This article is written by Khushi Kumari who is a first year law student in Lloyd School Of Law.

Abstract:- 

There are serious questions raised by the constant digitalisation of the financial area on privacy and intellectual property protection issues. Personalized banking and financial services are now possible through Fintech that allows for flexibility and convenience in consumer demands. As a result, there are huge quantities of personal information collected such as historical of finances and internet behaviours which can give origin to security problems because of the risk of possible corruption or mismanagement. This concern has led to an increased demand for strong Fintech data protection legislation that is well-tailored to suit the Fintech industry. The government plays a major role in the formulation and implementation of such regulations but there are always discrepancies caused by the different jurisdictions. Various countries adopt varying norms making it cumbersome for global Fintech companies. Blockchain technology’s immutable digital ledger feature makes the data used in Fintech services more secure.⇽ However, transparency is guaranteed for each transaction making user privacy and anonymity questionable. Moreover, Fintech incorporates sophisticated technological tools such as AI, machine learning in fighting against fraud. They enhance the security of transactions, though mismanagement and uncontrolled operation is detrimental to an individual’s privacy. The second problem concerning Fintech centres on IP rights. This intellectual property has been very critical for this sector as they are all dependent on uniqueness in their processes, designs and technology to remain competitive.

A good number of studies have shown that there has been a gradual rise in cases of HIV/AIDs among high school students in America. Such valuable assets would be misappropriated for Fintech companies, which may have an adverse impact on their businesses as well as financial position. New privacy issues arise from biometric security measures such as facial recognition and fingerprint scans that occur in the current times. Unlike password breach, which can be changed afterwards, data breach of biometric information has irrevocable consequences. Finally, data sharing with third parties is an important issue. Data privacy has become a priority issue for the  Fintech sector as personalized financial services become more popular. User data such as financial history, personal information and online activities are essential for service personalization but can also be a risky element when used inappropriately. Its secure ledger of indelible data supports block chain’s firm presence in the world of financial technology (Fintech). Though, the public nature of that ledger creates a lot of doubt about privacy issues and the identity of the users. If poorly managed, adoption of advanced AI and machine learning algorithms for fraud prevention can compromise users’ privacy. IP is essential for any Fintech company. Such cases have to be protected since their products could end up belonging to other players in the industry who would have to invest their resources leading to losses and low yields for their businesses.

Moreover, different governments rules and regulation concerning IP protection are not similar across boundary lines; thus making it complex for providing services globally . Another challenge brought about by the advance in biometric security measures includes; fingerprint scanning and face identification. Besides providing extra security, it also raises other issues relating to individual’s privacy rights. Any biometric breach is irreparable as no other person can substitute the finger/face for example. Another risk is partnering with third party organisations that most Fintech firms undertake. Customers’ information might end up being shared with different people who were not asked their permission first. Notably in this current digital age, such as many other risks, cyber security related threats have also greatly intensified, hence necessitating company’s continuous updating of their information protection systems and IP protection plans. Privacy, IP protection, government regulation, biometric security, third party data sharing and cyber attacks are of paramount relevance in Fintech. Fintech companies should take this seriously in order to ensure that they continue to be trusted as well as remain in business.

 Keywords:- Digitization, Biometric, Flexibility, Cyber security, Consent, Fintech (Financial Technology) 

Introduction :- 

The issue of protecting data on Fintech market with increase in personalized financial services is an on time issue in the Fintech industry. Although such amounts of user data such as financial history, personal information, and online activities are critical for personalized services, their misuse constitutes serious threats. This is why blockchain technology is popular in the Fintech area as it ensures security through an irreversible digital record. Nonetheless, this makes the transparency raises questions about users’ privacy and anonymity. However, such advanced AI and machine learning used in combating fraud should be well-controlled as it might invade on user’s privacy. Fintech companies’ importance lies in its Intellectual Property (IP). They should ensure that their unique processes, designs or technological advancement do not land in the wrong hands because that may pose a serious business consequence. What’s more, international governments have different regulations concerning intellectual property protection and these vary across borders, which makes the provision of services across nations quite challenging. Another hurdle is presented with the introduction of biometric security, like fingerprint examination and face detection. Although it introduces more safety measures, it also activates further privacy worries. Any compromise of biometric data is completely permanent since it cannot be changed nor reproduced. However, a partnering with third party organization, as many Fintech companies do, is also one of risks. The customer’s information can be shared by these third parties even without it being approved by the customer. Cyber-attacks have also increased in this digital age, thus it is imperative for the companies to remain alert and update their respective cyber security systems and mechanisms used for IP protection strategies. Therefore, privacy, intellectual property protection, government regulation, Biometric security, data sharing among a third party and cyber-attacks are still some of the core issues facing the Fintech industry. Fintech firms should be able to take an effective step ahead on this issue in order to maintain customers’ confidence and sustain their businesses.

