Debunking open banking myths
AML Services Manager
Open banking is a technology that has been gaining traction in recent years, but it remains a fairly new concept for many firms and their clients. This then leads to misconceptions inevitably emerging. In this blog, we debunk some of the most common myths about open banking.
Myth 1: Open banking is not secure
One of the biggest misunderstandings about open banking is that it isn't safe. The truth is that open banking offers a higher degree of security than traditional banking and manual data sharing.
Open banking is enabled by safe-guarded Application Programming Interface (API) technology, which allows third-party providers temporary access to selected financial information. The customer can control what information is shared and with whom and the use of APIs ensures that only authorised parties can access the data.
With open banking, customers' financial data is protected by a range of measures including multi-factor authentication, tokenisation, and encryption. Traditional methods of sharing financial information like emailing PDFs or posting physical documents do not offer this level of protection and are at risk of tampering and interception. With open banking, customers can be confident that their financial data is safe and secure.
What is an API? Think of an API as a bridge, with security measures in place that let different computer programs share information in a structured way. The measures in place prevent unauthorised communication from entering, keeping data and information safe. A common example of how you might use this is when making an online purchase - a payment gateway will use APIs to securely process transactions between online stores and banks.
Myth 2: Open banking has extensive data access
Open banking allows its users to share the minimum amount of information necessary through a simple, secure digital process. It isn't a free-for-all and doesn't give open access to the users' bank accounts, financial information or login details. When a customer opts in and gives permission for their data to be shared via open banking, it only provides temporary access to the data the user chooses to share.
When sharing bank statements via Thirdfort, open banking technology enables temporary, read-only access to six months' worth of bank statements, and that's it.
Myth 3: Open banking is only for tech-savvy customers
Open banking is designed to benefit all customers, regardless of their level of technical expertise. In fact, most customers will already have used open banking technology when making payments, aggregating accounts, using budgeting apps, comparing loans, investing and receiving financial advice.
Open banking continues to enable businesses like Thirdfort to develop increasingly accessible technology. The capabilities generated by open banking have allowed for the development of products and services which have increased inclusivity and access for people across the world.
Myth 4: Open banking will lead to more fees
Products using open banking are designed to simplify time-consuming activities. Less time spent completing processes manually means lowered costs and reduced friction. Open banking has also made it easier than ever to compare financial products and switch providers, meaning businesses must compete for their customers.
Increased competition in the market means providers must develop their offerings according to customers' elevated expectations. This environment is driving innovation, improving customer experience and lowering fees.
Myth 5: Open banking is only for large financial institutions
With open banking, size doesn't matter. Open banking technology has the capability to benefit all firms where there is a legitimate interest, regardless of size. Small and large institutions alike can compete by offering their customers better experiences through dynamic and innovative process design.
Open banking technology has facilitated an increase in collaboration between customer-facing businesses and technology providers. This collaboration has resulted in the development of innovative products that serve organisations of all sizes, not just the big players.
Myth 6: Open Banking providers see my credentials
When a user elects to use open banking technology, the app will redirect them to their online banking portal, where they will be asked to log in. Just like the way they usually log in, their bank controls this authentication process, it is totally separate from the open banking provider and the provider does not see or store any credentials. Once logged in, users can select the account or multiple accounts they wish to connect to and share in a read-only format.
Check out our video below which answers some of the most commonly asked questions about open banking and shows how easy it is to share bank statements using Thirdfort!
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