As the number of cyberattacks increases, it appears that hackers are constantly one step ahead of the game when it comes to exploiting new vulnerabilities. However, the reality is that the majority of data breaches are caused by the same old flaws.
According to Egress’ 2021 Data Loss Prevention Report, it’s reasonable to anticipate that newer technologies are more likely to contain security flaws. However, regular email remains by far the most common conduit for data loss. A valuable lesson for financial services providers wanting to improve their security in order to protect both their data and their reputation is learned from this incident.
According to the findings of the survey, 83 percent of organizations have had data breaches as a result of email, with the dangers ranging from unauthorized access and disclosure to plain old human error. Consequently, it should come as no surprise that 95 percent of IT executives believe that sensitive customer and corporate data is at danger of loss and unauthorized exposure when transmitted through electronic mail.
In the world of data exchange, new technologies like APIs are widely recognized as providing the most intelligent and secure method of doing so. APIs enable critical business systems to share and synchronize sensitive financial data programmatically, allowing for greater efficiency and productivity. It also avoids the time-consuming back and forth of transferring financial information by email, which is a manual process plagued with the possibility of error or information sharing with the wrong people.
Governments all across the world are beginning to legislate for the introduction of programmatic data exchange, with one of the most significant potential benefits being a higher degree of security.
For example, Australia’s Consumer Data Right, which was implemented in July 2020, provides individuals and small businesses with more access to and control over their own financial data, among other things. Customers must be able to securely transfer their own data in a machine-readable format, and Australian data holders, starting with the financial sector, must provide this capability to them.
The adoption of Open Banking, which will allow users to compare and switch between products and services more easily and effectively, will significantly improve consumers’ capacity to compare and switch between service providers, hence boosting competition between service providers.
Consumer Data Right has the potential to provide even greater business and consumer benefits as a result of its ability to significantly reduce the quantity of sensitive financial data that is transmitted over email. It is anticipated that this will considerably reduce the likelihood of unintended data disclosure and privacy breaches.
There are numerous other instances in which time-consuming manual data sharing with third parties poses a significant security risk. The potential exists for sensitive data to be accidentally disclosed with the wrong individuals every time a financial spreadsheet is emailed back and forth between finance departments or shared with other external parties such as accountants.
Australian small businesses rely on more than 40 different applications on average, according to the latest figures. Manually transferring data between systems becomes more difficult and insecure with each new application that is introduced onto the market.
Small firms can simply and securely share data from any financial system thanks to the Open Finance concept, which was developed to facilitate this. It enables small and medium-sized businesses (SMBs) to leverage data from their most essential business systems, such as accounting, point of sale, and e-commerce platforms.
In the end, tight communication between these systems has the most potential to decrease the administrative load on small firms – all while improving data integrity and security at the same time.
The combination of Open Finance and Open Banking gives a tremendous opportunity for local financial services providers to further promote innovation by developing alliances, joining API ecosystems, and connecting more closely with clients, among other things.
In addition to offering standardized access to over 30 small company systems such as Xero, MYOB, Shopify, and PayPal, Codat is an example of a global API that powers Open Finance by providing standardized access to over 30 small businesses systems.
All of this new data-sharing technology is fueling the emergence of the second wave of fintech. In turn, this puts Australian fintech innovators in an excellent position to build on the benefits of Open Finance and provide seamless customer experiences without the usual security risk of critical emails and spreadsheets falling into the wrong hands.