Is open banking safe?

Here, we demystify open banking security and answer the most critical question: is my financial data safe from prying eyes?

Open banking might be relatively new (it just celebrated its fifth anniversary), but it’s already proved to be invaluable in helping consumers and businesses take control of their finances by sharing financial information that was previously only available to banks. Of course, this raises questions around security.

How safe is sharing my financial data?

The short answer: very safe.

Products and services powered by open banking are designed to keep your data safe. The old way of doing things was called screenscraping, where service providers could access your online banking interface to pull data (hello fraud risk).

Now, your financial data flows through secure pipes called application programming interfaces, or APIs for short. More on that here.

To access our data in the first place, a Third-Party Provider needs our consent (your mobile banking app will send you a Strong Customer Authentication (SCA) notice to do this). Once you’ve consented, your bank will issue an access token and a refresh token. This enables the TPP to access your data with no additional effort from you.

Here’s what the process looks like …

  • For a TTP to access your data, you’ll give consent
  • You’re redirected to your bank, and authenticate using SCA
  • This allows the TTP to access your data for 90 days securely
  • To continue accessing data after 90 days, the TTP needs your reconsent
  • Rather than being redirected to your bank, you simply say “yes” or “no”
  • Access is renewed for another 90 days
  • Rinse and repeat

But, can I trust Third-Party Providers?

Absolutely. A TTP must be licensed by the Financial Conduct Authority and enrol with the OBIE Directory to offer open banking services. They also need to register with a regulator who will issue a digital certificate. This certificate serves as their identification which gets verified by every bank (including yours).

While the exact data a TTP can access varies, the most common types are…

  • Customer information: contact details and identification information
  • Account information: balances, transactions, and account details
  • Payment information: periodic payments and scheduled payments

What about open banking payments, are they safe?

Open banking payments are certainly safe! Payment rails are built on top of secure banking infrastructure and use the same encryption and security protocols as online banking. Moreover, it’s regulated by government bodies, which ensures that third parties are following strict guidelines for protecting customer data.

And on top of that, many open banking providers use advanced security measures like two-factor authentication and biometric identification to add an extra layer of protection. So, when you’re making an open banking payment, you can feel confident your money and personal information are secure.

What about businesses, how do they benefit?

Businesses can save lots of money. Take chargebacks as an example. Businesses receive chargebacks every day, and 86% of those are probable cases of friendly fraud. You read that right, nearly all chargebacks aren’t genuine. Sift’s latest report backs this, discovering nearly 1 in 4 consumers dispute a legitimate purchase.

Want to know more about how open banking can power your product innovation? Get in touch to see how Yapily can help.


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Ryan Waters, Senior Product Manager

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