Open Banking: Convenience Doesn’t Have to Compromise Security

The Convenience Factor

In the digital age, more and more consumers seek convenience in banking, and this is demonstrated with the digital payments industry reaching a value of US$721 billion in 2017. This desire for convenience is especially true of the younger generations with a survey by Accenture finding that 1/3 of those aged 18-44 were happy to share their financial data with non-banking third parties if they would benefit through deals or better user experience, whereas the average figure for individuals aged 45+ was half that.

Therefore, as an increasing number of consumers seek a better payments experience, technological innovations are necessary to adapt to and fulfill this need. Open banking is one such innovation that is causing a stir as fintechs continue to revolutionize the global payments landscape. Open banking not only increases convenience for consumers but also reduces friction and saves businesses both time and resources.

However, as with all new payments’ innovations, it is necessary to introduce regulations and legislation that safeguard against potential security risks. This ensures the public feels confident in the knowledge that new innovations are secure while also providing the smoother payments processes that they crave. Further evidence from Accenture echoes Canadian consumers' desire for these regulations with 71% of respondents citing that additional security measures would help alleviate their open banking concerns.

Security Implications

The introduction of such regulations is causing hesitancy in the adoption of open banking in Canada. This is leaving room for practices, such as ‘screen-scraping’ whereby third-party providers (TTP) access user financial data by logging into digital portals, that pose potential privacy and security risks.

So what solutions exist to overcome these potential security risks?

Tokenization is a solution that we use at VoPay to ensure consumers remain protected while enjoying this increased convenience. Tokenization is a security technology method that is designed to reduce the amount of data necessary for a business to access in order to complete financial transactions, thus protecting consumers’ credit card transaction data. This is achieved by replacing sensitive personal data with unique identification systems that are randomly generated. These tokens retain the essential information needed for the transaction while protecting the security of the data. Some of the benefits of this solution include:

1.     Quicker transactions: tokenization is completed with smart contracts which allow for elements of the process to be automated, reducing administrative time and improving the speed at which transactions can be completed.

2.      Payments efficiency: improves the potential for more efficient and easier transactions.

3.     Increased accessibility: this is especially true for small to mid-sized businesses as tokenization is empowering them to increase the security of customers’ credit card and e-commerce transactions and keep up with the larger competition.

Solutions such as this demonstrate that open banking does not have to compromise security and we are beginning to see Canadian authorities taking action to meet customer demands for banking innovation and convenience.

Learn more about the solutions we provide at VoPay.