Finance and Accounting

The Role of Data Security in Business Process Outsourcing for Financial Institutions

In the modern-day business landscape, data security is of paramount importance, especially for financial institutions that handle sensitive financial information. As financial institutions increasingly turn to business process outsourcing (BPO) providers for finance and accounting services, ensuring robust data security practices is essential. Outsourcing involves the sharing of sensitive data and if the data is not protected stringently, the threat of cyberattacks looms large. Financial services that are usually outsourced to BPO providers include accounting, financial analysis, tax preparation, bookkeeping, invoice and payroll processing and records administration, among others. 

Globally, the market value of the financial BPO industry was tagged at USD 56.42 billion in 2022. Industry reports indicate the sector is expected to expand at a CAGR of over 9% by 2030. 

Cybersecurity for financial institutions

Financial institutions are prime targets for cyberattacks due to the valuable data they hold. Cybersecurity in BPOs for financial institutions involves implementing measures to protect against unauthorised access, data breaches and other cyber threats. This includes using encryption to secure data both in transit and at rest, implementing multi-factor authentication and regularly updating security protocols.

In addition to protecting against external threats, cybersecurity also involves safeguarding against insider threats. This includes implementing access controls to limit employee access to sensitive information and conducting regular security training to educate employees about potential threats and best practices.

The importance of data security in financial BPO

Data security is critical in BPO for financial institutions for several reasons. As the industry grows, BPOs handle huge amounts of financial and personal information such as corporate financial data, personal financial and identity information data, tax data, risk and compliance data, to name a few. In the absence of sound security practices, the information becomes vulnerable to hacks, phishing activities and other forms of cyber attacks. 

BPO service providers are aware of the risks involved and take steps to protect such confidential and sensitive data. They adhere to necessary standards and guidelines and leverage advanced technological solutions to ensure all data is protected.

The advantages of maintaining data security in financial BPO providers include: 

• Sensitive financial information, such as customer account details, financial reports and transaction history, is protected from unauthorised access and data breaches.
• Ransomware attacks can be prevented by adopting automation and advanced data security tools to scan and monitor the system, data and documents.
• A BPO provider’s commitment to data security is reflected in its efforts. By implementing a structured and well-designed data security framework, it demonstrates its commitment to data protection and privacy. Such a model strengthens the trust and credibility between a BPO provider and its customers, regulators, and stakeholders.
• The financial and reputational risks associated with data breaches and non-compliance with security regulations are mitigated by ensuring strict data security practices.
• By employing efficient data protection techniques, BPO providers can ensure operational resilience and business continuity during emergencies. With effective disaster recovery plans and backup systems in place, they can quickly get back on their feet after any disruption.
• BPO providers that are reputed to prioritise data security attract more clients since businesses always prefer associating with providers that are serious about protecting sensitive financial assets and data.

Security compliance for financial institutions

Financial institutions are subject to stringent security compliance regulations to ensure the protection of customer information and to maintain trust in the financial system. By addressing such requirements, BPO providers can not only win their clients’ trust but also avoid lawsuits, penalties and in the worst cases, business closures. The cost of resolving security incidents can reach millions of dollars. Industry reports indicate avoiding a data breach can cost up to USD 4.35 million.    

Security compliance in BPO for financial institutions involves adhering to regulations and implementing controls to ensure data protection and privacy. This includes conducting regular audits and assessments to ensure compliance, implementing data protection impact assessments (DPIAs) and maintaining a data breach response plan to mitigate the impact of any security incidents.

It should be noted that compliance requirements may differ from region to region and also between functions. For example,

• The Cloud Security Alliance (CSA) Security, Trust, Assurance, and Risk (STAR) program enables financial BPO providers to fortify their cloud system protection
• The International Organization for Standardization (ISO) certifications such as ISO/IEC 27001 ensure that a provider is capable of meeting data security rules and requirements
• The Payment Card Industry Data Security Standard (PCI-DSS) protects credit cardholder data during payment transactions
• Non-disclosure agreements (NDAs) are part of BPO contracts and they stress the importance of data security and confidentiality;
• Data retention and destruction policies and procedures outline guidelines about how and why providers must protect classified information and also destroy such information when no longer needed.

Security is a joint effort

Data security clearly plays a vital role in BPO for financial institutions, particularly in the areas of cybersecurity and security compliance. For the best results, businesses and financial BPO providers must work hand-in-hand to ensure data security and thereby avoid the costs of mitigation and violation.

Key actions that must be performed include the implementation of strong access controls, encryption and safe data transmission measures; identification and patching of vulnerabilities in advance, performance of regular security checks, creation of strong response and recovery plans, staying informed about advancements in security measures and ensuring the right teams are trained to efficiently manage emergencies.     

How can Infosys BPM help?

Infosys BPM offers specialised Finance and Accounting Outsourcing Services to support clients’ end-to-end F&A function. We harness digital innovations and combine them with our domain expertise. We collaborate with CFOs and finance executives to help them build a more agile, integrated, adaptive and resilient finance function that is compliant with all necessary regulations. We ensure our clients are well positioned to effortlessly navigate their business sector.