Open Banking - Advantages, challenges and applications

Open Banking is often mentioned as an important driver of development in the auditing industry, including how auditors will work in the future to ensure trust in the accounts. In this article, we look at some of the opportunities, challenges and areas of use that exist at the present time.

Olav Harald Våge

3 min

About Open Banking


Open Banking is about banks and financial institutions giving customers access to their own data, so that customers can share this with third parties (with the customer's permission). It was developed to promote greater financial transparency for consumers and account holders, as well as to promote competition and innovation in the sector.

Open banking can include the sharing of balances and transaction data, as well as the execution of payments. 

This is the starting point for Brevio, when we have developed the Brevio Connect service. It aims to allow auditors to obtain transaction data from their clients directly from the bank.

Challenges:

A barrier to the use of Open Banking data in auditing is standardization. With this we mean both:

  • Access to data from banks: As the banks only need to replicate what is offered through their customer-facing online banking systems, there could be challenges on the bank's side, etc. data. This applies to both data fields and time periods for information.
  • Standardized information from the accounting system: If data obtained from the client is not standardized, time and expertise will be required to ensure that data can be used to perform analyzes and substantive actions.

Possibilities: 

By using Open Banking services - auditing companies will get immediate access to the customers' data. This will enable auditors to:

  • Detect discrepancies: By using a service like Brevio, you will retrieve transaction data directly from the source. This will result in higher data quality, and a greater likelihood of detecting any errors or fraud.
  • Doing this on a large scale and in an efficient way: Brevio helps to standardize and streamline the process for obtaining data, including how the data fields are presented.

Areas of use:

Below we mention some common areas in which Open Banking will be able to improve the process for auditors and not least for their customers.

  • Test for Fraud: Traditionally, auditors manually review bank statements to identify unusual or large transactions that may indicate fraud. It is obvious that this process can be time-consuming.

    With the introduction of Open Banking and data analytics, auditors can fully automate this process. Algorithms can flag one-off transactions, transactions with specific keywords, large amounts or irregularities.
  • Test of completeness and existence of income: Since Open Banking data is obtained directly from the bank, it is a third-party proof obtained outside the accounting system.

    Consequently, this will be a good starting point for testing the existence and completeness of income, which is normally difficult given that today data from accounting systems is used.

    Data analysis makes it possible to go from a sample to test 100% of transactions as all bank transactions are matched with sales transactions in the accounting system.


Conclusion

Open Banking will be a great opportunity for auditors, as the tests shown here can be used in most audits.

Given the above opportunities and challenges, Open Banking today and in the future will be an important solution for simplifying audit processes and ensuring efficient data sharing between audit companies and their clients.