Compliance is tough, especially when you’re running a finance firm or a tech company. There’s always some audit coming up, another control to document, another report to finish. On top of that, you have got clients and regulators breathing down your neck, asking if your systems are secure and if you’re playing by the rules.
SOC compliance is one of those areas where I see people really get stuck. I can’t count how many times I have heard, “Do we even need SOC compliance?” “Should we go for SOC 1 or SOC 2?” “What controls are actually important and where should we even start?”
Many people to find answers go online, search for answers, and end up more confused, and this is not because they are not finding any solution, but because advice is just everywhere, some old, some not really fitting your situation.
What hardly gets mentioned is how much your daily work, the tools you use, and how customer data flows through your systems actually change which controls you need. Finance companies often think transaction reports are enough, but with online banking, mobile apps, and APIs, you have got to think about monitoring and access controls as well. Tech companies sometimes check a box on SOC 2 and think that’s it, but if you’re not managing encryption, patches, and how you handle incidents properly, you’re leaving gaps without even knowing it.
So in this article, I’ll walk you through what’s different between SOC 1, SOC 2, and SOC 3 and why it matters depending on the kind of business you run. Whether you’re preparing for an audit, reviewing controls, or just trying to stay on top of things, this should help you figure out where to focus and what’s really important. So, let’s go through it.
SOC 1 vs SOC 2 vs SOC 3 compliance: What’s different for financial institutions and tech companies?
Now, before jumping into audits, you need to understand why the differences between SOC 1, SOC 2, and SOC 3 actually matter, especially with how fast things are changing. The way your business runs, the tech you use, and how data flows through your systems have never been more important. Cyber threats are evolving, regulators are tightening rules, and customer expectations around data privacy are higher than ever.
So, starting with financial institutions, SOC 1 has always been the standard because accurate financial reporting is critical. But it’s not just about transaction logs anymore. With more firms offering online banking, APIs, and digital wallets, regulators are also expecting stronger access controls, real-time monitoring, and fraud detection tools. There is also increasing pressure from frameworks like the FFIEC guidelines and state-specific regulations that go beyond basic transaction reporting.
Tech companies, on the other hand, are being pushed to go beyond SOC 2 checklists. Data breaches are hitting headlines daily, and ransomware attacks are costing companies millions. Cloud adoption and remote work environments have increased risks like unsecured endpoints and unmanaged patches. That’s why advanced controls like encryption key management, automated incident response, and continuous monitoring are no longer “nice to ”have”—they are essential parts of SOC 2 readiness.
SOC 3 might look like an easy way to build trust with clients because it’s a high-level report, but it’s becoming clear that regulators and customers alike are asking for more detailed assurance. Just having a SOC 3 isn’t enough if you’re dealing with sensitive customer data or if you’re operating in regulated industries like fintech or healthcare
So how do you decide which SOC report you need? First, don’t just follow what others are doing. Take a hard look at your current risks. Are you handling a lot of API requests? Are remote workers logging in from unsecured networks? Is your data flow complicated? These real-world issues should guide whether SOC 1, SOC 2, or a combination of both makes sense for you.
Which SOC report should financial institutions vs. tech companies get?
Now that you know why it’s important to look at how your business operates, let’s talk about which report makes sense for you. It’s not always obvious, and honestly, a lot of companies pick one just because it’s “standard” in their industry —without thinking about their actual risks, systems, or customer expectations.
Why SOC 1 is usually the starting point for financial institutions?
If you’re running a bank, lending company, investment firm, or anything where financial reporting is critical, SOC 1 is where you want to start. It focuses on internal controls over financial reporting, which is what auditors, investors, and regulators are going to ask about first.
Controls you should be focusing on:
· Segregation of duties – making sure no single person can both initiate and approve transactions.
· Transaction logging – automated logs that track all activities in your financial systems.
· Reconciliation processes – ensuring transaction records match across systems.
· Exception handling – processes to catch and correct errors or irregularities before reports are generated.
· Access management – controlling who has access to financial systems and sensitive data.
What’s new to consider?
With digital banking, mobile apps, and faster payment systems, it’s not enough to rely on month-end reports. Real-time transaction monitoring, fraud detection algorithms, and API access controls are becoming part of the SOC 1 requirements that auditors expect you to have in place.
SOC 2 is the real focus for tech companies
Tech companies, especially those handling customer data, cloud platforms, or SaaS products, lean heavily on SOC 2. It’s all about how secure and reliable your systems are, and whether customer data is protected.
Controls you should be focusing on:
· Multi-factor authentication – making sure only authorized users can access systems.
· Encryption management – securing data both when it’s stored and when it’s being transmitted.
· Patch management – regularly updating software to fix vulnerabilities.
· Monitoring and logging – using tools like SIEM to spot unusual behavior or attacks.
