Open Data Offers Benefits to Banking Customers
McKinsey’s research identifies three broad mechanisms that directly benefit customers: increased access to financial services, greater user convenience and improved product options.
Before the onset of open data, many customers might not have had access to certain financial services. “For example, where limited data from traditional documentary sources may disqualify consumers from accessing loans, open financial data can help assess the creditworthiness of borrowers by sourcing rent, phone, and utility bills,” according to McKinsey.
Customers also are able to save time when interacting with financial service providers thanks to the convenience of data sharing. Open access can allow consumers to apply for loans and mortgages with their applications already automatically prefilled, saving time and simplifying the process so that customers can benefit from the best rates.
The McKinsey report also points out the broader range of product options available to customers thanks to data sharing. “For example, an open-data ecosystem makes it easier to switch accounts from one institution to another, helping retail and MSME customers achieve the best yield,” the report states.
LEARN MORE: Find out how cloud security posture management can help banks protect their data.
How to Address Privacy and Security Issues Arising from Open Data
As previously mentioned, the degree of sensitivity around financial data raises additional concerns for the security of the information being shared via open banking. As a recent Forbes article put it, “Financial privacy and the security of consumers' finances are the main concerns for anyone involved in the open banking environment.”
Fortunately, the technology exists to protect the data and build the trust with customers necessary to make open banking effective. To defend against such threats as malicious third-party apps and data breaches, Forbes recommends artificial intelligence and multifactor authentication (MFA).
“Rigorous customer identification is the first step to preventing financial crime and money laundering,” Forbes notes. “AI, however, can do more. With open banking, AI becomes more knowledgeable and more powerful. It learns based on more data, develops a more accurate picture of a typical customer and their transactions.”
MFA is another important element in protecting customers’ financial and personal data. By requiring an additional step for access to an account — such as an extra question or a text sent to the account holder’s phone — MFA can provide greater security.