The concept of privacy remains critical nowadays as many financial systems have already undergone computerisation. The dangers of invading a user’s privacy continues when more information is made available online for sharing data about oneself and financial behaviour. These digital footprints are even more valuable than their digital identity since it is used to provide tailored services but can also be abused through unethical practices should such information fall into wrong hands. Therefore, the privacy protection issue followed by IP security matter is increasingly pertinent for the Fintech industry.  Various services such as banking, insurance, among others are provided by Fintech companies. Consumers provide a lot of their personal and financial information voluntarily when they use these services. This kind of information, based on the transactional and behavioural data, gives an insight into their preferences, habits, financial status, among others. Thus, these data sets allow the Fintech providers to personalize their offerings based on one’s digital identity and contribute substantially towards excellent customer experience.  Nevertheless, this is where valuable digital identities and data are causing some privacy worries.

Such information misuse can lead to numerous cyber crimes with devastating consequences such as identity theft, financial fraud, phishing attack, among others. And as data collection grows, it becomes important to guard against the IP protection of these data and analytics tools. There are numerous Fintech Startups which have come up with custom made services. In addition, the way these offerings are powered by methodologies, algorithms, and technology constitute the highly regarded intellectual property of a start-up. Hackers and malicious competitors are posing an ever-present danger to this intellectual property. Infringing upon this IP may lead to the eroding of their services value, financial losses, and competitive advantage to their competitors without a cause. This means that like its obligation to safeguard user privacy, Fintech also needs to ensure protection of their own property. A number of legislations, including the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States have been designed for this purpose. The rules mandate that organizations should be open in their handling of individual information and notify consumers on why the data is collected and how it will be used.

These laws can lead to severe penalties if not complied with. However, there is a lot of companies who are still struggling with making them successful in their business. However, patents, copyrights, and trademarks protect the IP. Though there are legislations and protections against such an occurrence, it is not possible to get completely rid of such risks. Thus, it is important for organizations to protect the digital identity of customers and the IP. This will involve strong cybersecurity strategies, consumer education on protection of personal data, tight IP control, effective regulation and innovation. The continued innovation of Fintech firms entails a balancing act of offering personalised solutions while safeguarding against threats such as data and intellectual property theft.

As a result, blockchain technology is heralded as the transforming power in the Fintech as it provides for anonymity, transparently, and a distributed network. These are the many attributes associated with the technological advancement and have numerous possible applications such as digital authentication. Nevertheless, in addition to the great potentiality it entails, there exist privacy concerns and copyright challenges which require appropriate handling. It can introduce a peer-to-peer form of authentication without relying on third parties. The user’s personal information like the date of birth, nationality, or even financial records are used to generate a digital identity and then stored on the blockchain network. The identity thus obtained could be utilized in executing transactions, granting access, and verifying credentials, thus acting as a digital credential for conducting business online. This is however, not so since all the transactions taking place on a blockchain network are visible to every participant, hence it could compromise the privacy of the users.

Behavioural analysis of the user behind the transactions can still be conducted and it can divulge much about the individual. Additionally, one may suffer from identity theft and fraud because blockchain transactions are irreparable in case a one’s private keys become compromised. On the other hand, the simultaneous challenge of protecting intellectual property makes it difficult for blockchain-enhanced Fintech companies. Innovation in blockchain is mostly related to software which in turn has led to difficulties in obtaining and enforcing software patents. Blockchain has inherent characteristics conflicting with the privacy aspect of IPP. Such a marriage between blockchain and privacy protection mechanisms might be the right answer there. User anonymity has to be maintained within this transparent scheme and privacy-enhancing techniques like zero knowledge proofs, ring signatures or confidential transactions could be implemented to do so.

