Context Changes: Open Banking

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What is Open Banking?

Open Banking provides third-party service providers open access to consumer banking, transaction and other financial data from financial institutions. Open banking will allow the networking of accounts and data across institutions for use by consumers, financial institutions, and third-party service providers.

Open banking has the potential to reshape the competitive landscape and consumer experience of the banking industry by allowing access and control of consumer banking and financial accounts through third-party applications. While it opens the door to new business opportunities, it also introduces new risks to consumers and potential liability for companies as more data is shared more widely.

Benefits of Open Banking

Financial institutions can strengthen customer relationships and customer retention by better helping customers to manage their finances instead of simply facilitating transactions. Before open banking, sites like Mint required customer credentials for each account and had to build custom screen scraping integrations with each institution.

This practice is less secure, difficult to maintain, and doesn’t prevent users from improperly storing their financial data. Open Banking compatible APIs eliminate these integration issues and provide a more secure way to share data directly without sharing account credentials.

Challenges of Open Banking

Open banking poses severe risks to financial privacy and the security of consumers’ finances, as well as resulting liabilities to financial institutions. APIs could be at risk by malicious third-party applications or data breaches due to poor security, hacking, or insider threats. Acquisition and misuse of customers private financial data could create greater risks.

 

Open Banking Technical Requirements

  • Pairwise identifiers
  • Strong Client Authentication
  • Certificate bound access tokens
  • Advanced consent capability
  • Dynamic client registration
  • Software statement validation
  • CIBA for pushed notification
  • Reporting

 

Fapi & FDX Support

Easily deploy FAPI-certified or FDX APIs through Cloudentity’s Authorization Control Plane. Free up your development teams to deploy quickly and securely by managing scopes and access control in a centralized manner and allowing them to simply pull down the needed claims instead of creating custom providing them the scopes and enforcing them through Cloudentity’s distributed policy enforcement points.