Insight: Understanding the need for transparency in Open Banking

André Casterman,
22 Aug 2023

In today’s rapidly evolving landscape of Open Banking, the imperative to meticulously track and comprehend financial transactions has reached unprecedented importance. While some businesses have promptly acknowledged and adapted to this much-needed shift, others have languished behind, persisting with outdated practices.

However, on the back of PSD3, the continuation of these archaic approaches is simply no longer viable.

Even before the recent update, Strong Customer Authentication (SCA) stood as a cornerstone requirement for businesses operating within the domain of financial services. Now, the significance of this concept has been further underscored. The revised legislation not only upholds the importance of SCA, but goes further in highlighting the dangers of emerging forms of fraud, such as spoofing.

New requirements are here

Under the new provisions, businesses must also be able to provide Open Banking SCA experiences that match, or even surpass, the seamlessness offered by online banking interfaces. It’s hoped the new directive will encourage companies to improve the user experience of Open Banking solutions across Europe which, in turn, will help to further catalyse adoption rates of the technology in the coming years.

Responding to this shift will require different things from different companies, but at the core, businesses would be advised to pursue technologies that allow them to effectively trace, trail and know transactions. From enhancing fraud detection and prevention performance, to ensuring regulatory compliance, solutions that enable greater accountability across financial transactions are increasingly indispensable to modern business.

Tackling transparency

It can be argued that transparency is crucial to the success of Open Banking. In fact, prior to the update to PSD3, the UK’s fintech industry body, Innovate Finance had already called for more transparency in the sector, including the removal of obstacles and better governance of businesses working within this field. The updates of PSD3 should help to engender improvements here and ensure more inclusive and transparent processes.

As mentioned, it’s also hoped that the update to PSD3 will not only help to improve transparency across the world of Open Banking, but simultaneously will improve fraud prevention performance within the field. Unfortunately, Open Banking fraud is a growing threat to businesses. Fraudsters have been able to infiltrate Open Banking systems to apply for loans and take out mortgages, scamming stakeholders at every stage of the process.

Intix marketing manager Andre Casterman

Finding effective performance

However, despite its importance, many businesses are struggling to meet the requirements of PSD3. That’s because end-to-end transaction chains are often incredibly complex and contain mountains of data that need an expert team and dedicated technology to sort through. Without taking the necessary steps to ensure this performance, achieving effective results can prove virtually impossible.

Increasingly, companies need solutions that can break down organisational and technical silos, which typically exist within financial institutions to provide a complete picture across myriad data. In this pursuit, real-time access to messaging data can be used to enable high performance search, access, reporting and dashboarding. This approach makes search and visibility far easier, enabling companies to find the needle in transaction haystacks.

Take control of Open Banking

Alongside this, businesses need data management solutions that can track transactions at any point in the processing flow, allowing for instant status updates. This is important as reconciling and delivering notifications on any part of the lifecycle flow helps to create maximum visibility and control over end-to-end operations. In doing so, these systems help to identify and prevent operational bottlenecks in a more time-efficient manner.

Similarly, solutions of this nature can help companies to identify fraud incidents at an early stage and will often raise alerts around suspicious incidents immediately, so preventive measures can be taken to mitigate financial and reputational loss. When assessing systems of this nature, look for solutions that can be configured to rules of your choosing and then automated, as this will limit the need for time-intensive human oversight.

Know your transactions inside out

Perhaps most crucially, businesses looking to respond to the updates to PSD3 must ensure they’re onboarding data management solutions that can provide contextual and holistic insights on transactions, to support compliance professionals should an investigation be required. Systems that collect, correlate, analyse, model and report data sets to produce the needed insights and forensics must be a priority here.

That’s because investigators often struggle to properly analyse client payments, as correlating data sets across dozens of systems is very complex and impossible to perform manually. The onus is now on companies to utilise solutions that enable a 360° view on a transaction by combining all events. In this endeavour, every piece of data really counts, so it’s essential companies know they’re collecting and analysing everything.

Finding the right approach

By following this advice, and onboarding solutions that can effectively trace, trail, and know transactions, companies can turn reams of data into actionable insights for operational excellence, compliance, and audit.

In doing so, businesses put themselves in the best position possible to comply with the new requirements of PSD3, which in turn, may help to improve Open Banking adoption rates across Europe.

André Casterman is marketing manager at Intix