“Is Open Banking Safe?”. This is a common question as the safety of new technologies is paramount. People need to feel safe and secure with new technology, especially when it comes to their money. Whilst Open Banking is becoming an ever-increasingly popular method of payment and managing finances on both a personal and business level, some may remain slightly skeptical. This article is to help put your mind at ease that Open Banking is not only safe, but it is also one of the most secure ways to manage payments.
It is linked to your bank
Perhaps the main reason why Open Banking apps and technology are safe is the fact that people do not need to share their banking credentials. The process works through Open Banking APIs (application programming interfaces) by authenticating the access requested by a third party through their bank. This means the third party never gets hold of the bank account details directly. Users can also withdraw access at any point.
Third parties have to be authenticated
For a third party to request payment using Open Banking APIs, they must be authorised by the FCA (Financial Conduct Authority). The FCA’s main role is to protect consumers’ money and therefore providers need to meet a range of requirements and adhere to strict guidelines. Consumers can check whether the third party wanting to access your information is approved by checking the FCA register or the Open Banking Directory. Providers should state where they are registered and also have a registration number.
Not all information is shared
Another safety aspect of Open Banking is that only the information needed for the service agreed to will be given to the provider. This means that consumers can rest assured their data is not being shared for no reason. For example, if an individual is using an app to help control the spending on their current account, the app will only need information regarding the current account and therefore will not have permission to look at any other accounts the individual has unless they have explicitly been permitted to do so.
Payment instructions are pre-populated
Open Banking is convenient and secure at the same time. When a customer chooses to pay a business via Open Banking, they do not need to enter payee details as the open banking provider pre-populates the details and is in control of where the money goes, removing any risk of human error and reducing the risk of customers being tricked into sending money to a fraudulent location.
Not only do providers need to be approved by the FCA, but they also need to be GDPR compliant. The provider will need to tell an individual what data they have on that person, which data they will use, how long they will keep the data, and what they will use it for. If you are concerned about what information a company has on you, ask them more about how they will use this data before you authorise them.
Strong customer authentication
Open Banking uses strong customer authentication to help increase the security of payments. Combinations of PIN codes, facial recognition, fingerprints, etc are used to help keep the information as safe.
Open Banking is optional
Finally, people need to remember that Open Banking is optional. Whilst there are a range of benefits to using open banking, it is down to the individual’s discretion how often and if they use it at all. It is important to note that whilst Open Banking is completely optional, not providing access may affect providers’ ability to provide certain products and services.
So, is Open Banking safe? The answer is a resounding ‘yes’. Open Banking is not only quick and convenient, but it also has safety and security at the heart of what it does. However, whilst there are many safety measures put in place, consumers need to still be careful with anyone they provide data to. Always ensure that providers are registered and compliant in order to provide as much protection to your money and data as possible.
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