Businesses who send data in payment files must do so securely in order to ensure that all important cash flow is in optimum health. SFTP helps to do just this and is becoming an increasingly popular tool, favoured by organisations big and small. Today, we tackle the big questions surrounding SFTP, answering the what, how and why behind Secure File Transfer Protocol.

What is SFTP (Secure File Transfer Protocol)?

SFTP, otherwise known as Secure File Transfer Protocol or SSH (Secure Shell) File Transfer Protocol is an IT network term that is used to describe the secure version of the File Transfer Protocol, or FTP.

FTP is used to transfer sensitive and private data through a network, and SFTP does the same thing but in a secure manner, using security features like encryption to make sure that your financial data can not be seen by potentially prying eyes (hackers and the like).

How does SFTP work?

SFTP Diagram

SFTP uses what, in the IT and Telecommunications world, is called a Secure Shell. Picture it like a tunnel, with traffic (cars) going in at one point and coming out at another – the destination. The thing is, anyone in the tunnel can see the cars and the passengers inside them. SFTP negates this by obfuscating the cars and their passengers (the data) by, for our example, tinting the windows so that passers by can not see who is inside the car.

This kind of obfuscation is achieved by using methods like encrypting the data that is sent so that nobody can see it without the relevant access. Encryption uses complex algorithms to jumble up the information, and the recipient gets what is called a “key”, a solution to the algorithm that allows them to unjumble the data and read it.

Benefits of using SFTP when transferring financial data

1. Security

As its name states, the biggest benefit to using SFTP when transferring financial data is security. You can be sure that the sensitive financial information that you are sending is safe and secure and that nobody can view it besides the intended recipient.

2. Flexibility

Another great benefit is that SFTP allows for flexibility and adaptability. For example, it enables people who are working from home to privately share the sensitive data that they need to do their jobs, an especially useful aspect in today’s current climate.

3. Simplicity

Because SFTP is already such a widely used technology, it is very easy and simple to use. The likelihood is that you already use it without even knowing. Most financial software has SFTP functionality built-in, but it’s worth checking with your IT department if you have any doubts or concerns.

4. Convenience

SFTP allows for great convenience, as an SFTP server allows you to securely store all of your sensitive data such as financials, customer details and others in one central location. This is especially useful for things like finance departments when they need to collaborate with colleagues both in and outside of finance.

Why using SFTP is crucial in finance

Why SFTP Is Important in Finance

Using SFTP is important for the secure transmission of all sensitive information, but it’s especially critical when dealing with financial data. Hackers tend to target financial departments specifically because they know that, if they’re successful, there is going to be a huge payoff for them as they will have access to the bank details of potentially thousands of people.

Not only would such a breach cause a significant loss in revenue, face and credibility, it will also net you huge fines of up to £17.5 million for breaching GDPR regulations (or 4% of annual global turnover). So, be smart and don’t skimp on investing in the right security for your business.

Consult FastPay today

Want to learn more about how to securely manage your finances via Direct Debit?

Speak to one of our friendly finance professionals today here at FastPay and we will guide you through the dos and don’ts of making secure payments.

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