Nowadays, in this age of technology, it is true to say that they are changing the face of financial services. These services primarily rely on digital identity for processing transactions. On the other hand, Fintech offers uncountable advantages in terms of efficiency for consumers, accessibility as well as convenience, but also there are some heated debates concerning privacy issues and IP protection associated with it. Digital identity becomes crucial within the Fintech sector and enables users to perform safe transactions through the internet. It is used in the authentication of the users and their ability to transact using the Fintech. Therefore, with increase in the amounts of digital identity data, this implies more chances of data breach and personal information abuse. Therefore, privacy fears are exacerbated following data scandals involving a number of significant tech businesses. Strict regulations of privacy and confidentiality must be upheld concerning transaction history, personal identifiers, and financial data that is sensitive in nature. Thus, it proves why there has to be a lot more emphasis on security and privacy since they could pose yet another risk in terms of unauthorized access or any other form of fraud.

However, using technologies that involve aspects of artificial intelligence and machine learning in detecting fraud in Fintech services may result in invasion into users’ privacy, including collecting more information than is required, thereby compromising IP protection. Another important issue to address is protection of IP in Fintech. Thus, there arises an important need for securing and protecting this unique invention as the industry increasingly develops new and innovative products and services. Their intellectual property can have a huge impact on a company’s competitive position, product quality, and ultimately their market share. The development of innovations may be supported via a regulatory context, which recognizes and rewards creative efforts. On the other hand, the issue regarding the abuses of IP rights is raised especially with regard to the issues regarding excessive protection and stifling competition. Consequently, as Fintech uses digital identity in increasing service offerings to users while maintaining IP protection is a very significant difficulty.

Fintech sector uses a wide range of innovative technologies driven for digitalisation with focus on financial services enhancement and optimization. Subsection  For, they include notions like digital identity, considered an essential element in online privacy, and IP, which is central to ensuring that innovative financial models or technology-based processes created by Fintech firms. The Importance of digital identity with respect to Fintech applications. This is a digital depiction of unique information about a person that can differentiate one from another person in digital settings. Protecting users’ information and data, digital identity is crucial during the customer authentication process. Data privacy of an individual’s digital identity in most cases becomes a great concern as it occurs in online transactional environment which often involves sensitive financial issues. Moreover, privacy is another factor that can affect, consumer trust on and acceptances of digital financial services. While the digital environment is the major source of data and information collection, it remains susceptible to several cyber threats including identity theft, data breaches, and hacking attacks, necessitating Fintech firms to consider investing on digital identity and privacy issues. Such enterprises should develop strong environments to ensure security of personal information with encryption, blockchain technology, and artificial intelligence (AI) based information assurance systems to increase confidentiality.

On the other hand, this entails protecting firm’s intellectual property or, IP, in the Fintech industry another vital issue. Businesses can secure their innovations against the actions of competitors through IP rights. Obtaining IP rights gives these Fintech companies a competitive advantage, because it prevents other firms from stealing their newly developed processes, models, or technologies that have not been patented yet (i.e., inventions). Lack of strong protective measures on proprietary innovations may lead to the wrong people using them, result in poor competitiveness, poor finances, and negative image. However, with more and more Fintech companies moving into cloud-based systems, open APIs and external partnerships, it is getting harder to protect IP rights within that digitized environment. Consequently, for the protection of their proprietary interests, Fintech should consider incorporating IP safeguards in their strategies. Summing up, as the Fintech is growing, focus on digital ID and privacy alongside the importance of robust IP rights are key for business survival, competitiveness, and the sustainability of all Fintech industry players.

