Open Finance is revolutionizing the financial services industry by offering users a more personalized and comprehensive experience, and safer. Among its most significant benefits is preventing risks like fraud.
In countries with advanced financial regulations, specific measures have been adopted to enhance security and fraud prevention, forcing players to implement strict technical and protection standards, improve user identification, manage consent to access data, and use secure APIs to share it.
As regulatory frameworks mature in other regions, cybersecurity and risk prevention are high on the agenda of regulatory authorities and members of financial ecosystems. Let’s explore how Open Finance strengthens security and becomes an ally to combat financial fraud.
- Data under control
Open Finance is based on the premise of always accessing users’ financial data with their authorization, and that they are the ones who have control over it. Therefore, users determine who accesses their financial data and when. If they want, they can revoke access from third parties, reducing the risk of information falling into the wrong hands.
- Greater transparency
One of the main advantages of Open Finance is to provide users with more transparent access to their financial data. This way, they can monitor their accounts and transactions more effectively, making it easier to detect suspicious, unusual, or unauthorized activity early.
- Verified identity
By utilizing open data, KYC or identity verification can be streamlined and improved by validating a user’s access or logins to one or more of their financial, tax or utility service accounts. Financial KYC also analyzes users’ behavior, such as patterns of online activity or financial transactions, and detects possible anomalies, helping to reduce the rate of fraud.
- Additional layers of protection
Open Finance services provide users with advanced security tools, such as two-factor authentication (2FA) and alert notifications for suspicious transactions. This adds an additional layer of protection to their financial assets.
- Investment in cybersecurity
Open Finance has helped to emphasize the importance of investing in cybersecurity to protect financial systems and reduce the impact of cyber-attacks more effectively.
- Closer synergy
Open Finance promotes collaboration between traditional financial institutions and Fintech, allowing the development of more advanced solutions to detect and prevent illegal practices, complying with current security standards and protocols.
While Open Finance will not eliminate financial fraud, it can be an effective tool to combat the problem. It provides users with more control over their data, advanced security tools, and greater transparency of their financial transactions.
It is therefore crucial to implement adequate security measures and regulatory oversight to ensure that users’ financial data is adequately protected. Collaboration between financial institutions and Fintech also plays a fundamental role in strengthening financial security.
These organizations should implement and update policies and procedures to assess risks and quickly implement the necessary measures to mitigate or eliminate them. This not only protects data, but it also generates greater trust between customers and their users.