Open Banking: A powerful tool against fraud in the Public Sector

In today's digital age, public sector organisations face a constant battle against fraud and misrepresentation, including the need to streamline services. Open Banking is emerging as a powerful solution, offering a secure and efficient way to verify financial information, combat fraud, and enhance the overall consumer experience.

In this blog we will delve into how Open Banking could help to transform public sector operations, from accelerating application processes to strengthening ID verification.

If you're a public sector leader, policymaker, or simply someone interested in how technology can improve public services, read on to discover how Open Banking can be pivotal in building trust and protecting public resources.

Key advantages of Open Banking in the Public Sector

Open Banking enables digital journeys and enhances fraud prevention. It offers:

• Enhanced verification: Real-time income and expenditure checks make it harder to misrepresent financial situations.
• Reduced burden of proof: Access to transaction data clarifies financial activity, easing fraud detection.
• Faster processing: Automating data retrieval reduces manual work and fraud opportunities.
• Identifying vulnerabilities: Analysing financial data helps identify those susceptible to fraud, enabling targeted support.

Strong Customer Authentication

When sharing information via Open Banking, customers authenticate through their banking app, often using biometrics. This ensures the bank verifies their identity and device, with sensitive details never shared with third parties.

Digital innovation

Public sector leaders are prioritising digital innovation. A 2024 KPMG survey revealed that 81% aim to boost cybersecurity, and 74% want to enhance citizen experience with better digital services¹.

Open Banking can eliminate these hurdles by reducing call times for processes such as debt recovery income and expenditure assessments from 45 to 10 minutes³, saving operational costs.

The simplicity of an Open Banking journey is key here. Imagine Sarah applying for housing assistance. Instead of gathering paperwork, she opts for Open Banking during her online application. She’s directed to her banking app to login, she authenticates, and agrees to their data sharing policy. The housing department instantly receives verified data, speeding up the process, eliminating the manual financial checks and reducing fraud risk.

This process provides Sarah with the control and the chance to confirm her identity. It's secure, fast, and incredibly simple for everyone involved.

How Open Banking can help to combat fraud in the Public Sector

• Benefits and Grant fraud: Verify income and employment details.
• Debt recovery: Facilitate fair repayment plans
• Service eligibility: Determine eligibility for public services by assessing applicants' financial standing.
• Identity fraud: Aid ID and bank account verification.

Enhancing ID verification

Public sector organisations face ID verification challenges. Traditional methods can be time-consuming and error-prone, while fraud tactics are becoming increasingly sophisticated. Here are just a few ways Open Banking can help:

• Real-time data access: Quicker, more accurate verification of identity and financial status.
• Improved insights: Comprehensive view of financial history.
• Streamlined processes: Reduced administrative burden.

Challenges and considerations

While Open Banking has huge potential in fighting fraud, there are challenges:

• Consent: Data sharing requires consent. A strong value exchange is key.
• Digital exclusion: Alternative methods are needed for those without online banking.
• Multiple accounts: Some individuals may have multiple accounts.
• Varied incomes: Different income types require careful consideration

Moving forward

Open Banking is a powerful tool against public sector fraud. By enhancing verification and streamlining processes, it could be used to protect public funds and ensure services reach those in need.

How Equifax can help

Equifax provides Open Banking solutions for various use cases. Discover how we can help public sector organisations in our white paper: Public Sector opportunities to utilise Open Banking.

Sources

¹ KMPG - Accelerate public sector digital transformation Forrester research report - Feb 2024

² Source FICO Survey 2020

³ BPO Analysis of Income & Expenditure calls, 2019.