Biometric security has become popular with the growing number of online payments using Fintech means and increasing use of digital identities. The new technique involves the use of biometric authentication measures such as fingerprint scan and facial recognition which, have been lauded for being difficult to duplicate hence more secured than using IDs. Nonetheless, their implementation into security systems has provoked privacy problems and prompted stronger intellectual property rights. The privacy issue is driven by the dangers of maintaining, transmitting and storing biometric information. Furthermore, our inherent identity factors such as fingerprints, face prints, iris, and voice patters are unforgettable, immutable and hence always remain constant; like one’s original passwords do not change easily with time or circumstance. In addition, the repercussions of a data leakage could be even worse since criminals may have a chance to abuse this information on lifelong manner.  There are regulations and standards directed at ensuring the security of these confidential data. Despite the policies in place, data breaches continue to happen because of poor practices, vulnerable systems, or sophisticated cybercriminals. Consequently, there is apprehension among users and developers alike concerning using this technology for critical applications like Fintech solutions. Fintech consists of technological processes created to outrank the typical financial procedures providing financial services.

Some of the major disruptions made by Fintech in the financial industry include reduced costs and increased financial inclusion; however, Fintech also need show it is able to securely keep user’s data private. The need for more robust IP protection is linked with privacy concerns. With growing number of biometrics, a swelling mass of new software and technologies is emerging. Such amplification introduces loopholes through which cybercriminals can abuse and therefore makes IP protection paramount. IP rights ensure that creators’ inventions and information are not taken by others. This protection acquires an additional dimension with reference to biometric data, whereby such information serves companies as trustees. Therefore, there is a necessity for proper and binding IP protection laws that will guard this emerging industry. Companies have to maintain an equilibrium of innovation, security, and privacy in relation to digital identities and Fintech sector. Ensuring proper protection for biometrics during storage, transmission, usage, and respecting of user privacy while conforming to regulations. Therefore, in conclusion, as the implementation of digital identity and biometric security expands, it is essential to extensively address the twin issues of privacy and intellectual property rights. Building adequate rules, as well as a culture of compliance that safeguards data privacy is necessary for reducing risk as it pertains to utilizing biometric techniques for Fintech security. Such an exercise would be risky considering the fact that it can lead to erosion of customer trust or even total rejection of the potent technology.

Digital identity increasingly plays an important role in several areas of life. For example, it relates to banking, finances, social interactions, and employment. It matters a lot in the Fintech space since it contributes towards various operations including risk analysis, compliance, customer support and authentication of users. Digital identity means a group of digital data that is attached to a person or an entity. Such information may consist of a person’s financial history along with personal details and even electronic transactions. The Increased importance of digital identity has also brought up the need to put in place a functional privacy protection and IP protections especially with regards to the third parties. These Fintech firms are working together to outsource each other’s services, including customer support, payment gateway, etc., and risk management. Though it gives some benefits, it aggravates the chance of exposure of customer data without knowledge and consent. Violation of an individual’s right to privacy involves many negative ramifications including disclosure and loss of vital records.

Such a thing may happen to personal data breaches that can cost the affected people monetary damages and destroy their reputation. A hacker in banking and financial services may access a customer’s personal information like their bank statements or other sensitive data that can lead to identity theft. The third reason is that most of the financial service providers use advanced analyses, artificial intelligence, and machine learning techniques to create new financial commodities and services. Thus, they largely depend on the utilization of and protection against IP for them to remain ahead of competition. Improper sharing of a firm’s IP with a third party may also constitute serious risks to it. For instance, allowing third-party firms to access IP-related algorithms and trading strategies may result in misappropriation of that IP, which would otherwise be the unique strength of the Fintech company. 

