrease.
Blockchain Technology to the Rescue
With weakening currencies in countries like Zimbabwe and Venezuela and hackers from China and Russia, the attacks will only amplify, in the years ahead. There is an urgent need to safeguard individual financial earnings, leveraging technologies like AI and Blockchain. While they are large and independent technologies, they form a core part of the Metaverse. They are the processing as well as the security layer of the Metaverse. Many futurists have predicted that our interactions will be with digital twins of institutions and banks in the Metaverse.
Fast forward to 5 years from now and the permutations and combinations of frauds and financial losses for individuals will only amplify. The promise of Blockchain is to essentially safeguard the assets and investments of individuals as well as organizations. By utilising blockchain, banks can set up a secure and tamper-proof ledger of all financial transactions.
With real-time monitoring and instant access to transaction records across the blockchain, organizations can track and analyze transactions in real-time, allowing them to detect and prevent fraud as it occurs. The trust architected within the technology enables seamless detection.
Challenges with Emerging Technologies
As has been the scenario with any technologies when they are new, be it Television or Computers or even Gaming, new technologies take time to be accepted mainstream owing to numerous challenges. Some of the challenges with Blockchain technology are as follows.
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- Evolving Technology – Until a technology is adopted mainstream, the maturity of the technology is determined by its limited set of users. The technology is tested for various scenarios by the very same users. Much like the planets move across the solar system with time, in addition to their rotation and revolution, the world is ever evolving with all its volatilities, uncertainties, complexities and ambiguities. No system can be tested for robustness without the volume of usage which only comes with higher adoption. Blockchain technology needs to cross this bridge to deliver on its promises of safety, security, and robustness.
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- Data Privacy Concerns – The more data that’s visible to Blockchain (and AI), the more seamless the tracking of frauds. But, from a user’s perspective, it warrants sensitive data to be made available, traceable at all times. With GDPR norms in Europe as well as upcoming Data Privacy Bill in India, Blockchain as it stands today, seems to conflict with the regulations.
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- Energy Consumption and Infrastructure – With ESG goals being one of the focus areas across organizations and Governments, the carbon footprint recorded by emerging technologies like Blockchain and AI, with cloud-based high-compute, tends to be on the higher side. There is a need for hardware optimization to be able to leverage the technology to its potential, in an environmentally responsible way.
In conclusion, Blockchain technology will serve as the protective layer of the Metaverse and will be at the forefront of minimising frauds and innovations around it. There is a need to accelerate the adoption of the technology to ensure its robustness to enable us to face the challenges of Metaverse in time.
Over to my co-writer Danielle who simplifies investing basics and how your hard earned money can work harder for you.
Danielle on Finance 101
I have many clients and connections that I come across asking me for advice on how to get their finances in order. ‘How can we maximise what we have now, so that we can make the most of our money later?’. Of course, one of the best passive things we can do, is to invest.
Investing is the concept of allocating assets, usually money, into different financial vehicles to create a profit. The bare minimum investment should be doing is beating inflation, because over time our hard-earned money is worth less, due to the rising cost of products. Before one starts investing, it is best to have a clear strategy, and get the basics covered first. Here are a few key financial areas you should have planned for:
1. Build an Emergency Fund
At a glance investing may seem like an obvious choice when it comes to saving money. Why not just throw all your savings into investment if it means high returns? The answer is that investment returns are NOT guaranteed– even the safest investments come with some risk, and sometimes the lock in periods are high, or the penalty for withdrawing early is expensive. To ensure that you are not over-investing, make sure that you have an emergency savings fund that is easily accessible. That way should an emergency arise (like a large hospital bill or having to pay for car repairs), you can use your emergency money instead of jeopardising your investments.
The recommended amount you should have in your emergency fund is 3-6 months of your monthly salary. This should be a healthy buffer should the worst happen. If you already have more than that, then that’s a great time to consider investing.
2. Know How to Budget
Of course, setting aside for investment would be impossible if you didn’t know how much to set aside. That’s why organising your budget is a crucial step in your financial planning. There are many ways and methods for planning, but a good starting point would be the 50/20/30 rule:
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- 50% of your monthly salary maximum should go on things you need to pay for: housing, bills, groceries & insurance.
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- 30% can go on doing the things you enjoy: hobbies, drinks and travel.
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- 20% should go into your savings: think about your long term savings and investment goals.
If you have surplus each month, you can even consider increasing this 20% to a higher proportion and allocate more into your investment goals.
3. Be Debt-Free
Before you do any investing, you should really consider paying off your debt. Having a credit card bill is fine, but having any large or bad debt will hinder you in your long-term goals. It seems counter-productive attempting to make lots of money with investments, whilst paying off lots of debt. It may be difficult paying off student debt or large loans, but you will reap the benefits in the long run when your debt isn’t eating into your assets.
