Open Banking: Tremendous Opportunity for Consumers, New Security Challenges for Financial Institutions

The concept of open banking, as structured by the U.K.’s Open Banking and PSD2 regulations, is designed to enable third-party payment service providers (TTPs) to access account information and perform payments under the authorization of the account owner.

This represents both a challenge and a tremendous opportunity for financial institutions and TPPs. On one hand, it makes the overall market more appealing to consumers and expands the services available to them to include a multitude of new players in the financial market. On the other hand, open banking significantly widens the threat surface and puts consumers and financial institutions at greater risk of attack.

New Standards Overlook Device Security

For this reason, the initiative comes with a new set of security standards. However, these mandates deal mostly with authentication, transaction monitoring and API security, and largely ignore the security of the devices from which transactions originate. This is problematic because compromising mobile devices is a popular activity among cybercriminals. By capturing large volumes of devices, threat actors can raise their profile and increase their ability to either attack devices directly or use them to launch distributed denial-of-service (DDoS) campaigns.

Since cybercriminals commonly target the source of a transaction, it is crucial for security teams in the financial industry to consider the consumer’s security first and use whatever threat intelligence they can gather to calculate the risk associated with a given transaction. This means that the risk level of a transaction should be calculated based not only on whether the user’s account is protected by strong authentication, but also whether malware is present on the device.

Open Banking and the Security Immune System

It’s important to note that opening the financial marketplace to third-party providers will drastically increase the attack surface. While it’s still critical to monitor individual transactions, financial institutions must focus on implementing security controls to reduce the risk of an attack. They can then integrate these tools and processes into a holistic security immune system designed to prevent, detect and respond to incidents.

Open banking also increases the criticality of cloud-based security controls. It is no longer a matter of whether an institution will adopt cloud solutions, but a question of who provides what services to whom. Cloud adoption is intrinsic to open banking, and having visibility into the cloud from a cybersecurity perspective is crucial.

Security teams must integrate these controls with processes that focus on detection to enable them to respond more effectively. By applying the security immune system approach to open banking, financial institutions can offer consumers greater flexibility and convenience — all while keeping their devices secure and their money safe from cybercriminals looking to exploit new security gaps.

 

Domenico Raguseo

Technical Sales and Solutions Leader in Europe, IBM Security

Domenico Raguseo is currently Manager of Technical Sales in Europe for the Security Systems Division. He has over 15...