Financial technology (FinTech) companies continue to grow explosively, with the market size expected to grow from $320 billion today to $1.5 trillion in revenue by 2030. Consumers and businesses are migrating to companies that provide innovative services that automate financial services and processes.
This blog covers the three top FinTech challenges and how Payment HSMs help overcome them.
Test our free Atalla AT1000 Payment HSM Simulator
Understanding FinTech Growth
Business-to-Consumer (B2C) FinTechs have become household names, such as PayPal, Robinhood, and Klarna, and Business-to-Business (B2B) companies like Ramp, Brex, and Bill are helping small and medium-sized enterprises (SME) and small and medium businesses (SMB) businesses. Thousands of start-up FinTech companies are innovating how we interact with financial planning and transactions.
Several key factors are driving the rapid growth of the FinTech industry:
- Technology stacks that have reduced cost and time to market. The cloud has removed the need for upfront infrastructure costs and early-scale planning investments. Other technologies such as AI, blockchain, and 5G have empowered FinTech firms to create and innovate faster.
- Friendlier regulatory environments have opened opportunities to new entrants. Across the world, regulations have become more favorable for non-banks to enter financial services markets. Of course, these entities still must abide by industry compliance and regulation rules.
- Customers desire digital financial services. McKinsey & Company reported that in 2022, 35% of the SMEs in the United States considered using FinTech for lending, better pricing, and integration with their existing platforms. In Asia, 20% of SMEs leverage FinTech for payments and lending. They also reported that retail consumers globally have the same satisfaction and trust in FinTech as they do with incumbent banks. Even global banking interactions now occur through digital channels approximately 73% of the time.
For these reasons, the FinTech industry is expected to grow almost three times faster than the traditional banking sector between 2023 and 2028.
Top 3 Challenges in FinTech
The most common challenges are meeting strict compliance regulations, driving down total cost of ownership (TCO), and reducing complexity.
Compliance
Financial Institutions are among the most regulated. Some of the most common are Payment Card Industry Data Security Standard (PCI DSS), PCI PTS HSM (PIN Transaction Security), General Data Protection Regulation (GDPR), Federal Information Processing Standards (FIPS 140-2/140-3), ISO/IEC 27001, Service Organization Control 2 (SOC2), Payment Services Directive 2 (PSD2), Identification and Trust Services (eIDAS), and a host of other country and local regulations.
Payment HSMs help satisfy compliance and regulation requirements for FinTech companies by providing tamper-resistant environments for cryptographic operations, ensuring data integrity, and supporting secure key management practices.
Here are just a few examples:
- Ensure compliance with PCI DSS by securely managing encryption keys, protecting cardholder data, and enabling secure transaction processing. For example, PCI DSS requirement 3.6.2 mandates secure cryptographic key storage, which HSMs fulfill by generating and storing keys in tamper-proof environments.
- PCI PTS HSM is the standard that governs the security of Payment HSM processes such as PIN processing, card verification, ATM interchange, and key management.
- Assist in compliance with GDPR requirements for data protection and breach prevention when handling EU citizens by encrypting sensitive personal data and securely managing encryption keys.
- Support for EMV (Europay, Mastercard, and Visa) chip card processing standard, which requires operations in a secure, certified hardware environment to prevent key compromise and fraud.
Total Cost of Ownership (TCO)
FinTech businesses are no different than any other, as they are concerned with the TCO of solutions. The TCO considers the cost of providing the capabilities and the people to operate the solution over time. Most FinTech services involve setting up a new company or product offering in the cloud. Payment HSMs are the best (or only) way to meet many compliance requirements and customer security expectations for cloud-native and data center hosted services. Depending on your architecture, services can have their Payment HSMs hosted in a data center, or a Payment HSM as a Service (Payment HSMaaS) can be used.
Payment HSMs are ideal when a company can do self-hosting. Controlling the hardware can lower latency for high-volume transactions, remove dependency on internet connectivity, and may lower long-term costs, especially for very high transaction volumes. Owning the hardware can be more flexible for customized integrations and may be preferred by certain regulators in specific jurisdictions.
However, those concerned about equipment hosting costs (especially if they don’t have a data center), the upfront costs of hardware, or proper sizing for peak transaction events often consider using a Payment HSMaaS.
Complexity
TCO and complexity typically move in lockstep. To reduce complexity, choosing the correct Payment HSM vendor is essential.
Test our free Atalla AT1000 Payment HSM Simulator
Overcoming Fintech challenges by utilizing Payment HSM capabilities
Utimaco’s high-performance Payment HSM, the Atalla AT1000 Payment HSM, is designed for secure and compliant non-cash retail payment transactions and cardholder authentication and optimized for design and operational efficiency.
- Superior Performance
With a speed of 10,000 transactions per second, the Atalla AT1000 Payment HSM is the fastest multi-core HSM on the market. This means that you can do more with less. Needing fewer HSMs to satisfy your use cases means less design complexity. - Multi-Tenant Architecture and Cloud-friendly Modern APIs
The Atalla AT1000 Payment HSM supports up to 10 partitions. This unique partitioning capability allows vendors to consolidate applications into fewer HSMs. Again, less hardware leads to simpler designs. Support for modern REST APIs, making it easy for your developers to integrate, automate, and orchestrate the HSM capabilities. - The Most Compliant Payment HSM on the Market
The Atalla AT1000 Payment HSM is a NextGen FIPS 140-2 L3 certified, FIPS 140-2 L4 (physical design) compliant, and PCI PTS HSM v3 certified payment HSM. Utimaco Payment HSMs are used by companies globally to meet regulations and have been part of thousands of audits. You’re prepared for future compliance regulations when building new use cases. - Remote Management
Unlike other Payment HSMs, loading Master File Keys (MFK) and lower-level keys do not need to be done simultaneously and at the same location. This dramatically simplifies operations. - Available as Payment HSM as-a-Service
Utimaco’s Payment HSMaaS is a fully managed, subscription-based PCI PIN-compliant service that can be accessed globally without investing in on-premises devices.
When building your FinTech service, there is a lot to consider. Whether you are looking for high-performance data security hardware or hosted data security services, the Utimaco product portfolio has you covered. Utimaco offers a free Atalla AT1000 Payment HSM Simulator. The simulator is a fantastic way to experience the Utimaco difference quickly and easily. If you’re looking for FinTech security architecture advice, contact us to meet with one of our data security experts.
