FinTech applications are increasingly vulnerable to cyber-attacks (identity theft, data breaches, distributed denial of service attacks, phishing attacks, insider threats), which have become a threat to many firms. These threats against FinTech services have the potential to wreak enormous societal, economic, and organizational harm. It is noted that various proposed methods failed to address the fundamental FinTech security issues of scalability, privacy, and trust distribution. Various well-known compliances of all FinTech are being adopted by developed countries to counter these cyber-attacks. Blockchain arouses increasing interest in different economic sectors, with confidentiality, availability, and integrity being fundamental factors. The study shows that the mass adoption of blockchain-based trust models has accelerated in the financial industry with private permissioned blockchain. The primary goal of these trust models is to assure the security, reliability, trustworthiness, and implementation of FinTech compliance.
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The word FinTech originated from “financial technology” and it was initially used in the early 1990s by Citicorp’s chairman John Reed (P. S. Wu, 2017) (Puschmann et al., 2020). It has come to be a common terminology in recent years that refer to novel technologies and encourages the improvement of financial industry structure incorporation of the financial industry, mutual promotion, and interaction (Shin, 2019). Most banks are now adopting FinTech due to personalizing offerings, generating new income streams, improving customer service, and targeting cross-selling (Kumari & Devi, 2022) (Aaron et al., 2017). Now digital banking is moving towards credit brokerage, video consultancy services, and the incorporation of social media. Approximately 75% of customers globally utilize at least one FinTech service, and this number is anticipated to grow as more individuals use mobile banking, contactless payments, online lending, micro-investing, and other FinTech-powered financial activities (Oladapo et al., 2021) (Abdillah, 2020). Companies across the Middle East are moving to digitization fast, putting customers at the forefront of their focus using technologies such as voice, data, and Artificial Intelligence (AI). According to (COMTEX, 2022) prediction, there will be a $306 billion projected value of the global FinTech market by 2023 and Islamic FinTech is projected to grow to $128 billion by 2025. Figure 1 presents the evolution of FinTech from generation 1.0 to 3.5. FinTech 1.0 (1886 – 1967): This phase of FinTech evolution includes the growth of infrastructure to enable multinational financial services. In the year 1886 by implementing technologies like Morse code and telegraph, the United States introduced the first electronic financial transfer system to the world (Helleiner, 1998). Today these are simple standards, but it was revolutionary at that time when infrastructure was being expanded to increase the financial transactions and services over greater distances. FinTech 2.0 (1967 – 2008): The very first Automated Teller Machine (ATM) was developed by Barclays in 1967 (Bátiz-Lazo, 2009), and it was the opening of this new phase, in which the move from analog to the digitization of funds was performed. In the 1980s, with the advancement of the banking sector due to mainframe computers and the expansion of online banking. The 1990s witnessed the start of digital banking, in this era customers started to manage their money in various ways. FinTech 3.0 (2008-Current): Lack of faith in banking sectors create the financial crisis, along with the legislative reforms, exposing the market to new providers. As smartphones become more popular, they will become the primary way for consumers to access the internet and other financial services. Bitcoin was introduced in 2009 followed by other cryptocurrencies based on blockchain technology (Phillip et al., 2018). FinTech 3.5: can be considered as the main reason for changes in customers' behavior and the way people more rapidly approach the banking sector in developing countries. In China and India people are the highest Fintech applications users in the world because they did not feel overburdened with banking infrastructure and services like Western countries people feel, and hence have been able to implement innovative solutions more rapidly than their Western counterparts. (Arner et al., 2018) (Sorongan et al., 2021) (Ashta & Biot-Paquerot, 2018).
On the other side, FinTech applications are facing tremendously increased cyber-attacks that have become a challenge for many organizations (Nayak & Singh, 2021). These cyber-attacks against FinTech services might cause significant social, economic, and organizational damage (Berg et al., 2020). In 2021 the average cost of a data breach in the banking sector is $5.72 million (Kost, 2022). FinTech applications are the primary target of many modern cyber-attacks. Besides the attacks, FinTech applications have made waves and disrupted the finance industry. They come with lots of challenges but the biggest issue is authentication. Gaining customer trust and loyalty takes a lot of hard work especially when money is involved. It has been seen that most people lack trust and are skeptical while switching to something new such as FinTech, to make their financial operations simpler. It can be observed that most of the attacks get successful after compromising the authentication and other verification methods of FinTech applications. To combat these threats and protect users’ information, there is a need to implement strong authorization and authentication mechanisms as part of the FinTech application security policy (Gocer & Bahtiyar, 2019) (Stoica & Sitea, 2021).