Losses caused to customers on account of cyber events would require financial institutions to compensate customers for such losses. Institutions may also face a variety of potential operational and cyber security issues related to the use of APIs, including data breaches, misuse, falsification, denial of service attacks and infrastructure malfunction.
Compliance and Reputational Risk: While open banking expands vistas of traditional banking and offers unique business opportunities, it also reposes extreme responsibilities with respect to compliance with applicable prudential regulations and privacy laws. Risks arise due to exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements due to omissions and commissions of the third-party service provider.