Money20 20 Zeros in on AI, Open Banking, and Payment Innovation Goodwin

Similarly, in open banking, companies that survive and thrive must become more innovative, data-driven, and cost-effective. Machine-learning techniques are already common in banking and will become even more important in the future. Open banking — rules that force banks to share customer data with competitors — will be the catalyst that upends this decades-long innovation stasis. Nearly two decades later, almost every industry has benefited from mimicking this level of transparency and access to data and APIs — but banking largely hasn’t. The report also found a clear generational divide in attitudes towards AI adoption in banking.

Specifically, consumers prioritize AI applications in fraud monitoring, a priority highlighted after a surge in fraudulent activities in 2023. Real-time fraud detection emerged as the top choice, resonating with 35% of respondents who value the proactive security measures AI can offer to safeguard their finances. Yet, because all open banking services are built on APIs, new security risks have emerged that must be addressed to fully protect open banking’s valuable and lucrative attack targets. Authentication, authorization and encryption are the primary security defenses used in open banking, but they do little to address the complex security challenges that APIs create. However, as with all digital innovations, open banking also increases the attack surface. Banks and financial organizations have always presented one of the most attractive targets for criminals and other bad actors, as evidenced by a higher frequency of security incidents compared to other industries.

How voice technology and emotional AI shape the future of financial services

Moving to a modern cloud and AI-based bank is easier said than done, but CEOs are firmly focused on it because they understand the existential threat of inaction. Specifically, open banking will do to banking what open source did to software. Despite mentioning concerns, OpenAI has urged the Trump administration to avoid regulation, saying that could hamper tech companies’ ability to compete with foreign AI innovations. Senate voted to strike a controversial provision from Trump’s agenda bill that would have prevented states from enforcing AI-related laws for 10 years.

• According to Visa, 87 percent of U.S. consumers use open banking, but only 34 percent know that open banking drives their connected financial services.
• The report also found a clear generational divide in attitudes towards AI adoption in banking.
• Banks have a long history of ensuring secure payments and data, authenticating identities and buffering against privacy concerns, earning unrivaled trust with their customers.
• One issue many customers face during this application process is that traditional approaches to lending tend to exclude those with little or no credit history, or with untraditional income sources.
• With custom interfaces, unique logic and layers of integration, API environments are highly complex.

At least 44% of American consumers express contentment with using AI in personal banking.

Althoughseven million people and businesses used Open Banking systems in January of this year, that is still a small percentage of the156 million bank accounts in the UK. Companies like Bud, Plaid and Tink are successful on their own terms, but don’t match the rapid growth of companies like Klarna and Revolut. Amongst the general public, awareness of what Open Banking does is low. For this reason, some people are already asking whether we should stop trying to make Open Banking happen. With increased consumer comfort with (and preference for) apps, and especially with government support, the stage is set for foundational changes to the financial industry.

“I am very nervous that we have an impending fraud crisis. Just because we’re not releasing technology doesn’t mean it doesn’t exist — some bad actor is going to release it. This is coming very, very soon.” This underscores a growing consumer reliance on AI to achieve financial goals and navigate economic uncertainties. To standardize initiatives, open banking APIs have been designed and documented to support open banking regulations. Authentication and authorization protocols, such as OpenID Connect (OIDC) and OAuth 2.0, define how APIs must be structured to enable predictable integrations in open banking. An ideal way could be to have an open-data permissioning regime whereby a lender can seek consent from a borrower for data from his/her existing banking relationships. There’s been a growing number of startups now taking advantage of this A2A boom, among them Trustly out of Stockholm, which to date has raised €23 million.

