Technology has advanced significantly in the past decade, and 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
• 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 it is not just long and rigorous, but it is self-imposed and is also 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 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 minimize the incidents’ impacts whenever needed.

Well, there are numerous reasons why fintech companies need to be proactive about having SOC 2 compliance or 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, 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 upheld 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 cause long-lasting reputational damage to the fintech companies. 
• A report by IBM also found that the financial industry, especially the fintech companies, has 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 happened due to failures to follow security protocols.

Moreover, in the same IBM report, it is also stated that 38% of data breach costs incur from 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 your fintech business is SOC 2 compliant, then it can add an extra layer as well to customer trust. In fact, a SOC 2 compliant company also significantly suffers less from a data breach than 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 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 fintech companies for delivering more functions and 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, 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 that they need.

So, in today’s world, where frauds, data breaches, and cyberattacks have become so common, SOC 2 compliance is a solution for any fintech company that wants to stay relevant and ahead of the competition.

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