Open Banking Security Risks in Botswana: A Growing Concern

The adoption of open banking is reshaping the financial services landscape in Botswana, introducing new types of risks that go beyond data security. As organizations in the country navigate this evolving ecosystem, they must prioritize risk management to ensure customer trust and loyalty.

Understanding the Risks

According to experts, the current narrative on open banking focuses too much on its benefits, while neglecting the potential risks involved. “Consumers deserve clear and direct control over how their financial data is shared,” said Wells Fargo in a recent statement. However, American Banker warned that open banks carry strategic, operational, model, conduct, financial crime, and reputational risks.

Key Areas of Concern

The increased volumes of data and speed at which it is consumed by open banking ecosystems create new risks. Partners from non-banking industries may not share the same level of sensitivity towards customer data as regulated banks do. They may not recognize the hidden costs associated with compliance, risk, and security protocols required to protect data or maintain the integrity of open banking transactions.

Player Risk

• The expansion of the open banking playing field beyond traditional financial institutions introduces new risks.
• Fintech firms, digital banks, data aggregators, credit bureaus, payment networks, and third-party providers (TPPs) may not have the same level of regulatory oversight as traditional banks.

Process Risk

• The complexity of services increases process risk, including misuse of customer data by TPPs.
• Lack of process execution controls, fraudulent TPP access, lack of traceability of customer data use, risk of accountability by all parties, and data security across devices are also concerns.

Technology Risks

• The platform business model championed by Amazon, Google, and Alibaba is what open banking is to financial services.
• Execution risk – the failure of a platform and all ecosystem components to deliver on high-performance required for customer interactions – is a significant concern.

Data Risks

• The sharing of data across industries introduces unprecedented new challenges, including security issues, HIPAA, ECOA, and other industry-specific regulations.
• Document retention policies and credit losses stemming from incorrect credit data used in offerings are also concerns.

Tackling the Risks

To tackle these risks, organizations must adopt a minimum level of risk management that ensures compliance with regulatory mandates. This can be achieved by:

Aspirational – Customer First

• Implement mechanisms preventing loss of customers and promoting loyalty.
• Ensure every player aligns accountability to the customer, closing inter-player gaps that hinder transaction processes.

Competent – Integrated Player Accountability

• Adhere to regulations, including consumer protection, data security and privacy, financial crime, financial disclosures, third parties or technology standards.

Conclusion

In conclusion, open banking security risks in Botswana are a growing concern that must be addressed through sound risk management practices. By prioritizing customer trust and loyalty, organizations can ensure the delivery of frictionless customer experiences.