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Over the last few years, open banking and API have transformed the way traditional banking takes place and made their way in the modern world. With open banking, there are plenty of financial products for users and they are also in complete control of their data. As per regulation, banks have to take prior consent from the customers before sharing their data with third parties.
However, with sensitive data comes the possibility of cyberattacks. Enterprises, big and small, have been a victim of a ransomware attack or a phishing attempt. Gartner predicted that by 2022, API abuses will be the most frequent attack vector against enterprise web applications that lead to data breaches.
For open banking to be successful, it is essential to build a safe and secure ecosystem.
So the question to be asked is: how do we make open banking safe for everyone?
Mechanism of open banking: Open banking uses APIs and enables third-party providers (TPPs) and fintech firms to build services. It lets banks share your data with authorized providers that offer budgeting apps or other banks – but all of this needs your permission. This will lead to the development of better products that aid you in managing your money, as competition and innovation will get a boost. When you connect with an authorized provider, they will be able to view only the data you have allowed them to access or the service you have signed up for. Moreover, you can withdraw your permission at any time. This ensures that your data is safe and secure.
Code quality and code security: There are tools available in the market that help you in enhancing your workflow and protecting your data on multiple fronts. Such tools fit seamlessly into your existing tools and raise a flag when the security is at risk. The impact includes better deliverables, customer satisfaction, getting everything right the first time, and so on.
Version control systems and automation servers: Implementing these control systems lead to automate process pulling code from various systems, automatic checking of code hygiene, improved team efficiency, better builds, and customer satisfaction. It also fastens the turnaround time. The features of such tools include file locking, merge tracking, atomic commits, and most CVS features. You can also use their support building, deploying, and automating features for maximum protection of sensitive data.
Together, these solutions make open banking safer for everyone involved.
The way forward
Banks can exploit the benefits of open banking to ensure safe and secure transactions. Some more things banks can do are:
- Through collaboration and standardization between APIs, banks, and Fintech firms, and also financial regulators and government bodies, standards and best practices can be followed.
- To build relationships with customers, transparency is critical.
- AI needs to be utilized to spot unusual patterns.
- A robust cybersecurity plan needs to be in place to seek out vulnerabilities as and when they arise.
The government needs to take concrete steps to ensure security in digital banking and India is already on its way! As per a recent report, the RBI announced a new set of guidelines for the digital banking and payments ecosystems, that requires regulated entities to conduct periodic assessments of apps and associated third-party services.
By using security tools, having sophisticated cyber policies and legal policies, we can protect the ecosystem of open banking and minimize the associated risks.
Open banking does not only mean introducing technology and radicalizing existing banking techniques. It is more about using all of that to empower banks and securing relationships between customers and service providers. We believe that open banking has the potential to completely transform the banking experience as we know it!
The above article is authored by Carlin Crasto, Lead Solutions Architect, Mobileware Technologies.