Cybersecurity-Priority in Open Banking

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Cybersecurity-Priority in Open Banking

CFO Tech Outlook | Monday, January 10, 2022

Open banking has the potential to revolutionize the financial industry. Consumers who give third-party access to their banking data can help financial companies and institutions develop more personalized products, services, and value.

FREMONT, CA: Open banking enables third-party financial services to access a user's data about banking, transactions, and other financial activities with their approval. Consumer activity data may originate with banks and other financial institutions and is shared via application programming interfaces (APIs).

Because open banking enables data exchange, it can catalyze significant innovation in the banking industry by enabling third-party providers to build customized goods and services that best meet the demands of their consumers. Many think that open banking can change the competitive landscape by enabling superior customer experiences.

With this important data, third-party financial services will better target customers with financial service options, evaluate aggregated data to generate distinct marketing categories, and assist customers in switching from one bank's checking account to another.

With such a large amount of customer data traveling between diverse players, banks, financial institutions, and third parties that adopt open banking must do so with cybersecurity in mind from the start.

Data leaks and human mistakes are two key hazards connected with open banking. If the APIs used by third-party providers do not adhere to security standards, data breaches may occur, harming both the consumer and the bank that shared the data.

Vulnerabilities in a third-party company's website or mobile application could allow hackers to enter and commit fraud, such as soliciting bogus payments or posing as an individual user.

Individually, far too many people are unaware of their own choices have on their data security. Most cyberattacks are directed against individuals, and 81 percent of the target users use weak or repeated passwords. With 61 percent of users using the same password across numerous accounts, it becomes substantially easier for attackers to access data dispersed over multiple digital sites.

There will always be hazards associated with exchanging sensitive information with a digital product, whether through online credit card registration or registering into a digital banking site. However, most users do not let these risks deter them from using those goods since they have a degree of trust in the platform's security.

Similarly, open banking must become a reality. It is critical that customers and financial players do not shy away from open banking as a whole but rather educate themselves and establish the required structures to ensure data sharing is secure and safe.

Additionally, users should be trained to manage their data properly and ensure its protection in the digital arena. This requires setting strong passwords and never sharing them, while any digital financial service should always use multi-factor authentication (MFA) to increase security. This is self-evident, as MFA prevents 99.9 percent of account takeover attempts. Encryption technology is also critical for data protection during transmission, storage, and sharing.

Financial institutions and third parties can use machine learning (ML) algorithms to strengthen their surveillance of questionable behavior. Machine learning algorithms can learn from previous instances of fraud, identify anything unusual, and recommend the proper course of action. Unlike manual monitoring techniques in the past, automated threat response systems can keep up with the rate of attempted attacks.

These safeguards must be included in cybersecurity policy from the start rather than being utilized to address concerns after they occur.

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