Banking is going through a big change. Open banking was introduced in January with the Payment Services Directive 2, to encourage more innovative relationships between businesses and banks, to give customers a smoother, more personalised retail experience.
Open banking allows customers to share their banking information with businesses through an API, including:
· Accounts and balances
· Standing orders
Businesses can use this information for new products and targeted advertising, for example:
You spent £120 in Supermarket S this week. The average weekly shop in Supermarket L is just £75. Making the switch could save you £45 a week. That’s more than £2,000 a year.
This tool could be very valuable to businesses looking to attract customers who want to save money, or who struggle to budget.
Within the legislation, businesses can also request access to payment initiation within a customer’s account. This allows the business to send money from that account.
How secure is Open Banking?
The possibility of third parties accessing payment information and even making payments can be a worrying prospect for customers.
These privileges are normally reserved for banks, who must have very sturdy cybersecurity. To access the same situation, third-party businesses should step up their cybersecurity to protect their customers.
The simplest way to upgrade your cybersecurity and make customers safer is introducing multi-factor authentication to your account login process. This ensures a customer’s banking information is still safe even if a different website with poor cybersecurity, that the customer uses the same login details for, is breached.
Open Banking is regulated so that only approved third parties can ask permission to access information. Every business looking to provide open banking must meet rules set by the Financial Conduct Authority, and then be approved by the Open Banking organisation.
To implement open banking, third-party businesses should be penetration tested and comply with ISO27001. OmniCyber Security can provide you with the support your business needs to make your service secure enough to enjoy the opportunities offered by open banking.