The Basel Committee on Banking Supervision published a report on open banking and application programming interfaces (APIs). The report monitors the evolving trend of open banking observed in Basel Committee member jurisdictions and the use of APIs.
Open banking is the sharing and leveraging of customer-permissioned data from banks with third-party developers and firms to build applications and services to provide more efficient and transparent options in banking.
It comes with benefits to banks but also various challenges, such as risks to their business models and reputation, and issues regarding data privacy, cybersecurity and third-party risk management. In response to this trend, banks and bank supervisors should pay greater attention to these challenges that accompany: (i) the increased sharing of customer-permissioned data; and (ii) the growing connectivity of various entities involved in the provision of financial services.
“Data sharing brings many benefits, but also results in a bigger surface area for cyber attacks. Data collected by third parties, whether via screen scraping, reverse engineering or tokenized authentication methods through APIs, can be stolen or compromised. Furthermore, as more data is shared and with more parties, the possibility of a data breach increases and therefore effective data management has become more crucial,” BCBS wrote in the report.