• • Remediation to bring API security insights back to development to strengthen APIs are they are being built and fix vulnerabilities before exploitation.
• It’s clear that everyone who is “elderly” cannot be slotted into a retirement bracket.
• To identify logic flaws that may be under attack by bad actors, organizations need to monitor APIs as they are being used within open banking systems—that is, during runtime.
• Jamie Dimon, CEO of JPMorgan Chase, recently addressed the topics of cloud and AI in an earnings call by saying “10 years from now, Cloud+AI will be probably 50 times more than we are doing today. And I would spend anything to get it done faster.”
• The success of Large Language Models (LLMs) like ChatGPT have encouraged the proponents of Open Banking to suggest that maybe this is what Open Banking has needed.

Information sharing across companies and collaborative intelligence across the banking environment enhance this process. Open Finance breaks down silos between different sectors and platforms and represents an unprecedented opportunity for all industries—especially in the context of the rise of artificial intelligence (AI) and machine learning. The way individuals borrow, save, and move money hasn’t changed much in decades.

From stagecoach robberies in the Wild West to international bank heists, attackers always follow the money, and it’s no different in the cyber world. The move toward open banking payments, especially in the EU, effectively kicked-off the fintech boom. Open banking standards meant that fintech startups could create wallets and effectively become banks, or at least “neo banks,” in practical day-to-day terms.

However, this might also mean that established banks will find more expensive and sophisticated ways to connect to their customers and increase customer retention. Finally, open banking providers need to understand that API attacks occur over time—over days, weeks and even months. Organizations need comprehensive context into API behaviors to spot threats, including continuous analysis of hundreds of API attributes across millions of users and API calls. Obtaining that level of detail requires AI, ML and automation capabilities that can only be powered today by cloud-scale big data. Only cloud-scale big data, with the application of artificial intelligence and machine learning, has the power to capture and analyze this much data, correlating activities over time.

Leveraging digitalization, open banking also increases competition across the financial services sector, gives consumers more choices to meet their financial needs and consolidates and centralizes financial insights. Research from Simon Torrance and Bain Capital Ventures projects that new markets enabled by open banking will comprise a $3.6 trillion market share by 2030. We have read often enough about bias in decision-making and there is extensive debate about its impact on lending. Bias is a term that is traditionally applied to the marginalized in society. But what if marginalization is a process that is gradual, complex and affects a far wider range of individuals than we are given to think? Is a well-off businessperson, a young start-up owner or a middle-aged salaried employee at risk of being sidelined in the lending decisioning process?

Open Banking and APIs: What IT Leaders Need to Know

Marco Santos, CEO of GFT Americas, emphasized the pivotal role of AI implementation in banking’s digital evolution. Enhancing everyday banking experiences and bolstering cybersecurity measures are among the applications consumers are more inclined to embrace, contingent on their age. GFT’s comprehensive survey of 2,002 US consumers underscores the boundaries and expectations surrounding AI in personal banking. A new report released by global digital transformation company GFT shows that US banking customers increasingly accept integrating artificial intelligence (AI) into their banking experiences, with a few caveats.

While younger demographics, such as Gen Z, exhibit greater openness towards AI applications, older generations remain skeptical, particularly those aged 55 and above. According to the Banking Disruption Index, 44% of American consumers express contentment with using AI in personal banking, especially when banks provide transparency regarding its implementation. To supplement existing defenses and adequately secure the expanding API attack surface generated by open banking demands dedicated API security. Organizations need solutions that include the following capabilities as a baseline for API security.

Agents and Customer Engagement

However, because each API represents unique business logic, and each attack on APIs is therefore unique, protections depend on uniquely fingerprinting each API environment to pinpoint bad actors. Moreover, today’s typical application security solutions, such as web application firewalls (WAFs), can identify known attack patterns, but they lack the ability to protect an API’s unique logic. A plethora of A2A payment platforms now exist, each with its own unique characteristics. In Brazil, the Central Bank developed PIX, while in Canada, Interac Online is an e-commerce payment service provided by Interac, a private collaboration between the leading Canadian banks. Furthermore, the National Payments Council of India and the Reserve Bank of India launched the Unified Payments Interface (UPI) in India in 2016.