The World Economic Forum has led the creation of an industry consortium focused on improving the cybersecurity of financial technology companies, as a collaboration between fintechs and financial institutions grows.
The consortium’s founding members include Citigroup Inc (C.N), online lender Kabbage, the Depository Trust & Clearing Corporation, Zurich Insurance Group (ZURN.S) and Hewlett Packard Enterprise (HPE.N), the companies said this week.
The group will create a framework to assess the security level of fintech companies and data aggregators, whose preparedness against hacks is seen as increasingly important to the stability of the wider financial industry, the companies said.
The financial services sector is among the most vulnerable to cyber crime because of the vast amount of money and valuable data that banks and investment firms process each day.
Over the past few years, banks and other finance firms have been strengthening their ties with young tech-savvy startups which are aiming to revamp the way financial services are created and consumed. The growth in collaboration is occurring either voluntarily, with banks looking to remain competitive, or due to new regulation such as the European Union’s revised Payment Services Directive.
This has heightened the need for fintech companies to implement sturdy cybersecurity measures, said Matthew Blake, head of the Financial and Monetary System Initiative at the WEF.
“Many partnerships are forming between financial technology companies and incumbent institutions,” Blake said in an interview. “Through those linkages there is a potential introduction of risk.”
The need for better cybersecurity assessment mechanisms was identified in a WEF report published earlier this week as one of the solutions to the security challenges posed by the increased use of digital services in finance.