Blockchain can help Open Banking reduce risk

The Central Bank of Brazil says the new system should arrive in 2021 completely. However, some risks of the technology have been studied by experts.

Open Banking is being implemented in Brazil and blockchain technology can help the new system. According to Forbes, although promising, the new banking system is full of risks.

Since May 2020, the National Monetary Council (CMN) and the Central Bank of Brazil (BC) have made it clear that Open Banking regulation was ready in the country. The project was even expected to begin the first phase on Monday (30).

According to Bacen at the time, Open Banking Bitcoin Superstar would be based on keeping the data in the possession of bank customers.

“The premises of the Open Banking model that will be implemented in the country are that the natural or legal customer holds their personal data and that their experience in the process of requesting sharing should be agile, secure, precise and convenient, through the electronic channels of the institutions,” BCB noted in May 2020

However, the “Open Banking” movement is not being implemented only in Brazil. Several countries are struggling to improve their banking systems, making the sector more competitive.

More opening such a system can offer more risks to customers, according to a survey.

Open banking could offer large risks to the population
According to Forbes writer Alastair Johnson, the so-called Open Banking revolution is rapidly gaining momentum. In his opinion, the new system is likely to improve customer relations with banks and the operational efficiency of the services offered.

However, customers could face some risks with this new banking system. One of these is the risk associated with privacy, which could easily be ignored in the system. Moreover, data security could be another serious problem, Johnson said.

For the finance enthusiast, banks’ obligation to share data undermines basic protections. Even so, there are tools today that could help solve these problems, such as self-sovereign digital identification.

Alastair cited that in the US more than 2 million people already use Open Banking. The initiative there has been promising, fostering competition and even the inclusion of small businesses in the banking sector.

Even crypto exchange applications have been linked to Open Banking there, Forbes said. All of this, however, does not remove the risks inherent in the system.

Blockchain technology could help Open Banking mitigate risk
With the easy entry of companies into the banking system, even fintechs specialized in data theft could emerge, Alastair pointed out. Or a legitimate fintech could have its server attacked and its data stolen.

Bank customers, on the other hand, could also be hacked or suffer from phishing. Cyber threats could be threats to companies and customers.

At least in the US, which is where Alastair focused his analysis, there are major risks with so-called Open Banking that must be addressed. There, he says, the new system is not as good in security either for customers or banks.

In the case of banks, they provide the service as agreed with the regulator, but privacy and data are off-limits. In other words, there are few guarantees that Open Banking will not let data fall into the wrong hands, Forbes said.

The solution would be to create secure digital identities, with guarantees of blockchain immutability. According to Alastair Johnson, this removes the burden of having data leaked and privacy exposed, protecting bank customers.

In addition, a secure digital identity could ensure that less data is stored by banks. In this way, the blockchain technology enthusiast ensures that Open Banking could be more successful and give more guarantees to its users.

In Brazil, Open Banking is expected to arrive fully in 2021, promoted by the Central Bank of Brazil. The tool joins PIX and the future digital currency that Bacen promised for mid-2022. Here, means of circumventing risks should also be evaluated, and may even use the US as an example.