Unauthorized Transactions and Unintended Transactions in Open Banking:

Abstract

Open Banking allows for faster data flow data to flow faster and more widely. At the same time, a variety of risks have emerged as a result. This paper examines two major types of risk: unauthorized transactions and unintended transactions, both of which take place when consumers provide authorization for and confirm transactions. Although many safeguards have been adopted to ensure the safety of a transaction, existing surveys show that the effectiveness of these safeguards is not satisfactory. Through theoretical analysis and experimental report, this paper will demonstrate an important concept called "predictable irrationality", explaining why the problem is still unresolved despite the presence of a large number of protective safeguards. Irrationality exposes consumers to greater risks, especially in the context of open banking; it makes consumers unable to fully realize the consequences of their authorizations, which potentially leads to the occurrence of unintended transactions. To reduce this risk, this paper first puts forward suggestions for all aspects of authorization. However, considering that procedural suggestions alone cannot effectively address this risk, this paper also puts forward suggestions for the current legislative model as well. It is the hope that more effective safeguards can be adopted at the authorization stage and a more reasonable loss allocation principle can be applied after loss happens to reduce the two major types of risk and protect the interests of customers.