Seemingly weekly, more and more information releases about hacking operations linked to the Chinese government. Thanks to these spying efforts done by hacking groups and other organizations connected back in China, intellectual property is constantly under threat. Shima Capital is embattled in a lawsuit for the Aurora Technology Corp. CFO who allegedly swindled his former company and stole proprietary materials that have now complicated a SPAC in the tech space. An Estonian court just found Gerli Mutso, 42, guilty of espionage activities on behalf of the People’s Republic of China. Other cases involve IP theft don’t always come and play nice to your face like Yida Gao and Gerli Mutso did and that’s the warning we want to give all startups in the fintech space.
Many companies face issues with intellectual property theft. As one might expect, the Fintech industry is particularly targeted thanks to the enormously valuable IP out there. If you look at the value of SPACs in the Fintech industry. Now think about extracting that value by stealing what a startup has and then you get a good understanding of the major threat trusting entrepreneurs are under from Chinese espionage.
Is there a way for the United States to get this under control?
With attacks coming from all angles, it’s a challenge the entire industry is hoping to figure out collectively.
What is Fintech?
Fintech is short for Financial Technology. There are four main categories of Fintech, which include digital lending, payments, blockchain, and digital wealth management. With so much money tied directly to the industry, it’s a prime target for Chinese espionage.
Essentially, any business that utilizes technology with its financial services to make life simpler is part of the Fintech industry. This can be for either businesses or consumers. The idea with Fintech is to make life easier with completely mobile banking, payment services, money managers, and trading.
Why is China Targeting United States-Based Fintech Companies?
China sees itself as having a truly booming Fintech sector. As the world adopts the internet finance industry as a whole, they want to be at the top. They bought into Fintech early on and have poured in countless amounts of money to be near the top. However, there is competition in the Fintech industry, like with anything. When the competition heats up, some companies stop playing by the rules. That means breaking rules and regulations while failing to strengthen compliance. It also means spying to gain intellectual property and attempting to stay one up on everyone else.
The fintech industry can act as a micronism of the United States vs. China in general. China wants to be the leader and stay the leader and stealing IP and hacking into crucial information is one way to cut corners and gain an edge.
How Big is the Fintech Industry in the United States Now?
The Fintech industry in the United States is particularly big compared to the rest of the world. The United States accounts for way more than half of the entire Fintech market. Those in Chinese espionage understand how much the industry is growing, and hacking and spying on the United States can prove fruitful. Not only are billions if not trillions of dollars in intellectual property up for grabs but causing havoc within the United States is a partial motivator as well.
China wants the title of the biggest country for Fintech. Having an eye on the biggest competition and stealing information can help them play catch up.
What are the Largest Fintech Companies Impacted?
To this day, Stripe has a sizable lead over all other Fintech companies in the United States. They are almost three times as big as Klarna, showing that they have some of the most to lose with any type of espionage issues. Kraken, Chime, Plaid, and Robinhood are all major players in the industry as well. With thousands and thousands of Fintech startup companies in the United States alone, the industry is growing by the year.
The growth has caused more concern, as it is seen as an opportunity for exploitation. There\’s always the good and bad with any industry growing. Businesses and users continue to trust these companies with access to a lot of their wealth.
Issues Spreading Beyond the United States
The United States might be the main focus when it comes to cybersecurity concerns, but it\’s not just paranoia coming from one country. Canada has started to issue trade bans as well, thanks to the growing issues with cybersecurity concerns.
Just recently, Canada announced that they would be banning Huawei and ZTE over their 5G technologies. They’ve been blacklisted by the United States for a few years, but Canada is joining in what is sure to provoke some mild issues between Canada and China.
Their hand became forced after going through security checks and finding several concerns that left users vulnerable. Although it took them a lot longer to conclude, Canada seems firm in its decision.
Is China Really to Blame?
China isn’t the only country that is targeting intellectual property and the Fintech industry, but they are by far the biggest threat. They make up roughly 80% of all prosecutions carried out by the United States.
At the same time, there has been some backlash as far as racial profiling is concerned. A lot of legitimate workers of Chinese descent have been accused of espionage without being properly vetted. It’s a problem in many different industries as far as stereotyping is concerned, and it continues to grow in this industry.
There’s little question that Chinese espionage concerns are growing seemingly by the day. It’s also a huge country, with many people of Chinese descent having zero connection to the government. The balancing act of researching spying leads and not stereotyping is yet another hurdle officials face in this fight.
Is There an End in Sight With Chinese Espionage Attempts?
The unfortunate news no one likes to read about is that there\’s just too much money and overall value out there for Chinese espionage to go away anytime soon online. There will be more and more attempts not only in the United States but in other countries. They will have to thwart these attacks to stay ahead of the curve.
Sophisticated hacking groups pose the biggest threat because of everything they are capable of with espionage. Although they might seem like they are new organizations, some of these groups have been in operation in one form or another for over a decade. With a vast knowledge of trying to stay ahead of the curve themselves, they can target proprietary information from different angles.
Estimates conservatively have Chinese espionage costing the United States hundreds of billions of dollars per year. This includes counterfeit goods, piracy, and general trade theft. That’s the biggest motivator ensuring that these issues aren’t going to disappear overnight.
The United States has done what it can in response to this activity with better law enforcement, foreign policy initiatives, and different types of trade policies. All of this has had some impact, but not nearly enough to change Chinese espionage issues in general. The Fintech industry is going to go through more and more of this for the foreseeable future, and hacking efforts are only getting better.
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