The financial tech industry, also known as fintech, has completely disrupted the traditional financial sector. In fact, there are nearly 9,000 fintech startups in the U.S. alone. These technology-led financial services firms are only set to increase in the coming years and are changing how consumers trust traditional banks with their money and investments.
But while these companies provide consumers and businesses with innovative tools to manage their money, such as AI-led wealth management or app-based banking, they’re also prime targets for cyber threats. Fintech businesses have a unique combination of risks and liabilities that are causing companies to rethink coverages like network security and banking professional liability for their employees.
In order to limit the risks, it’s important to know what you’re up against and how to combat them.
Negligent advice and failures in client services are major risks for any company providing financial services and products. But this is even more of the case for fintechs that are trying to find a firm foundation. Fintechs can also have a reliance on third-party professionals, who can end up adding a new layer of liability due to negligence.
Fintechs and banks that utilize financial technology, such as AI-driven investment tools, should keep their cyber security measures updated as well as their liability coverage. Having banking professional liability can help these companies by protecting their assets while covering the cost of defense and damages awarded, up to the policy limits. This comprehensive coverage is a specialized way to keep professionals in the financial sector safe from claims.
A majority of fintech companies deal with a high amount of funds movement. From payments to transactions to activity in customer accounts, fintechs are being left to feel vulnerable to theft. These thefts could be by an employee or a third party.
New products and new financial technologies bring a number of criminal activities as well as new regulatory exposures. Fintech companies will need to make sure they keep up to date on the implementation of risk management systems in order to avoid major regulatory risks. As the market evolves, so will the regulatory environment. Fintechs will have to consider differing regulations in different markets if they operate internationally.
Not all new tech is perfect, and this is especially the case in the fintech industry. Innovative technology is important for fintech companies, but having a heavy reliance on tech means these companies can be vulnerable to cyber issues. Technology failure can mean that customers are unable to access their own accounts or the services they use, resulting in loss of money.
About Financial Guaranty Insurance Brokers
Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (877) 485-4413 to speak with one of our professionals.