4. Set Your Investment Goals
This is arguably the most important step, defining your goals. What is the reason for investing? If you are doing it out of pure greed, then your judgment will become clouded when it comes to riskier investments, and you risk losing it all. So have a long and hard think about why you want to invest. You are putting your money, that you worked hard for, somewhere that could give you high returns, or give you nothing.
Therefore, it’s best to have a long think and define some clear goals for your future. Do you want to plan for your retirement? Save for a house? Pass something on to your children? Whatever it is, decide how much you would need and by when. Most investments give better returns if you have a longer-term commitment, so it’s OK to think big. If you have no clue and are just investing for the sake of it, you will quickly lose your drive and passion for making money.
These steps may seem simple, but they really are the key to an effective investment strategy. I work with clients every day to ensure that they have budgeted correctly, serviced their debt, and built an emergency fund, and together we work together to work towards their financial goals. Many find that this is more complex than they first thought and will include tax planning and ensuring that their assets are protected. This is of course one of the added benefits of hiring a professional. If you feel that these services are something you would require, feel free to reach out at Danielle.teboul@sjpp.asia or click here.
Over to my co-writer Ajit who tells us that finance 101 is best learnt by engaging emerging technologies like AR, VR as it helps in educating about financial products to customers in a more engaging and impactful manner and to all age groups, across the economic strata.
Ajit on Finance 101
Background
In its “Economic Well-Being of U.S. Households in 2022” report, the U.S. Federal Reserve System Board of Governors found that many Americans are unprepared for retirement. Twenty-eight percent indicated that they have no retirement savings, and about 31% of those not yet retired felt that their retirement savings are on track. Among those who have self-directed retirement savings, about 63% admitted to feeling low levels of confidence in making retirement decisions. Low financial literacy has left millennials—the largest share of the American workforce—unprepared for a severe financial crisis, according to research by the TIAA Institute. Even among those who report having a high knowledge of personal finance, only 19% answered questions about fundamental financial concepts correctly.
A 2021 survey by the Federal Reserve Bank of San Francisco revealed that 28% of all payments were via credit card, with only 20% being made in cash. In India this is bound to be much more skewed in favour of digital payments, with the ubiquitous presence of UPI. Given high volume of online transactions and multiple banking products for individuals, there is a need for greater financial literacy to ensure every individual makes the most of her hard-earned money.
Financial Literacy can cover short-term as well as long-term financial strategies. The key is to simulate WHAT-IF scenarios of various investment decisions and visualise their impact across years and even decades, well in advance. Today, most of this occurs in MS Excel and is largely based on linear data projections or on a logarithmic scale. Can we visualize the consequences of our financial choices with the advent of technologies like AI and machine learning (ML) models? I believe so. To top it, consider it as a visualised, gamified scenario builder in Virtual Reality (VR), the visual layer of the Metaverse.
Role of Immersive Technologies
Imagine your financial investments playing out their profit-loss cycles across decades, thanks to AI modelling. These What-if scenarios would provide greater education and retention of one’s decision-making as far as financial instruments are concerned. As newer products enter the market, a constant training to these models will ensure the What-if scenarios remain invaluable for you as in individual investor. Taking it a step further and looking at visually gamifying the entire basics of financial literacy (Finance 101), it could prove to be a powerful learning tool for students in schools and colleges as well as working professionals.
Memory retention with VR is far greater than attending lectures, videos or e-learning modules. While the learning retention is only 5 percent for lectures and 10 percent for reading, we find VR among the top 2 with a learning retention of 75 percent. VR training is only beaten by learning that happens through educating others, where the learning retention is at 90 percent.
The learnability and application of knowledge would become second nature for every individual, thereby raising financial literacy, exponentially. There is a need to tap into the power of this technology for a crucial knowledge capsule that’s absent in the masses. This would ensure financial stability and growth in every individual beyond the cycles of survival and existence.
In conclusion there is a need to increase financial literacy in global population and immersive technologies like VR ably powered by AI could prove to be transformative in serving this need. Technology is the biggest leveller across urban and rural communities worldwide and hence could serve as a powerful tool ushering in this much needed aspect among various facets of literacy, financial or otherwise.
References:
Most Asked Questions
How AI can help in avoiding cyber threats?
Whilst using manpower takes time and money, AI systems can scan masses of data sets, analyse data, spot anomalies, and therefore detect possible cyber risks before they have even happened.
What is 50/20/30 rule of financial planning?
50% of your monthly salary maximum should go on things you need to pay for: housing, bills, groceries & insurance.
30% can go on doing the things you enjoy: hobbies, drinks and travel.
20% should go into your savings: think about your long term savings and investment goals.
Most Seached Queries
Virtual Reality (VR)
General Data Protection Regulation (GDPR)
Payment Card Industry Data Security Standard (PCI DSS)
Financial literacy
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