최종편집 : 2020.4.2 목 13:18
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Open Banking Should Not Be Put into Action
Yang Chae-hyun  |  ych9962@cau.ac.kr
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승인 2019.12.10  19:15:40
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On October 30th, ‘open banking' was launched by 10 commercial banks in South Korea. Unlike the traditional method of going directly to a bank branch or doing banking via the Internet, open banking allows people to manage their banking through a single application without spatial or physical limitations. Through this, all banks' accounts can be accessed from one platform, which standardizes and opens up a remittance or payment network. In addition, clients can remit money at a low cost. Open banking has the advantage of increasing convenience for financial consumers in that it results in greater inter-bank mobility. But behind the convenience comes some hidden side effects. For example, sensitive financial information can be distributed more easily, resulting in a greater threat to security. In addition, open banking can lead to excessive competition among banks, affecting their soundness. Moreover, the number of bank branches will be reduced as the barriers of the banking sector are torn down by services, which will inevitably hurt the underprivileged. Now, let's learn more about the downsides of the open banking system, and why it should be opposed.
 
Experts say they are most concerned about the growing threat to the security of financial information. Through open banking, clients can enjoy more advanced and more convenient fin-tech services. However, since all individuals' financial data are accumulated under a single system, the risks of centralization are feared. Ten commercial banks are participating in the trial operation, but all fintech firms classified by the Financial Services Commission, including electronic financial business operator can also use open banking starting from December 18th. In August, 78 fin-tech firms applied for the use of open banking in advance, which had increased to 138 as of October 29th. In the case of commercial banks, they have been strengthening their security networks based on the experience in the past through various security accidents and are said to execute astronomical budgets on security systems in the face of growing concerns among clients about the security threat of open banking. Woori Bank announced that they have formed a 'cyber red team' to check and improve vulnerability from the attacker's perspective and have also completed building a cloud-based shelter for the Financial Security Agency to defend against massive DDoS attacks. However, if new fin-tech firms utilize open banking, the system deployment could be relatively poor due to lack of experience, which would increase the risks that the security of applications with centralized financial information could be infringed.
          
Second, competition among banks will be overheated when selling financial products. If open banking is implemented, all banks will be eager to attract clients. This is because banks can check which products clients have subscribed to from other banks and encourage them to subscribe to their own products in accordance with their clients' characteristics. So, overheated competition, which can lead to the deterioration of banks’ integrity, can be triggered. As the soundness of the banking sector deteriorated in 2016 due to excessive competition in the financial sector, each bank continued to put pressure on its employees to expand performance, sparking controversy over its unsound business activities. In addition, it became a problem as it conducted promotional activities for teenagers in front of school. This suggests the possibility that the open banking may change into a trajectory similar to the current situation in card industry. To attract clients, card industry has led to competitions that benefits clients excessively, such as low-interest loans and offering prizes. The government eventually intervened when excessive marketing costs led to reverse margins. Of course, unlike card companies, banks are said to be a health-conscious financial group. However, as the possibility of open banking is open to banks as well as fin-tech firms, the possibility of integrity breaches of the types that have affected card companies in the past, should not be overlooked.
 
Finally, open banking makes the digital financial underprivileged more isolated from financial services. Recently, bank branches and ATMs have been rapidly disappearing as barriers in the banking sector have been torn down. Some say it is a natural result of technology's development, but this is an idea that has failed to consider the damage it does to the financial underprivileged. Even before the open banking took effect, banks were expanding mobile banking and consolidating branches. If open banking is implemented, the trend of shrinking branches will become steeper, which will further intensify discrimination against the digital financial underprivileged, such as senior citizens, who are used to face-to-face financial transactions. Of course, banks are also aware of this. “The importance of face-to-face trading has also been talked about by banks as a whole, and we are trying to start when all banks are ready," said Song Hyun-do, head of the Financial Services Commission's financial status division. However, if open banking is activated, it cannot be denied that banks also benefit only by excessively reducing their workforce, and face-to-face transactions will eventually be forced to close their branches because there will also be limits.
 
Many people think of open banking as a natural change due to technological innovation. Of course, it is undeniable that open banking provides clients with the convenience of transactions and offers other various benefits. However, side effects from the commercialization of open banking continue to be raised. Sensitive financial information could be circulated more easily through applications after the implementation of open banking, which could lead to expanded side effects of threats to financial security, and could lead to excessive competition among banks, aggravating the soundness of the financial market as a whole. In addition, as the barriers to the banking sector are torn down by the service, fewer bank branches will intensify financial insecurities felt by the underprivileged. Given these problems, the sweeping expansion of open banking should not be viewed simply as bringing only positive benefits for clients. It will not be small to be missed and avoided in pursuit of convenience and quickness.
 
   
 
The advantage of open banking is that it can check and use the transaction information of various banks with just one application, which can increase convenience for clients. It also seeks to develop the financial industry by weakening banks' exclusive rights, contributing to creating new financial markets, and reducing the costs of fintech firms participating in open banking. However, problems continue to cause concerns. If financial information is leaked, then security issues could be severe. A related concern is that excessive competition among banks and financial firms could pose a threat to the soundness of the financial market as a whole. Also, the drop-in branches due to the expansion of open banking could lead to discrimination against the underprivileged. CAH hopes that the various opinions of the pros and cons will be brought together and resolved well.
 

 

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