Here is Why Fintech Startups Should Invest in Cyber Insurance
Grow Your Business, Not Your Inbox
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With India’s financial inclusion and easy access to credit for the MSME, the industry is all set for an upward trajectory. However, there are several last mile delivery issues in the financial services space – especially with the cost of servicing smaller customers. This is where the fintech companies and its innovative business model are disrupting decades-old businesses.
According to NASSCOM report, which was published this year, transaction value among fintech companies is expected to reach USD 73 billion in 2020 and the market is forecasted to touch USD 2.4 billion by 2020.
Having said that, with the kind of data fintech startups deals with is much more complicated than that of banks, and it is not limited to credit score, account statements or credit cards. For example, a consumer lending startup can also access their client’s personal messages to understand their spending behaviour or SME lending startups is in a deal with POS machine data which would help companies avail merchant cash advance.
The Big C Word
Given the quality and quantity of data fintech startups deal with, they are more prone to a cyber-attack than any other industry.
Farrhad Acidwalla, Founder, CYBERNETIV Digital says financial industry has been one the early industries to adopt cybersecurity strategies across the board, however, there are reports of several emerging fintech startups having weak cybersecurity processes in place.
“This leaves them particularly vulnerable to malicious attacks, especially considering the sensitivity of the information they possess. Most importantly this can lead to a breach of reputation and consumer/client trust. No enterprise will ever be pleased with a loss of data and consumers along with brands will definitely be less likely to associate with the breached enterprise. Therefore, a proactive approach in securing their digital platforms is the need of the hour,” he added.
Cybercrime is the fastest growing crime in the world and fintech need to start paying attention while increasing its cybersecurity measures. But what if there is a breach, how do handle this crisis? We recommend fintech startups to invest in a good cyber insurance policy.
Subir Mukherjee, MD and Fonder, GIBL.IN says a data or security breach or any sort of cyber attack can cost business so hefty than one can imagine. Being a startup company if such a huge financial crisis is suffered due to breach it would be nearly impossible for the startup to stand back up against in terms of finance and reputation.
“A business or organization can become a victim of cyberattack anytime and without cyber insurance, they will be left on their own. With an increase in the threat levels of cyber attacks, it becomes a must for fintech startups to invest in cyber insurance,” he pointed out.
Things to Keep in Mind
While there are several general insurance companies like HDFC Ergo Tata Aig, Bajaj Allianz, ICICI Lombard marketing cyber insurance as one of their products, here are few things you need to look out for while investing in a policy
Area of Cover
What is the area of the cover which the policy will provide to manage the expenses incurred while responding to a cyber incident?
Keeping in mind expensive processes and steps need to be taken after a breach - Will the policy cover both external and internal expenses? Legal and regulatory repercussions usually follow a breach - will the policy be covering expenses relating to these? Cyber breaches potentially lead to non-physical damages such as raised operational costs and a decrease in potential profits - will these be accounted for? – are some questions Acidwalla says fintech startups should ask their insurer.
Read Between Lines
Get some information on how the coverage and limits apply to both first and third parties.
Mukherjee says to check whether the cyber insurance policy covers non-malicious actions taken by an employee.
Post the breach, if a consumer is seeking damages to protect their information or financial loss, will the policy covers these expenses is something every fintech company should seek.