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Making Open Banking a success for banks, not criminals

Senior Business Solutions Consultant, Fraud Prevention, BAE Systems Read time: 3 mins
Balancing the opportunity of Open Banking against appropriate security and good user experience will be tricky – but ultimately worth the work, says Gareth Evans.
Making Open Banking a Success for BanksOpen Banking is revolutionising financial services. In Europe PSD2 is a live issue for every bank. And similar payments reforms are under consideration elsewhere, too. The challenge is how to take advantage of the new opportunities on offer and navigate the complexities of transaction monitoring without compromising security.
 
Open Banking is then both a business opportunity and a security concern. For banks that get this right, there is the chance to become an account service provider – bringing all of a customer’s balances into one place for a single view of their finances and allowing the generation of targeted communications on deals or credit. 
 
While Open Banking should result in an increase in valuable competition, breaking the big banks’ stranglehold, the responsibility for any security vulnerabilities could end up falling squarely on those same organisations. Security measures must therefore be front and centre of new systems. 
 
Mobile payment systems, such as Apple Pay and PayPal, currently operate as mobile wallets, with a card for payment. Open Banking will eventually allow customers to debit money directly, saving on transaction fees. 
 
 

Security implications

The security implications of this are clear. Banks in the past were physical buildings, protected by one heavy door. Now cards and mobile internet banking have added more doors for security to watch – and these aren’t always controlled by the banks themselves. Security is reliant on different parties.
 
Banks need to ensure that Open Banking keeps the doors open for customers, without leaving them vulnerable to attack. When an organisation seizes the initiative on its own security, it can improve business and challenge new competitors. 
 
Established banks have the advantage of investing in fintechs showing exciting innovation in this area. Developments to watch with interest include targeted monitoring, used to assess the transaction risk. With the advent of PSD2, transactions are increasingly coming via third parties, so banks need to be prepared to develop their detection capabilities. 
 
There are lessons for European banks on this from elsewhere in the world. The Monetary Authority of Singapore and the country’s Association of Banks have published an API Playbook to support data exchange between banks and fintechs. Japanese banks, meanwhile, must publish their open API policies and are encouraged to contract with a single third-party provider by 2020. 
 
 

Open Banking offers great opportunities

Open Banking offers great opportunities for banks to reap lucrative business opportunities. It allows them to compete with fintech start-ups and disruptors. However, security is a real challenge and addressing this must be the first step, preceding the application of data. Banks must meet customer expectations, developing appropriate security while improving the user experience so that Open Banking benefits the organisations and their customers, rather than the criminals.
 
 

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The world of banking is transforming at enormous speed. Criminals are easily keeping pace. The most successful and profitable banks of tomorrow will be those that work hardest on financial crime prevention and defence today.
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Gareth Evans Senior Business Solutions Consultant, Fraud Prevention, BAE Systems 20 September 2019