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The rapid development in financial services has led to constant competition within the various financial technologies. Open banking technologies provide an opportunity to abolish these pressures rather than associating with them. Open banking systems are the technologies adopted to provide bank account ownership to the customers directly rather than the interference of various financial institutions. It is a technology that alters the relationships between the organization and customers by switching systems and conventional practices, and it creates new revenue sharing ecosystems.

Open banking technologies can increase the revenue streams in the financial systems along with expanding the reach of customers to the financial organizations. Open banking systems acknowledge banks to commercialize their infrastructure by shifting into the backend as a service space (BaaS), granting core services to financial technologies and other third-party organizations.

Implementation of Open banking systems

Successful implementation of open banking technology is essential for banks and other financial institutes to gain full advantage of the technology. Some of the key considerations to achieve successful implementation open banking systems are:

API Specification: the banks and financial institutions need to characterize an appropriate API specification, to make sure how bank exposes their internal data and services to the external mediums. Various data and internal banking applications like ATM locations, exchange rates, interest rates, and branch locations, are exposed through the open APIs. All the sensitive customer account information is exposed by the banks or financial institutions through the secured APIs.

API Security: the banks and financial institution need a plan to restrict unauthorized third-party access to the secure APIs. When APIs are defined and are available to the outer world the banks generally implement multiple layers of security technologies to protect the exposed APIs. The authorization mechanism, such as certifications based on third party authorization, authentication, and OAuth2 tokens, are regularly used in various open banking systems.

Customer authentication: The bank requires customer’s consent while sharing sensitive customer data with third parties. The authentication is the combinations of two or more factors of ownership, knowledge, and inheritance to safeguard the sensitive financial information. Some of the authentication factors that are used by the banks and other financial institutions are facial recognition data, fingerprints, voice, and SMS OTPs. The methods, such as mixed, delegated, and embedded techniques, are also used by the financial institutes and banks to safeguard sensitive data.

Transaction risk analysis: It is essential to go through all the authentication procedures and provide consent while generating payments, even if the transaction procedures do not have any risk. The transaction risk analysis (TRA) refers to identifying the level of uncertainties during transactions and providing access to the customer to skip the authentication factors if the level of risk is low.

While implementing the open banking technologies, the banks need to think about the capability of the platform, or about the transaction risk analysis solutions that are implemented by the banks and other financial institutions.

Customer consent management: This deals with providing the customer with the authority to control the personal financial data. Based on the criteria’s such as level of sharing, time-period, and purpose decisions on managing consent is made… The open banking systems should be capable of capturing storing and validating permission while sharing the customer data with the third party.

Third-party onboarding: The consumers generally subscribe to the APIs offered by open banking when needed. The banks usually provide signup forms for third party customers.

The banks are capable of handling the signup request of the customers generally in two different ways. Some of the banks prefer fully automatic, where the data are checked and approved automatically through a fully automated workflow. And in some instances, banks prefer the manual procedures where the banking staff needs to review and approve the signup forms manually.

The directory services introduced in some of the financial institutions provide the customers with onboarding capabilities. The banks and customers designate with the directory services and provide essential credentials that help to recognize the customers. The banks call the directory services when the end-users communicate with the bank with the help of the credentials submitted by them during the registering process.  

Risks in open banking technologies

Attacks on APIs: the distributed denial of services (DDOS) is caused due to the attacks on application program interface (APIs), May results in downtime of banking operations. Cybercriminals study API systems to find security flaws in the systems.

Attacks on applications: The open banking application is the prime target of cybercriminals since most of the customers prefer mobile apps while using open banking systems. The passwords, username, and encryption keys present in the applications may help cybercriminal to retrieve the sensitive banking data. The criminals can use this to mimic as customers to perform various banking operations.  

Attacks on fin-Tech companies: The security levels and experience of various fin-tech companies differ from each other. The cybercriminals pretend to be a legitimate bank or customers to attack fin tech servers as they are the ideal targets to steal the customer’s banking data.

Disaggregation and disruption: the propositions of transactions processed by the various organizations decrease with the increase in players providing financial services. The overall activities will be having a limited view, which makes it harder to identify suspicious or irregular behaviours.

Endpoints Security: the endpoints in banking systems are always sensitive towards security risks. The third-party APIs are protected with the help of valid API formats. Protecting various business networks accessed by remote devices such as tablets, laptops, smartphones, or other wireless devices are referred to as endpoint security protection.  

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