Biometric security has become necessary due to the growth in use of digital identities for carrying out digital transactions using Fintech solutions. Biometric authentication, such as fingerprint scan and facial recognition, is said to be a better method for verifying identity because one cannot copy biometrics. On the other hand, their adoption has seen growing concern over privacy and demands to better protect intellectual property in its use for security purposes. Privacy concerns are due to the associated risks of storing and collecting biometric information. First of all, these data such as our prints in a finger, our face pattern, eye’s iris, even our voice pattern, which is impossible to change unlike an old fashioned alphanumerical password, are closely related with our identities. In essence, the impact of data theft can go beyond and provide criminals with irrevocable opportunities of abusing such data. Although there are regulations and standards meant to safeguard this confidential information, breaches still happen because of various factors such as disastrous practices, systems with loopholes, and hackers who are highly experienced. Such an approach has caused hesitation on the part of people towards using these technologies, particularly in instances of trustworthy dealings like Fintech. Fintech, a portmanteau term meaning “financial technology”, is about competing against traditional ways of providing financial services using technologies and innovations. The Fintech has caused many disruptions in the finance industry by reducing cost and expanding to financial inclusion and it also needs to assure that user’s data is safe. IP security concerns are linked to issues of privacy. Increasing use of biometrics continues to breed more softwares and technologies in the industry.

The amplification of this gives cyber criminals a chance to circumvent this and therefore IP protection becomes essential . This helps in protecting the creators from having their data and invention used fraudulently against them. However, when it comes to protecting biometric data, it seems like companies are just acting as custodians for that data. This emphasizes the need for strong and legally enforceable IP protection laws in the sector’s growing category. Innovative digital identities must always maintain proper levels of security and privacy in relation to Fintech. This requires appropriate security measures for safe storage of data, transmission and usage while ensuring user’s privacy and following regulatory guidelines. Finally, there is a need to develop strict rules about protecting individual privacy and enforcing intellectual property rights in the context of digital identity and biometric security. Therefore, it involves setting up stringent regulations emphasizing on data safety as well as adoption of compliant culture to manage risks related to biometric security technology within the Fintech space. There may be much at stake as failure to do so might lead to distrust among consumers and eventual dismissal of such an influential solution.

The concept of digital identity is gaining more importance in many areas of life such as banking and finance, friendship and job search. It has a huge impact in the Fintech area where it is involved in many processes like risk assessment, compliance, customer service, and user verification. Digital identity generally corresponds to the collection of electronic details about a person or company. Such might be personal data together with financial history and digital transactions. The importance of digital identity is, however, leading to growing concerns of adequate protection mechanisms of user’s personal information as well as IP rights when shared through third parties. For example, a Fintech firm is partnering with another entity to execute diverse roles such as customer services and risk management. Although this joint approach has some positive aspects, it also increases the potential threat for customer information leakage. Privately, gaining illegal access and use of such private data would result in serious repercussions. Such can lead to unauthorized access of personal data that may cause losses amounting to millions of dollars as well as reputational damages to all the parties concerned. As an illustration, a hacker can unlawfully use an individual’s information such as bank records and commit theft of identities and forgery.

Moreover, most of these financial service providers apply sophisticated analytics, artificial intelligence, and machine learning to invent new financial services. In order to sustain this level of competitiveness, they depend on IP use and protection. Unauthorized sharing of third-party data into a firm’s IPR is another risk involved. This may be illustrated through an instance where a proprietary algorithm is provided to a third party firm and it might result into infringement upon that company’s intellectual property which would subsequently diminish the competitive advantage of the initial firm in Fintech. Hence, Fintech companies should implement reliable data management plans and privacy controls such as regulating the dissemination of third-party information. It is also important for customers to receive straightforward communication that explains how they are going to share their information and what impact it could have on the customer’s privacy rights.

This can be very crucial in building trust between the Fintech firms and their clients. At IP protection level, adopting strong digital identity system, using advance encryption approach for data and signing legally bind agreement regarding use of data can help in this regard. However, while Fintech continues using data as an enabler, the problem of providing open data vs maintaining secure information may prove challenging. However, if privacy and IP protection are prioritized it is possible for the industry to realize the huge opportunity available in digital identity without subjecting customers or their companies to un-necessary risks. The Issue of privacy and IP protection has been intensified following digitization of identity and provision of financial services online.

