Safeguarding customers and the risks of hacker attacks

Open Finance undoubtedly represents an important milestone for the financial sector and, in particular, for wealth management. In addition to the possibility of being able to offer expanded financial and wealth advisory services, including insurance products, it will, in fact, enable new opportunities for cross-selling other financial products, hopefully increasingly tailored to meet client needs.

Although, therefore, the resulting business opportunities are potentially significant, there is no small concern for operators about customer protection within the Open Finance.

In the open digital environment, increasingly, alongside the traditional product and service protection dimensions, the protection of customer privacy and security is significantly added.

Already reflecting on the reasons for the failure of Open Banking to take off reveals the great sensitivity of customers in exchanging their financial data.

For retail customers, it is crucial to have both an environment that ensures trust in data sharing and processes that are transparent with respect to how operators use shared data. This is also what emerges from the European regulator. ù

Following the European Commission 's public consultations on May 10, 2022, evidence emerged with respect to concerns about data sharing in the absence of a framework establishing clear safeguards and a clear delimitation of scope. Concerns have also arisen with respect to privacy, data protection and cybesecurity issues, and the general feeling of not being able to control how data is used.

In this sense, the digital dashboards for managing customer permissions to use data introduced by PSD3 and PSR, as well as the Digital Operational Resilience Act (DORA) regulations, represent the regulator's concrete effort to create the systemic conditions for Open Finance, through increased customer protection and awareness of the consents and permissions granted, the purposes and benefits, and the risks involved. 

Financial operators are also preparing. Already to date, according to the latest survey by Cetif, the research center ofUniversità Cattolica in Milan, financial institutions are placing special emphasis on strengthening their digital defense structures to be able to guarantee maximum levels of data protection and safeguards. 

As of 2023, data protection tools are the most implemented digital technologies by 80 percent of Italian wealth management, surpassing even cloud platforms and analytics tools. 

Thus, the commitment of wealth management to make data security a priority in order to create a secure environment, a key element in promoting open finance is highlighted. More specifically, advanced data protection applications are currently found in the areas of product knowledge and customer segmentation, which are of particular importance since these are the processes that use vast amounts of sensitive data. But that may not be enough. 

The arrival of Open Finance, on the other hand, will require wealth management to focus even more attention on the security of sensitive client data. Indeed, greater circulation of sensitive information is expected to bring greater risks of hacker attacks and data breaches. 

Thus, major investments in cybersecurity and the integration of specialized skills are expected. 

With this in mind, by 2025, it is expected that data protection efforts in wealth management will be focused on three processes in particular:customer onboarding, product knowledge and segmentation, andorder execution, a process in which wealth management has lagged relatively farther behind. 

In conclusion, financial institutions are well aware of the importance of customer data protection and their role in fomenting trust in the new system. 

They have been moving accordingly: going to focus their digital efforts in developing data protection solutions, although they need to keep in mind the importance of investment and integration of new skills to better address upcoming cybersecurity challenges.