Open banking brings great opportunities and greater responsibilities

From 1 July 2019, the big four banks have been asked to share their product data voluntarily, which will make comparison of different products easier. While consumers are the ultimate winners with the open banking regime, it also brings significant opportunities for the FinTech industry.
 
What is the benefit of open banking?
The open data environment means that our banking sector will no longer be dominated by the big four. They will no longer have the advantage of holding onto customer data which has made it difficult for players to enter the market for so long. Open banking is aimed at providing consumers and small businesses with improved choice, greater access and better deals. It is an exciting time in the financial services sector as open banking encourages new innovation, greater efficiency in the delivery of financial products and services, and the potential for Australian financial service providers to compete globally.

Where do the opportunities lie with open banking?
Some of the products included in open banking are savings accounts, transaction accounts, term desposits, foreign currency accounts, mortgages, business finance, GST and tax accounts, cash management accounts, personal loans, consumer leases and overdrafts.

What are the risks associated with open banking?
Open banking gives the consumer control of their data and how it is used. They can ask their bank to send their personal data to another bank or financial service provider. This means there will be a lot of personal data moving around and being stored in more locations. It raises serious concerns about privacy, data protection, and security breaches. As more and more sensitive data flows between organisations, the greater the risk of cyber attacks. Unfortunately, open banking also brings opportunities for cyber criminals. We are likely to see an increased frequency in phishing attacks and malware attacks as hackers try to steal banking credentials, personal data, identities and money. The challenge for Fintech Insurance Solutions and the open banking regime is to offer customers a better experience without compromising on privacy. FinTechs that want to be an accredited data recipient must foster appropriate systems and processes in place to protect the data that they have been entrusted with. They also need to be transparent with how the data is used and who it is shared with. Privacy and data protection is not only a responsibility for each individual service provider, it is essential for the industry as a whole to ensure the benefits of open banking are sustained over the long term.

Speak to Cindy Lau a CMX cyber risk specialist to find out how you can protect your business with cyber insurance.