The digitally validating or authenticating of individuals comes at a price that is paid by these digital identity services that are also targeted by cybercriminals. While the Fintech is seen to be the most innovative digitalized sector, it too has been known to face their own types of challenges associated with privacy and copyright infringement. A critical personal data is located in digital identity that is a representation of either an individual or an entity. It comprises personal information such as financial information, online activities, login credentials among others. Once obtained by cybercriminals without authorization, it leads to security breaches, whose result is identity theft, economic losses and violations of privacy. In addition to monetary losses, the damages will lead to spoiling credibility and brand of the Fintech firm. In summary, therefore, strong cyber security and ensuring data privacy has been and will remain the heartbeat of any fin-tech entity’s strategy. Likewise, Fintech firms should take similar measures for IP protection.

In most cases, Fintech companies have novel concepts, software’s, business methods, or digital properties that amount to immense brainpower and trade worth. These valuable innovations, therefore, are protected by some of the legal tools referred to as intellectual property rights. Such rights spur innovation within Fintech organizations, and ensure that others do not exploit them. Despite this, contemporary complex cyber attacks – like advanced persistent threat – have made intellectual property and privacy more susceptible than ever. The unique characteristic about these attacks is that they target particular weaknesses within a system, persist in a victim’s network, and only stop when they achieve their purpose. Fintechs are particularly worried about IP theft because this means not only an economic loss, but a weakened competitive position. Still, there is a more complex new generation of cyber attacks such as advanced persistent threats, that intensified potential loss on confidentiality and intellectual property protection. These threats are most importantly targeted at certain weaknesses of systems’ infrastructure and are continuous on victim’s network before they achieve their purposes. In addition, loss of economic advantage and vulnerability in its competitors characterize IP theft especially for Fintechs .

The case of Nike vs Converse proves this point. Fintechs must have adequate protective measures that include applying for IP rights, using protective measures like digital rights management systems and including IP clauses in employee, as well as contractor agreement. Fintech and digital identity providers should implement the complete measures of cyber-resilience. Updating knowledge on emerging cyber threats, employing robust cybersecurity measures including encryption, periodic audits, creating a disaster recovery plan. In a wider sense, the governments together with cybersecurity firms, Fintech firms and digital identity services can also contribute in hindering these cyber-threats. Enacted laws imposing tighter data protection standards and sanctions against infringements would deter potential offenders. Cybersecurity innovations, employing competent human resource, and creating a safe infrastructure for defence purposes are good lines of defence that guarantee protection of digital identities and IPs. In summary, with threats from cyberspace increasing in frequency and intensity, cybersecurity and privacy need to be dynamic, always adapting, so as to guarantee a safe Fintech realm and unwavering safeguard for digital identities and IP.

Conclusion :- 

Protecting consumers’ data and copyrighted materials remains an issue in the continuing online transformation of the financial industry. Data corruption, mismanagement, and other cyber risks are highly probable with such amount of collected personal data by Fintech platforms. This is why stricter data protection law is necessary. The incorporation of new technologies like artificial intelligence, machine-learning and blockchain into Fintech provides avenues for improved transaction safety. Nevertheless, such improvements may result in a violation of personal freedom as well as violating the right to private property if not properly implemented or used. In addition, issues relating to intellectual property rights arise because Fintech services capitalize on their own unique process, design, and technology so as to remain at a competitive edge.

Fintech companies risk suffering a loss of their cherished possessions and incurring serious business ramifications if they violate such valuable property rights. However, more serious concerns arise considering the increasing use of biometric security practices such as facial recognition and fingerprints since data breach in this area may result to irrevocable damages. Privacy is a problem for third-party integration in Fintech services that may lead to unauthorised sharing of users’ data. In this regard, an organization needs to always keep updating its cybersecurity measures in order to safeguard them against cyber attacks. As a result, although digitization is of high significance for the Fintech industry, the questions relating to the privacy, intellectual properties protection, government regulation, bio metric security, as well as the use of external data should be properly clarified.

Reference:-

1.https://www.mdpi.com/2227-7072/11/3/90

2.https://www.lexology.com/library/detail.aspx?g=f8621932-cd91-4b9f-95ea-b27394b10074

3.https://www.lexology.com/library/detail.aspx?g=f8621932-cd91-4b9f-95ea-b27394b10074

4.https://www.iiprd.com/ip-protection-for-fintech-companies/

5.https://www.adnovum.com/blog/digital-identity