Prioritising Security: Why Open Banking is the Solution
Published
Harriet Holmes
AML Services Manager
Open Banking has been a buzzword for some time now. But, there is still a real under-appreciation of the positive impact and risk mitigation that Open Banking can offer the regulated sector. With the rise of data breaches, fraud and cyber attacks, security has become a top priority for all regulated firms and consumers alike.
In this blog post, we'll explore how Open Banking can help prioritise security and why it's the solution to the challenges faced by the regulated industry. Firms can see clear, tangible benefits by exploring and educating consumers on open banking.
Open banking in simple terms
Open banking allows consumers to share financial information that only a consumer and their bank can see, such as their balance and transaction history, with other financial providers or services at their discretion.
Since 2018, Open Banking rules meant that the UK's largest banks must let consumers share their financial data with authorised providers, granting them read-only access to spending transactions and regular payments.
The Benefits of Open Banking
| Benefits to regulated firms | Explanation |
|---|---|
| Streamlining | Only receive the statements needed - and in an easy-to-digest format. |
| Improved decision-making | High-risk transactions/activity is automatically highlighted. |
| Cost Reduction | Create a full picture of a client’s Source of Funds without all the back and forth—no more waiting for paper statements—access clients’ digital bank statements instantly with a clear, user-friendly, accessible report. |
| Fraud Prevention | Financial records are genuine and obtained independently from the source. Eliminating the risk of statement tampering or interception through email or post. |
| Multiple sources | Clients can easily provide bank statements across multiple accounts. |
| Secure | Sensitive client information is shared securely. |
| Safe | The method for sharing sensitive information is safe. |
| Control | Clients retain control of their data safely and securely. |
How Open Banking supports good compliance
Compliance is a critical issue in the regulated sector, and Open Banking plays an essential role in ensuring that firms meet regulatory requirements. Open Banking enables institutions to share data more efficiently and securely, reducing the risk of non-compliance. For example, banks can use Open Banking to share transaction data with regulatory bodies, ensuring they meet reporting requirements. Law Firms can use Open Banking to view the transactional history and accounts of clients to provide transactional advice.
Open Banking also promotes transparency and accountability in the regulated sector. Firms must comply with strict regulations and standards, and Open Banking provides a framework for achieving this. By sharing data securely and transparently, institutions can demonstrate compliance with regulations, building trust with customers and regulators.
Conclusion
Open Banking is the solution to the challenges the regulated sector faces today. It provides a secure way to share financial data, promotes innovation and competition, and supports good compliance.
As the threats evolve, Open Banking can help regulated firms and consumers stay one step ahead. It's time to prioritise security and embrace the benefits of Open Banking.
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