Is Open Banking safe?

Written by Yapily · February 11th, 2021

Yes, Open Banking is safe. For anyone that wishes to share information and make payments through Third Party Providers (TPPs), applications powered by Open Banking have a lot to offer in terms of security and confidentiality. The main benefit is that end users have much more control over who can access their data and for how long.

When using Open Banking users do not have to share passwords or sensitive login information, you can approve payments and allow secure access to your information directly from your mobile banking app.

Why sharing information with Open Banking is safe

Open Banking is transparent and secure in comparison to old fashioned methods such as screen scraping. A common misconception is that Open Banking and screen scraping are the same - they are not. The end result from a user perspective may appear similar, however the mechanism and infrastructure is very different.

Screen scraping allows third parties to login to a bank’s online banking interface as the user, to extract data to use in third party applications. Although this access was authorised by the user, the bank has no way of differentiating between a TPP and the end user. This makes screen scraping an ideal target for fraud.

If there was a data breach, the bank could assume the fraudster is a customer. There is no way to tell. Highly sensitive data such as passwords are shared when using screen scraping, which also could put customers in breach of their banking contract, whereby they state that they will not share personal data or passwords. Given the opaque nature of screen scraping, users have no visibility and control over access rights.

Whereas Open Banking technology works using a consent system, whereby the consumer gives the third party a consent to access their data. For account information each consent lasts 90 days before having to be renewed. This can be stopped at any time at the sole discretion of the users themselves, this prevents businesses or consumers having to share passwords and login details. This gives the user and bank full transparency with regards to who is pulling the data as opposed to someone posing as the consumer to access the information.

Why making payments with Open Banking is safe

Security is a vital part of Open Banking and online payment journeys are becoming more popular as the years pass. With the acceleration in online demand as a result of COVID-19, Strong Customer Authentication (SCA) is key to ensuring that users are safe when purchasing goods and services online.

Card payments are the most common and albeit outdated way of paying online which have presented challenges when it comes to fraud. Recent statistics published by UK Finance, showed losses from fraudulent Card Not Present (CNP) transactions for UK issued cards totalled £470.2 million in 2019. Find out more about how Open Banking payments tackle fraud and UX challenges here.

‘Buy now pay later’ schemes and virtual wallets are growing in popularity, increasing the potential alternative payment options that consumers have. However, Open Banking payments are providing the biggest shake up to the payments industry, rivalling card payments, direct debits, standing orders and payroll. The key benefits to Open Banking payments are listed below:

  • SCA is built into Open Banking payment journeys as standard, not added as an afterthought or extra development. Providing a safe and secure payment flow.
  • Fees associated with Open Banking payments are significantly lower than card payments for merchants.
  • User experience and authentication flows are a lot smoother given the flexibility of web, decoupled and mobile user journeys.

The immediate goal for regulators and the industry is to increase awareness and availability of Open Banking services and the problems they solve. As more innovative products and services are powered by Open Banking data and payments, familiarity and confidence is increasing significantly.

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