Written by Ali AktharTechnical Account Manager
With the rise of fintech in the world bringing innovative and emerging technologies to cater to customers financial needs and the pressure from the regulator such as PSD2 in Europe, Open banking initiatives have become more meaningful. It is set to disrupt the financial services value chain.
Open Banking means the openness of technological elements within the bank, which lets the bank expose their services (APIs) to third-party developers to build innovative services and applications around the financial institution. It could be things like an account opening process could be part of a sign-up process for a particular app, and the data sharing will be done between the bank and the fintech player/ third party developer.
Open Banking is a technology effort and a mindset change between people, processes, and technology. It also brings a lot of responsibility for customer's data, which also requires compliance with GDPR.
PSD2 is a European regulation for electronic payment services. It helps to make payments more secure, boost innovation and help banking services adapt to new technologies. Incumbent banks are compelled to open their data to regulated third parties through a standard API interface. This harmonizes two types of services, the Payment Initiation Services (PIS) and Account Information Services (AIS). There are fintech players who are already working with banks on AISP and PISP, such as Yodlee, Wepay, & Stripe etc.
They operate through a single unified source that brings Account Information Services from customers different bank accounts, allowing them to have a global view of their financial situation and quickly analyze their expenses and financial needs. Meanwhile, in Payment Initiation Services, the fintech players provide interfaces to make safe and secured payments online. These services help to initiate payments from the consumer accounts to the merchant accounts by creating an interface to bridge both accounts, filling in the information needed for the bank to transfer and informing the store for the transaction.
APIs are an integral part of Open banking. Banks cannot work in silos and demands innovation to bring more business. Ultimately, open banking APIs should make it easier for banks to innovate and expose services to new fintech players to focus on providing a great user experience.
There are three main categories of APIs deployed by the bank
To cover multi-dimensional use cases of Business to Employee APIs, which comes under internal APIs, Business to Business APIs, which are Partner APIs and Business to Consumer APIs, are available for the Public.
Fundamentally, banking APIs—notably open APIs—are playing a crucial role in helping lenders transition from conventional banking to open banking, letting third parties utilize banks services or offer the same services to their customers. They also enable businesses to connect with their consumers more seamlessly than previously possible, which in turn increases customer experience. A digital wallet, for example, facilitates to provide payment services. Or the customer could use GPS (Global Positioning System) tracking with the banks API to find the nearest branch or ATM. Customer-specific APIs are also created with the right levels of security to offer customers with their individually tailored banking information—such as account alerts, bill payments and fund-transfer services—in the end, allowing them to gain better control of their finances.
Third parties can also leverage banks financial data to build applications that enable a connected network of financial institutions and third parties. As such, APIs make communication convenient and efficient, as they are being used to change the face of global banking. In addition, they have become increasingly sophisticated, representing integral components of the Internet of Things (IoT), whereby smart devices utilize APIs to deliver solutions to customers.
At Royal Cyber, we have laid a strong foundation with several global customers with API Management tools like MuleSoft, Apigee, API Connect, and much more. By partnering with us, you can expect to see remarkable results in vital areas that define the performance and achievement of an implemented Open Banking strategy and operating model with expert guidance. For more information, you can email us at [email protected] or visit www.royalcyber.com.