Advancing open banking: driving change and adding value

The momentum towards open banking and open APIs is now universal. It’s a trend that reflects a wide array of factors – ranging from the move by banks to a more agile platform-based model, to the increasing demand from customers for personalized experiences, to the rise of fintech service providers.

But whatever the underlying drivers, it’s increasingly the norm for customers to obtain account information and manage payments using third-party applications that connect directly into their bank’s systems via public domain APIs. This is a development that promises to fundamentally transform the payments experience for users ranging from individual consumers to global corporations.

FinTechs offer solutions that help to enable many of the digital experiences that bankers are trying to create. However, a large proportion of banks are continuing to be very cautious and conservative about how they share data with their fintech partners. It feels like banks are waiting for more banks to adopt and take a fast follower approach versus blazing the journey to driving innovation in an early adopter model. But by leveraging a platform approach and having fintechs and technology companies in agreement and certified on the platform, banks can better manage which systems and data fintechs can access.  

By way of example, take a fintech that allows a bank to enable a broader digital consumer experience, but which only needs a handful of specific data sets to do this. By leveraging the platform, the bank doesn’t have to be so concerned about going through extensive partner management efforts, as it will have the checks and balances in place to mitigate security risks and disclose all the necessary data.  Platform APIs have a lower level of data exposure than the underlying product has as controls for access management and app lifecycle management to ensure API data access: requires consent by the FI, is auditable by the FI, and is revocable by the FI.

As such scenarios underline, the rise of open APIs and payments brings profound implications not only for users, but equally for financial institutions. In doing so, it raises questions both around how they source, manage and use payments technology – and around how they compete and differentiate themselves in the marketplace.

To find out more about Finastra’s cloud payment solution, visit the Fusion Payments To Go page.

#PaymentsMadeEasy