One of the standout performers during the COVID impacted market has been cyber security firms. Already a thriving sector estimated to be worth $1 trillion from 2017-2021, it was bolstered by hygiene fears brought about by the pandemic and desire not to physically touch anything during transactions.
One issue posited by Christian Fredrikson, CEO of Fingerprint Cards, a cyber security firm that has produced one billion sensors, is that making things like transactions easier makes them less secure and greater security takes away from convenience. So a balance must be struck.
Speaking at a Legal & General Investment Management (LGIM) event, the firm’s head of ETF Investment Strategies Aanand Venkatramanan said the world of cyber security has moved a long way from the days of viruses and malware that dominated around 15 years ago. Now there are state sponsored attacks, denial of service attacks and a host of other threats to contend with.
The impact of these attacks is felt by individuals, companies and even governments. Mr Venkatramanan gave some startling statistics, in the US, 60 percent of businesses have been impacted by a cyber breach while in the UK in 2018 alone, 50 percent of small businesses had been breached at some point.
As an investment, this is certainly a growth industry. As Mr Venkatramanan told the audience, hackers aren’t going away so the demand for solutions is only going to grow.
Although the purpose of the discussion was to demonstrate how effective using an ETF is to catch the upside of this burgeoning industry, Mr Venkatramanan said it would be wrong to have a static basket of stocks for a such a rapidly evolving sector. This said, the main cyber security benchmark, ICE Cyber Security UCITS Index is up 20 percent in one year.
Fingerprints is growing by 20 percent per annum and is part of the aforementioned index. The company supplies sensors to eight of the top ten smart phone manufacturers and produces one million sensors a day. He detailed the different uses for the products, one of the most interesting being a fingerprint payment card. Currently with contactless, if someone takes your card they can go on a limited spending spree until it is blocked. A card needing biometric data, a fingerprint for instance, can’t be used without the owner’s presence.
Mr Fredrikson longs for a world without passwords as he views them as far to easy to hack. He estimates that this will occur in five years. Items such as biometric payment cards could be in the UK by the end of the year he said as banks are interested in the technology.
In terms of which countries are leading the way in the drive for increased cyber security, the US and China far outweigh any other nations. Mr Fredrikson said that Europe is perhaps slightly behind the curve due to it being a federation of 27 member states and GDPR has implications for some technology used for immigration such as Iris scanning.
While it’s difficult to find any positives from the COVID pandemic, an increase in secure ways to transact without needing physical contact has been a boon for the cyber security industry which doesn’t look like slowing any time soon.
