Open banking is a term that gives a secure way to service providers to access your financial information and build applications around financial institutions.
- It allows the owner of the network to give universal access to developers/third parties to build and offer next-generation products, services and convenience.
- In the European Banking Industry due to PSD2 guidelines, API banking is gaining traction
Benefits of Open Banking
Note: The percentage represents the FinTech and banking executives who have given a rating of 6 or 7 on a scale of 1-7 for each of the benefits
- Integrate our products into other value chains (i.e. commerce, corporate ERP systems)
- Aggregate third party data into our own value chain to provide customers with holistic financial management
- Orchestrate a platform that combines supply and demand by linking multiple providers with Bank’s customers
- Add new products and services to our offerings (i.e. expense tracker in MB app)
Solution 1: Account Information API (AISP) – To deliver secure, consent driven portal that aggregates all transactional data across customer’s account information using open banking API
Solution 2: Payment API (PISP) – To overcome the inefficiencies in the transactional costs of intermediaries for the online payment industry
Four Approaches For Unlocking Business Value Of APIs
Build APIs for Client connectivity
- Enabling Straight through the process
- Moving to real-time information flow
- Modernizing corporate to Bank data exchange
Build APIs for Banking Innovation
- API Developer portal
- Conducting Hackathon with Fintech Partnership program
- Promoting APIs to
- encourage adaptation
Build APIs for Banking as a Platform
- Modular application stack
- State of the art technology capabilities
Build APIs for Client Integration
- REST APIs for
- mainframe application
- Microservices architecture to the abstract legacy system
- Industry-standard for web services and APIs
Globally Banks have started partnering with Fintech to build innovative products and services with more than 50+ such initiatives having raised more than $2 Billion
- DBS Bank launched the world’s largest API Platform consists of 155 API’s in over 20 categories
- PSD2 is a regulatory mandate to standardize and make an interoperable card, internet and mobile payments. By Jan 2018, all FI in the 28 EU members needs to be PSD2 compliant
- CMA9: Open Banking as a directive covering only the top 9 banks in the UK
- According to Forrester Consulting Total Economic Impact™ (TEI) study, there will be 50% to 90%+ improvement in API management productivity, freeing up time to focus on innovation
Open APIs will enable banking organizations to gather actionable data from various internal and external sources, including buying habits, financial goals, risk tolerance and even social interactions.
- Insight derived from this API will enable more proactive (and accurate) multi-channel marketing, moving from reactive sales pitches to proactive solutions and advisory services.
- The ability to apply Artificial intelligence(AI) in analyzing these API calls (stateless), given they can amount to huge volumes over time can be a great source of learning for AI tools.
It will respond to the customer desires of “Know me,” “Look out for me” and “Reward me” and thus expected to greatly improve the customer experience which currently lacks personalization and real-time engagement.
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Biswajeet is a part of the AIM Writers Programme. He is a Senior Manager at a noted bank. A Data Science evangelist, he has been a Big Data and Analytics certification from C-DAC. Biswajeet loves to innovate ideas about ML, AI and Big data.