How to Ensure Data Security and Confidentiality When Outsourcing FinTech Software Development

How to Keep Outsourced Data Secure

Unfortunately, you can’t unilaterally guarantee your outsourced data will be completely secure, as your software provider is equally responsible for its safety. That’s why it’s vital to thoroughly research potential outsourcing partners. Some of the best methods to be sure you can work securely with an outsourced developer include the following:

• conduct a thorough background check;
• define security requirements and confidentiality agreements;
• implement data loss prevention and access control measures;
• create a disaster recovery plan;
• determine data handling policies;
• train the development team on data security strategies; and
• regularly monitor and audit the outsourcing processes.

Conduct a thorough background check

Assessing the background of your potential vendor must be the first step before jumping into an outsourcing agreement. Anything that indicates legal and financial issues or a lack of integrity can be a red flag.

Examine your vendor’s security policies and practices, check references, and confirm that they adhere to all applicable laws and standards. Also, ensure that your outsourcing partner has sufficient security measures in place to protect against hacking and unauthorized access, such as encryption and multi-factor authentication tools.

It’s worth reviewing certifications such as GDPR, PCI DSS, and SOC 2 that can guarantee safeguarding of your sensitive information. This is important to ensure you won’t face legal disputes and potentially hefty fines down the road.

At HQSoftware, we always engineer financial software in compliance with legal requirements, to defend your business from cyber criminals and protect your company’s reputation. For example, one of our clients required HQSoftware to develop a tax management solution that would be in compliance with Swedish tax legislation. Since the solution is built to support all accounting activities, it automatically meets all requirements of the current tax legislation and provides tax reporting to the Swedish tax agency.

Determine data handling policies

Define clear data handling policies and procedures for the vendor to follow. This includes specifying how to handle, store, and process data, as well as who has access to it.

First of all, make an audit of all types of sensitive data that outsourced developers may access. This includes personal identifying information, financial info, intellectual property, etc. Then differentiate sensitive data based on potential harm from unauthorized access or disclosure. This helps determine appropriate security controls.

Define data retention periods and require outsourced developers to delete sensitive data once it is no longer needed for projects, restricting access to backups to authorized staff.

Define security requirements and confidentiality agreements

You should set up an outsourcing NDA (non-disclosure agreement) or a security agreement to guarantee that confidential information will not be shared with anyone unauthorized.

You will need to specify security expectations, obligations, audit rights, and penalties in legal contracts with your outsourced providers. It may also be important to address intellectual property rights and ownership issues.

Also, include in your security clauses a requirement that you must be notified immediately if any data security incidents or breaches occur involving your data.

You may require outsourced developers to comply with your organization’s security policies and procedures related to handling confidential information, if needed.

As your financial development software provider, we specify what confidential information can  be used to ensure safety and confidentiality of your sensitive data.

Implement data loss prevention and access control measures

By implementing data loss prevention (DLP) solutions, you can monitor and prevent unauthorized transmission of sensitive data. This includes incorporating audit trails, logging data access, and reviewing access logs on a regular basis.

As an example, a financial solution that we developed for one of our clients makes it possible to collect data from a third-party service, aggregate it, remove any irrelevant data, and then stream real-time stock quotes to a secured page on the client’s website. Engineers at HQSoftware implemented the SSL protocol with required certificate authentication so as to attain an acceptable level of security.

With access controls, you can ensure that only authorized personnel have access to sensitive data. The best option here is to create a unique user account for each team member, implementing multi-factor authentication and restricting access to sensitive data on a need-to-know basis. To eliminate any issues, remember to grant developers the minimum access they need to complete their work and revoke access as soon as the work is done.

Another option to safeguard your sensitive information is to use data encryption. For instance, you may implement AES-256 (Advanced Encryption Standard), RSA (Rivest–Shamir–Adleman), and SHA-256 (Secure Hash Algorithm) to encrypt data both in transit and at rest. You can also isolate networks used by outsourced developers. Consider using virtual private networks (VPNs) with strict firewall rules..

Create a disaster recovery plan

To ensure that data can be recovered in the event of a data breach or other failure, you need a disaster recovery plan. This includes creating backups of critical data, testing recovery procedures, and creating a plan for notifying stakeholders in the event of a data breach.

Then ensure that backups of application code, configurations, data, and other artifacts are securely maintained in geographically separate locations if you work in different zones. Don’t forget to clearly communicate the disaster recovery plan and individual roles to the outsourced development team and provide training.

As your outsourcing provider, at HQSoftware, we create detailed, step-by-step instructions for recovering each critical application, including procedures for restoring from backups, rebuilding infrastructure, etc. We always determine the Recovery Time Objective (RTO) and Recovery Point Objective (RPO) for each critical system. This helps our development team to specify how quickly and to what point we need to recover data.

Train development team on data security strategies

For secure development you can guide outsourced developers through your specific processes, such as secrets management, code reviews, penetration testing, access controls, etc. It’s important to educate your outsourced developers on all relevant regulatory compliance requirements they must adhere to, related to secure development and data protection.

Regularly monitor and audit secure outsourcing processes

Beyond the initial check, consider periodic checks to identify any issues that arise over time. You may also retain the right to conduct security audits and reviews of the outsourced developers’ practices, systems, and facilities related to protection of confidential information. By routinely performing security assessments, penetration tests, and audits of the developing systems, you can ensure that the result meets expectations for quality, security, and compliance.

At HQSoftware, you can request audit reports and periodically review the security practices and controls used by your outsourcing providers. Proper KPIs, reviews, access controls, and testing uncover issues that can then be addressed, improving outcomes over time.

By following these practices, you can significantly reduce risks when outsourcing data and development activities. The key is to take a “defense-in-depth” approach, with multiple layers of security controls, monitoring, and oversight of outsourced developers.