· Incident response – having automated and tested procedures for when something goes wrong.
· Data backup and recovery – ensuring you can quickly restore systems after an outage or breach.
What’s new to consider?
With more remote work and cloud-based operations, endpoint security and identity management are no longer optional. Regulators and customers are expecting proof that you’ve gone beyond basic policies and are actively monitoring for threats.
What about SOC 3?
SOC 3 is mostly used for marketing, it gives clients confidence that your company meets basic security standards without showing the detailed controls. But don’t lean on it if your business is in a high-risk sector or if customers are asking for detailed audit reports. It’s a trust signal, not a compliance solution.
So, if you’re wondering which SOC report is right for your business, start by asking:
· What kind of data do we handle every day?
· How exposed are we to risks like fraud, hacking, or data leaks?
· What do regulators or clients expect from us?
· Where do our processes need the most tightening right now?
Once you answer those, choosing the right report and controls becomes a lot clearer. In the next section, we’ll look at how you can prepare for a SOC audit based on your industry’s needs.
How financial institutions vs. tech companies should prepare for a SOC audit?
What you need to focus on for financial institutions?
If you’re in finance, auditors will want to see that your controls around financial reporting are solid. It’s not enough to say “We do reconciliations every month.” You’ll need to show how you prevent fraud, ensure data integrity, and keep a proper audit trail.
What you should check before the audit?
1. Review transaction logging – Make sure your systems are automatically capturing transaction data and that logs are tamper-proof.
2. Check reconciliation workflows – Show that processes for matching transactions across accounts are consistent and verified regularly.
3. Test exception handling – Identify and fix errors in a timely way. Auditors will ask for examples where controls caught issues before they became problems.
4. Access controls – Audit who has access to sensitive financial systems. If there’s too much access, or outdated permissions, it’s a red flag.
5. Third-party oversight – If you rely on vendors for processing payments or reporting, ensure they meet the same control standards.
Important but often overlooked areas:
· Real-time monitoring tools for fraud detection
· Controls around API access and data sharing
· Backup systems in case of outages
· How you handle customer complaints and disputes
The regulators and auditors are no longer satisfied with spreadsheets and email trails. You’ll need to show evidence — dashboards, logs, controls that are running continuously and reviewed regularly.
What you need to focus on for tech companies?
For tech companies, SOC 2 audits are usually where the pressure is. Auditors want to make sure you’re not just “checking the box” but are actually protecting customer data and making sure your systems are running smoothly.
What you should check before the audit?
1. Access management – Review how you authenticate users. Multi-factor authentication should be enforced wherever it’s needed.
2. Encryption controls – Show that data is encrypted both at rest and in transit. You’ll need to explain how encryption keys are stored and rotated.
3. Patch management – Ensure you have a process to regularly update software and fix vulnerabilities.
4. Monitoring and incident response – Have logs in place to catch unusual activities. Also, test how you respond to breaches or outages.
5. Privacy controls – Explain how customer data is collected, processed, and stored. Be ready to show how you limit access and handle data disposal.
Important but often overlooked areas:
· Security around remote access tools
· Identity management for contractors or third-party vendors
· Cloud configuration reviews
· Regular penetration testing reports
· Data flow diagrams to show how customer data moves across systems
Auditors will ask for proof that you’re not just following policies on paper. They’ll want to see logs, reports, workflows, and even interviews with your team to confirm controls are working day to day.
Conclusion
SOC compliance doesn’t have to be confusing. Start by understanding how your business actually operates, where data goes, what risks you face, and what controls you need. Whether you’re in finance or tech, show that your controls work in practice, not just on paper. Focus on the areas that matter, be prepared with evidence, and stay ahead of risks. By doing this, you’ll not only pass audits, but you will build trust and run a stronger business. Take it one step at a time, you’re on the right track.
Author Bio:
Narendra Sahoo (PCI QPA, PCI QSA, PCI SSF ASSESSOR, CISSP, CISA, CRISC, 27001 LA) is the Founder and Director of VISTA InfoSec, a global Information Security Consulting firm, based in the US, Singapore, UK, UAE & India. Mr. Sahoo holds more than 25 years of experience in the IT Industry, with expertise in Information Risk Consulting, Assessment, & Compliance services. VISTA InfoSec specializes in Information Security audit, consulting and certification services which include GDPR, HIPAA, CCPA, NESA, MAS-TRM, PCI DSS Compliance & Audit, PCI PIN, SOC2, PDPA, PDPB to name a few. The company has for years (since 2004) worked with organizations across the globe to address the Regulatory and Information Security Challenges in their industry. VISTA InfoSec has been instrumental in helping top multinational companies achieve compliance and secure their IT infrastructure.
Corporate Email: narendra.sahoo@vistainfosec.com