Forget cybersecurity, it’s “hardsec” that will reinvent banking
Henry Mason, Principal, Dawn Capital, the largest European VC focused on fintech and b2b tech, shares with FinTech Magazine how "hardsec" has the potential to transform the banking industry.
If you work in a bank, it’s a simple fact that you need to interact with risky things in order to get the job done. When combating financial crime, for instance, you might need to hunt down information about terrorists or human traffickers on shady parts of the internet. Or you have to open email attachments and download files that turn out to be laden with malware. These problems are particularly acute in banking: banks were early adopters of technology, but now their patchwork of ancient systems and software is both a hindrance to innovation and a security risk.
If being hooked up to the outside world is such a security risk, what can banks – for whom interconnectivity is so key to business – do about it?
One route is to pull the cable, disconnecting workers from the internet as much as possible, which has in fact been mandated in several countries by the local regulator. In reality, however, this is totally impractical given the amount of valuable data that comes from the web. How can you investigate that money laundering ring without access to the internet? Even worse, when banks turn off the internet, well-meaning knowledge workers, keen to stay productive, resort to unsecure workarounds, like using personal devices and 4G, opening up an even greater security and compliance risk for the bank.
More commonly, the current paradigm for any large institution is to take a layered approach to security strategy: build a series of walls, and expect that malware will get through the first few but hope that it won’t be able to defeat all of them. Similarly, at each layer you step up the efforts on detection, slowing things down and scrutinising them more thoroughly.
But the software/walls/detection approach is again problematic, particularly for banks. It becomes increasingly difficult for developers to patch legacy systems written in obsolete programming languages, and modern software is littered with bugs and vulnerabilities waiting to be exploited. But here is the crux of the issue: building firewalls from the same materials that attackers use – software – is building a house on sand. Software is not the solution in cybersecurity, it is the problem. We need to remove it from the equation altogether. This is where “hardsec” comes in.
Hardsec reinvents security by returning to the bare bones of computing: it utilises hardware to fight threats. Let’s take the example of Garrison, one of my portfolio companies, which counts several global banks as customers. The team chose an unlikely candidate for transforming cybersecurity: Field Programmable Gate Array (FPGA) chips. The revelation they had is that these 34-year-old IT stalwarts could be repurposed to offer a hardware solution to a software problem.
Here’s how it works. FPGA chips can only be programmed using specific physical pins and attackers are thwarted because they cannot physically transmit data to the pins. And because hardsec controls are comparatively simplistic and narrow they are in effect “too dumb to hack.”
For banks, this kind of technology is a gamechanger. Hardsec does not just offer a secure way for employees to use the web, it can also enable institutions to host and protect customer data in the cloud, using that same buffer system. It means they can have customers interacting with a website but not have to worry about exposing their vulnerable software to attack – the threat is neutralised before it even enters the software architecture.
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Suddenly, knowledge workers no longer have to do their job and be security experts. They can simply crack on with the former. For one major European high street bank, Garrison’s technology, initially trialled across one team, is well on its way to becoming the standard for the entire organisation. All employees will be accessing a cleansed copy of the internet, making them safer than they’ve ever been before – and without compromising their experience.
As a consumer, this paradigm shift will alter something we’ve all come to take as gospel: that the neobanks will overtake, if not destroy, incumbents. Hardsec is already enabling financial services’ biggest players to innovate as fast as challenger banks, improving their offering while retaining their huge customer bases. Expect this to accelerate. This is not the era where big banking dies; it is the era where big banking gets better.
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BME and BBF Fintech to stage sustainable finance hackathon
The first hackathon focused on the fintech and insurtech world at an international level, concentrating on sustainable finance, will be hosted in Bilbao.
The ‘Hack & Disrupt!’ event will take place on 25, 26 and 27 June, and is organised by BME and BBF Fintech. The event aims to bring together companies, entrepreneurs and startups to solve global technological challenges as a team.
The event, which is sponsored by BBK, Plaza Financiera Bilbao and SIX's startup accelerator, F10, wants to connect entrepreneurs and businesses to re-imagine finance and insurance through digitalisation. The challenges that participants will be facing are geared towards innovation and sustainable finance.
Due to the pandemic, the event will be held in a hybrid format, combining a face-to-face part, at the BBF Bilbao Berrikuntza Faktoria, and through a technological platform, which will feature different stands, chats and workrooms. The opening and closing ceremonies, as well as various panels related to the entrepreneurial world and the fintech and insurtech ecosystem, will be streamed from the platform.
What will happen at the event?
The opening will reflect on innovation in the securities markets and then afterwards there will be a panel discussion on sustainability. Challenges will be introduced on Friday evening, and the teams will start working on their resolution until Sunday 27th. Saturday 26th features presentations by several experts, including Berta Ares, General Manager of BME Inntech, and Manuel Ardanza, Chairman of the Bilbao stock exchange.
The winners, which will be announced on Sunday, will be eligible for three prizes: a prospection trip to Switzerland, where they will be able to get to know its fintech ecosystem in detail, the possibility of participating in the incubation Programme and in BBF Fintech’s II Open Innovation Programme, the public-private fintech incubator promoted by Bizkaia’s provincial council, Bilbao’s City Hall, the University of Mondragón and Dominion, as well as direct access to the final interview to participate in the F10 incubation and acceleration programme.
Javier Hernani, CEO of BME, believes that BME's presence at this event reaffirms the company's commitment to digitalisation, innovation and the promotion of SMEs and disruptive startups, which adds to other initiatives, such as the Pre-Market Environment. "Today's startups can be tomorrow's stock market blue chips," he stated. “We also reiterate our support for Bilbao as an innovative financial centre, where BME closely follows the entrepreneurial ecosystem”, he added.