Technology has advanced significantly in the past decade with the complexity and need for regulatory and security compliance has also increased. Talking about the fintech companies such as banks and other financial institutions, they are in such a business where they are required to constantly store and interact with the most sensitive consumer information.
Hence, the financial institutions are needed to have a standardized framework which verifies that the partners they work with are securely handling the information of their clients.
However, the SOC 2 audit report is commonly known as the best compliance for fintech companies and it is also viewed as a gold standard compliance indicator especially for the fintech industry. It has been developed by the AICPA (American Institute of Certified Public Accountants) and the SOC 2 information security standard is an audit report which is provided on the examination of controls including –
- Security,
- Availability, and
- Confidentiality.
In today’s times, most of the fintech companies understand the value of security and claim they are 100% secure. But, that claim doesn’t hold any weight without some concrete and objective proofs such as a SOC 2 report.
However, the SOC 2 report is generally a long and rigorous process and not just long and rigorous but it is self-imposed and it has also been pursued by the companies that take their customers’ data security seriously. But, the SOC 2 report can vary between the companies. This is because of the organizational differences the companies have. However, it is also evaluated based on multiple criteria for making sure that the company follows the strict IT security protocols for the purpose of protecting their systems as well as their clients’ important data from unauthorized access. It also ensures that such companies also minimize the incidents’ impacts whenever needed.
Well, there are numerous reasons why fintech companies need to be proactive about having SOC 2 compliance or for becoming SOC 2 compliant. But, the most critical reason among all the reasons is that it shows a higher level of information security framework in place. So, whenever any financial institutions search for collaborating with a fintech partner, then they will always look for such companies that take the clients’ data security and information security seriously.
Moreover, when a fintech company is SOC 2 compliant then it also shows that the company has put in its valuable resources to ensure that they have upholded a high standard of security for their partners.
- Banking institutions and financial institutions have such data that contains some of the most sensitive information but if such important information is mishandled then it can cause significant losses in terms of money. In fact, not just the monetary losses but it can also give long-lasting reputational damage to the fintech companies.
- A report by IBM also found that the financial industry, especially the fintech companies, have the second-highest average cost of a data breach among all the other sectors.
For instance, there is the infamous case of the Equifax data breach which took place in 2017 and it did cost the credit bureau giant around $700 million. Well, it has happened due to the failures to follow the security protocols?
Moreover, in the same IBM report, it is also stated that 38% of data breach costs incur from the lost business shares and this cost includes:
- The increased cost of customer turnover,
- The lost revenue which happened due to system downtime, and
- The cost that has been incurred for new customer acquisition.
When you fintech business is SOC 2 compliant then it can add an extra layer as well to the customer trust. In fact, a SOC 2 compliant company also significantly suffers less from a data breach than the other companies and they also need to bear less substantial incurred costs.
However, not just financial losses could be better but at the same time, your brand reputation and the equity will also be much better as compared to the companies that aren’t SOC 2 compliant. That means, ultimately SOC 2 compliance will bring in more business for your fintech business.
Today the financial institutions are favoring the fintech companies for delivering their more functions and for increasing their service offerings, hence in such a time, they are incredibly selective when it comes to choosing the fintech companies that they want to work with.
However, with countless fintech companies out there, the SOC 2 compliance will allow any fintech company to stand out among all the non-SOC 2 compliant competitors which will ultimately give those financial institutions the confidence which they need.
So, in today’s world, where frauds, data breaches, and cyberattacks have become so common, the SOC 2 compliance is a solution for any fintech company that wants to stay relevant and ahead of the competition.