Insuranceciooutlook

Is Open Banking completely secure?

By Insurance CIO Outlook | Thursday, November 15, 2018

With the evolution of the Open Banking system, which was designed as a way to give customers more control over their financial information and accessibility to a wider array of products and services, the veil of security has come down, making the customer data more susceptible to fraud. Over the years, banks were the sole custodians of the security of the sensitive customer data and the systems of how the data is transferred.

The advent of Open Banking paved the way for new communication portals allowing TPPS access to the bank account details of each customer. Without fully comprehending their security measures, banks would be interacting with these companies that propose a new risk of where the data will end up being held. Inevitably, banks can be a prey to hundreds of new threats outside their dominions. Complete security of these new portals is essential, as they run a risk of being compromised and customer information stolen by various fraudsters and criminals if done otherwise.

In order to ensure the security of these communication portals and any intercepted data, advanced encryption methods should be put into place, which would make sure that any data being transported is incomprehensible to the malicious party.

A seemingly authorized request can be sent across if an FCA regulated third-party provider is hacked into; to banks from that company in order to request customer information. Banks are bound by the new rules of Open Banking, allowing FCA regulated companies the requested data; provided they have explicit consent from the customers. Nonetheless, with the increased sophistication of scams, it won’t be too long before fraudsters find a way around replicating customer consent.

Awareness is the key to countering fraudulent attacks as consumers who are unaware of the system of Open Banking can willingly give their information to fraudsters after they have been convinced of the sanctity of false rules and regulations.

The objectives of Open Banking hold true as stimulating market competitiveness is good for consumers and also an opportunity for banks to attract new customers, up-sell, and cross-sell and offer competitive financial products. While sustaining traditional banking standards of security, a ‘beyond banking’ environment would foster new choices, while assuring trust. Putting the operational cybersecurity factors in place, companies can traverse all security obstacles thus ensuring that the Open Banking initiative achieves a stupendous success.

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