Open banking has opened up new possibilities for financial services and technology, allowing companies to tap into consumer data like never before. For example, third-party service providers can now access a customer’s bank account information, account balances, financial history, etc. through a bank link and customer consent. row.
Growth and enhancement through intensive collaboration
Internet of Things (IoT) can see growth and enhancement through in-depth collaboration with open banking technology to provide Additional benefits and uses for humans.
The benefits include consumers accessing their financial data, such as bank balances through wearable technology and AI assistants, making required and automated payments through IoT devices, allowing for more detailed credit checks, simpler insurance claims, etc.
Data safety and cyber security in open banking
When it comes to any new fintech innovation, consumers are often concerned and skeptical about data safety and cybersecurity. Much Consumers trust that traditional financial institutions are better equipped to protect their data than fintechs.
This may be due to years of continued use and lack of deep understanding about terms like “open banking” required and what security measures are in place to protect consumers.
Open banking is as secure as ever and spreads its data security policies and practices across various case studies in the IoT world.
Current methods of data protection in IoT
The rise of IoT and smart technologies has resulted in a continuously improved customer user experience through day-to-day operations that seamlessly respond to user needs. In terms of security, however, IoT has previously been met with a lot of criticism regarding built-in security features, and it often relies on the safety of the network the technology connects to.
Data collected, stored, and shared by IoT devices must be protected under the General Data Protection Regulation (GDPR). GDPR refers to a legal framework that sets out guidelines for how data should be collected and protected.
IoT application vendors have an important obligation to put in place GDPR-compliant data security and protection measures to keep their users’ data safe and protected, and to ensure Ensure that available sensors are not collecting more data than necessary.
IoT technology has the potential to be targeted with malicious intent
Just like any other device that can be connected, IoT technology has the potential to be targeted, exploited, and used for malicious purposes. For example, in 2020, a study by Palo Alto Networks found that 98% of all IoT data traffic is logged unencrypted.
One year 2021 global survey by IT security firm Trend Micro shows that 86% of IT professionals believe their organization can do more to educate about IoT security threats.
With anticipation With an estimated over 30 billion IoT connections established by 2025, security must be at the forefront of the minds of users and organizations.
Open banking will protect a specific piece of data
While open banking can only protect a specific part of the data collected by IoT devices with the utmost certainty, implementing open banking policies and technologies will protect the information associated with it. finance and payment first.
With smart payments, automated purchases, and direct banking on the rise, finance will no doubt become a fundamental aspect of IoT.
How open banking is kept safe
Safety is one of the main things pillar of open bankingand despite the security concerns, it’s as secure as a traditional bank.
The Open Banking API Endpoint is actually developed by banks and has been rigorously tested for maximum data security.
Open banking also gives more power to consumers themselves, allowing them to share data only with third parties of their choice. Eligible banks also have their own security measures, creating a multi-layered safety wall.
Payment Services Directive 2 (PSD2)
Payment Services Directive 2 (PSD2), the regulation behind the creation of open banking, was initiated in part to re-establish security requirements in the payments sector. Strong client authentication (SCA), dynamic binding requirements, and consent management have been introduced to ensure that only authorized users can connect to sensitive data.
Consent management is required when banks and other companies require customers to consent to the entity collecting and sharing their personal data.
SCA’s Authentication Process
SCA refers to an authentication process that requires account holders to prove their identity through the use of two or more security factors that fall into three categories:
- knowledge (something only the owner knows);
- property (something that only the physical owner holds); and
- coherent (something related to attributes that are unique to the user, such as fingerprints or voice recognition).
Dynamic Link Code
Similarly, dynamic linking establishes a user’s identity by requiring a new, unique code for every new transaction.
Unlike questionable methods, such as screen scanning (the process of copying information from a screen instead of securely connecting to the actual platform being displayed), open banking never requests users share their login details with anyone – making the above methods a viable option for identity verification.
How IoT devices benefit from open banking security measures
While all IoT devices are geared towards convenience and consistent data sharing, some sensitive information, such as financial data, cannot be easily accessed outside of the agreed upon scope. .
With Unauthorized access to devices As one of the main concerns, it is important that PSD2-supported open banking identity verification processes, such as SCA, be implemented when setting up automatic payments and new transactions. This ensures that only authorized users can set up future payments.
On the other hand, it reduces simplicity and the easy-to-use IoT is much loved. However, the same level of security is required for regular IoT payments as in any other financial application.
Data collected about users can be useful in protecting users from fraudulent actions.
By securely connecting to a bank account, consumer data can be collected and analyzed to create a portfolio that includes recurrent spending patterns, most used shopping categories as well as such as gambling habits and excessive spending.
This customer file can then be used to analyze whether their current transaction is a feature of their typical spending behavior. If a new transaction does not match a typical customer profile, the system may be notified and additional identification and verification procedures may be implemented.
While many IoT devices don’t encrypt traffic, open banking goes the other way. It does its best to ensure that APIs are protected by implementing various security measures.
Combined with heavy-duty identification verify and analyze datathis establishes a system of protection, although the IoT technology itself may be vulnerable to some attacks, financial and account data connected to the device is still protected.
This protection ensures limits on fraudulent payments, login attempts and access to banking data.
IoT and open banking for the future
Protecting customer data is at the core of PSD2 and open banking, allowing customers to control and maintain their own financial information. Therefore, security is crucial when it comes to sensitive financial information, and solid safety measures are a top priority.
Open Banking and IoT
Open banking and Internet of Things technology will certainly go hand in hand in the near future. When IoT has security concerns, open banking can help provide the answers and safety nets needed to protect users while accessing their finances on the go.
As technology continues to evolve and prosper, both of these options in open banking will create more ways to connect and create countless innovations to enhance and improve the lives of users globally.
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