Discuss these 4 security topics when choosing an Open Banking provider

During our conversations with potential partners, who are software providers themselves, the subject of security is always a key item on the agenda. Naturally so, as the cybercrime industry keeps growing. Here are 4 focus points if you are in the process of choosing your future Open Banking partner to help you make your decision. 

Security goes beyond the TPP license

Open Banking allows third-party providers (TPPs) to access financial data, making it possible for end-users to speed up their reconciliation and payments. Open banking uses Application Programming Interfaces (APIs) to access financial data, providing connections between TPPs and bank accounts. Qualitative APIs are by design a safe way of communicating between systems.

Additionally, anyone offering open banking APIs must be a licensed TPP, which is a whole conundrum. There are multiple costs and efforts involved in obtaining and maintaining a PSD2 license. For example, the licensed TPP must undergo strict regulations and periodic audits to guarantee certain standards of security and privacy. For this reason, most software companies partner with a licensed open banking provider.

However, deciding who to partner with is an important decision that impacts the future of your software platform. To help you in this process we’ve highlighted 4 security elements to evaluate before making your decision:

1. Strong Customer Authentication (SCA)

Licensed Open Banking providers are required to implement SCA, a robust two-factor authentication process that verifies the user’s identity before granting access to financial data.

The most common model implemented is the redirect model. In this model, the users are directed to their banking portal. They authorize the Open Banking request using the bank’s known and secure authentication methods.

SCA greatly reduces the risk of unauthorized access to data by employing a combination of something the user knows (e.g., a password), something the user has (e.g., a smartphone), and something the user is (e.g., a fingerprint).

2. Data Encryption to protect sensitive information.

Reputable Open Banking providers use state-of-the-art encryption techniques to protect sensitive information. Advanced encryption algorithms render data unreadable without the proper decryption key. This ensures that even if a hacker intercepts the data during transmission, they can’t interpret it.

3. Secure Data Storage

Licensed providers must maintain data centers with robust physical and digital security measures in place. This includes firewalls, intrusion detection systems, and round-the-clock monitoring to safeguard data from unauthorized access, tampering, or theft.

4. Making the end-user consent visible

As Open Banking gains traction, managing consent within the organization of the end-user becomes an essential aspect of maintaining control over financial data.

For example, Ponto, Isabel Group’s Open Banking solution, offers an end-user interface as part of its solution. This central consent management portal enables the end-user to view and manage all accesses in one location. The increased visibility allows end-users to keep track of which providers have access to their financial data. It can provide real-time updates on customers’ consent status and they are notified when new consents are granted, revoked, or when the consent duration expires.
This central consent portal holds some additional benefits.

This central portal maintains a comprehensive audit trail of all consent-related activities. It allows users to review historical data, assess consent management strategies, and identify potential improvements. Additionally, the portal can generate reports to help users demonstrate compliance with data protection regulations, ensuring you meet your legal obligations.

Open Banking provides secure and convenient financial data access for users and third-party providers. When choosing a licensed Open Banking provider, ensure they offer top-notch security elements such as strong customer authentication, data encryption, secure data storage, limited data access and central consent management.

For more information on how Ponto does it, check out our website.

Wishing you a wonderful Open Banking journey!