Why Open Banking Needs Secure Identity Verification Methods
What do we want? Secure identity verification methods. When do we want it? Now. Let’s take a look at whether open banking stands in the way.
The key to revitalizing banks
Now more than ever, consumers are trusting businesses with their personal information – especially in fintech. With many of these open concept models, however, concerns around the security of user data will naturally arise. One solution, then, is to ensure secure identity verification methods that can provide the authenticity that customers need in order to feel that their information is safe.
As time goes on and technology advances, fintechs are rejuvenating old ways to better meet the needs of businesses and their customers. PayPal, for example, is stepping in and replacing the role of a traditional bank in many ways.
Yet, banks won’t simply be left behind. They can step into a world of opportunity through open banking. Open banking is creating a new financial services ecosystem, just in time as non-traditional banking experiences grow more popular amongst consumers. But is an open concept as easy as it sounds? As the adage goes, nothing good comes easy.
The scoop on open banking
So, what’s the 411 on open banking? The global trend refers to the opening of internal bank data and the ability for external parties to receive data through digital channels. It’s an approach that allows banks to securely share customer-authorized financial data with third parties. Now, third party fintechs can provide apps that enable consumers to access multiple bank accounts from a single app – or apps that make it easier for businesses to share data.
Financial institutions are building the technology and security frameworks to support open APIs, but there are some skeptics out there who wonder just how secure data will be when it’s shared between servers. To succeed, banks and third party partners need to implement authentication tools that follow strict regulations.
But most of all, open banking can only succeed with consumer privacy sitting at its core.
A whole new world or an impossible reach?
Does this new inclusive model come with limitations? Supporters say open banking allows banks the option to expand their products and services and cater to a more dynamic customer base. Along with banks, consumers and small businesses will benefit, too, as lenders gain more visibility into their creditworthiness.
The opposing view, however, centers around data privacy and secure identity verification methods for the usage of financial data. The playing field for this data will vastly increase, and along with it circumstances where customers might not be okay with their data being used in all the ways their banks are planning.
Experts tackled the potential problems of open banking head on at Money20/20 Asia. Gavin Littlejohn, chairman at FDATA, laid out seven crucial items to keep in mind when implementing open banking:
- Implement customer data rights
- Ensure the customer can give and take away consent
- Consider liability
- Put in place a regulatory framework
- Discuss technology specifications
- Set up an implementation capability that considers governance and funding
- Explore the implementation journey and monitor success
Combating these gray areas will need stringent data privacy policies and secure identity verification methods. Consumers should have the option to rule out use of or sharing of their data, and should at all times be aware of how their data is used. And as a foundation, there should be a verification process that’s indisputable if and when concerns arise.
So, is it possible?
At the end of the day, financial institutions can keep their traditional, anchored customer relations all while adopting a new customer dynamic. Open banking may be plausible if banks keep their focus on data privacy and secure identity verification methods.
If nothing else, open banking shows that financial services are moving in the right direction. Banks are taking note of how positively consumers and small businesses respond to fintech innovation. They’re starting to follow suit, and more importantly, they’re starting to prioritize keeping consumer data in the consumer’s hands.
You want the data you’re using and collecting to be recent, secure, and consumer-permissioned. If you’re ready to amp up your verification process with user-permissioned data, speak with a data expert today.
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- What California’s Consumer Privacy Act Means for the Future of Data Security
- Out of Wallet or Out of Touch?
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About Amy Hou
Amy Hou is a Marketing Manager at Urjanet, overseeing content and communications. She enjoys writing about the latest industry updates in sustainability, energy efficiency, and data innovation.