By Jacob Ideskog, CTO at Curity
The adoption of Open Banking has increased rapidly over recent years and has had a revolutionary impact on financial institutions and on the experience consumers have when interacting with finance products. According to the OBIE 5 million people are now using Open Banking in the UK, as the benefits of the new products and services begin to be recognized by consumers and businesses alike.
However, the rapid rise of Open Finance has also coincided with concerns about the compliance and security risk that it poses. Curity’s latest report ‘Facilitating the Future of Open Finance’ revealed that over 70% of organizations globally are concerned with security related issues associated with Open Banking. It’s clear that this is a significant hurdle that still needs to be overcome if the adoption of Open Banking is to continue its rise.
The cybersecurity sector has the opportunity and means to alleviate fears and be at the forefront of the adoption of this revolutionary technology.
Addressing and Alleviating Security Concerns
A key concern amongst businesses is the extensive involvement of third-party providers that Open Finance requires and the heightened security risks associated with this, as over 65% of organizations view this as a top security concern. Additionally 62% of organizations have concerns with outdated security systems that don’t support securely sharing data.
However such concerns, whilst understandable, don’t recognize the current capabilities of security solutions available such as Multi-Factor Authentication and the implementation of Government regulations such as PSD2 in the EU. Crucial elements of the Open Banking experience are Application Programming Interfaces (APIs). APIs enable the efficient exchange of data between applications, services, and customers and can be safely used as long as security and access is properly secured. Acting as the backbone for Open Banking, applications built using APIs with correctly secured access allow backend communication between banks and financial institutions without the need to re-enter or re-share login details every time.
With regard to outdated security systems, investment will be crucial in addressing this issue. Reassuringly, 83% of all organizations surveyed do plan to invest more into Open Banking this year than the previous 12 months. This will not only allow them to update their security systems to meet the standards that Open Banking requires, but will also improve the customer experience and reassure potential users.
The foundations of Open Banking are rooted in providing consumers with choice of financial products and how they control their finances. Therefore providing a service that is interoperable between brokers, banks and third party financial institutions can be used to better the customer experience, so that all parties are equipped with the information that they need is vital. Furthermore, investment into the deployment of modern authentication methods will be a key aspect of addressing consumer hesitancy due to security concerns and ensuring consumer buy in.
Communication will also play a crucial role, both internally and externally. As mentioned previously many concerns of both financial institutions and consumers are either already accounted for by security systems or have solutions that can be immediately implemented. It’s vital to ensure that education around Open Banking is improved to alleviate fears that in some cases are unfounded amongst businesses and consumers alike.
The role of the cybersecurity industry
Whilst there are clear concerns and issues amongst organizations across the globe, there is undeniably significant momentum behind the adoption of Open Banking. With almost three quarters of organizations surveyed planning to introduce Open Banking in the next 18 months, cybersecurity professionals’ focus should be on ensuring this transition is as smooth as possible.
This momentum and clear intention from businesses to adopt and invest in Open Banking provides the cyber security sector with a significant opportunity to be at the forefront of this banking revolution. It will be vital for the industry to work closely alongside financial institutions to support this change and mitigate risk at every turn.
We can expect the adoption of Open Banking to continue in the short term, but its long term health and adoption is absolutely dependent on the ability of the industry to address the security concerns and hesitancy that exist.
There’s potential for Open Banking to have a revolutionary impact on the way businesses and consumers approach their finances and more and more institutions are set to incorporate it into their business. However, despite the clear benefits associated with Open Finance, this cannot be done at the expense of individuals’ security and protecting their personal and private data. This is why the cybersecurity sector plays such an important role. If the industry doesn’t effectively mitigate risk and alleviate fears, no matter how much enthusiasm and momentum there is behind Open Banking it will not realize its full potential.