How APIs can help you win the Open Banking race

UK Chancellor Rishi Sunak, in his first Mansion House speech in July 2021, called for financial services to be 'more open, more competitive, more technologically advanced and more sustainable'.

Regulators such as the UK Financial Conduct Authority (FCA) agrees, conceding Open Finance (OF) could 'significantly benefit consumers, increase competition, and improve advice and access to a wider and more innovative range of financial products and services’. It also advises 'key building blocks are needed for OF to develop in the interests of consumers'.

Banks are already creating new ecosystems to enable them to operate and compete in this open world, yet in the UK only ten have signed the Fintech Pledge – a set of principles covering: onboarding guidance and clarity, best practice, and a commitment to implementing and sharing feedback.

In the UK and globally, many financial services providers are yet to embrace Open Finance/Open Banking or adopt a Banking-as-a-Service (BaaS) strategy. They appear reticent to take that leap of faith, change their architecture and extend their ecosystems, and are equally unsure about the IT they need to help them evolve and grow.

Composable building blocks

The answer is to add new components to existing legacy systems and become a Composable Enterprise. By building, assembling and reassembling core business elements, businesses can connect to new ecosystems and increase their exposure to new markets and revenue streams.

The top priority is to review future business plans and identify what ecosystems are important to connect with. It’s also important to ensure the architecture can adapt and repurpose propositions (Packaged Business Capabilities – apps, purchased or developed, can help here) and that composable software components (accessed via tools such as APIs) are in place.

Legacy systems can be strengthened with modular technology platforms. Microservices architecture, for example, connects separate or ‘decoupled’ elements and supports interlinked software applications, enabling them to communicate via the Cloud and be managed, modified, tested, deployed, and scaled, without affecting the wider operation.

APIs

Application Programming Interfaces (APIs) are crucial to a Composable Enterprise. These modernisation tools share data securely across business systems, mobile applications, Cloud services etc, connecting businesses, partners and third-party providers. They’re more than a technology facilitator – they’re a strategically vital tool to compete in a digital world.

APIs standardise communications, and while it’s important to share services, it’s equally important to focus on how they are shared. Third parties that encounter unresponsive interfaces or difficult coupling processes will have to overcome connection barriers. APIs allow a smooth transition with easy onboarding, reducing development cycles and ensuring faster delivery to partners and customers.

They also have security benefits; APIs manage and protect payment data, access control, and authorisation/authentication issues, giving peace of mind to regulators, businesses, and customers.

Catalyst for change

As the FCA confirms, Open Banking is the catalyst for change and through innovation, will improve the customer experience. In the future, it may be common to find single-view banking platforms that, having connected with other ecosystems, share additional products/services with customers.

The platforms could host, for example, a personal finance management dashboard that consolidates all accounts held with different providers (bank, savings, mortgage, credit card, pension, insurance etc) into a single app, giving a simple overview. And after analysing transactional data, the dashboard may notice a skiing holiday is booked and so offer discounts with a skiwear provider, foreign exchange services, and tailored travel insurance.

Digital experiences are already replacing some elements of human interaction and soon they’ll be even more intuitive, reminding us of the things we need, before we’ve even thought of it (such as renewing a passport for that skiing holiday).

The key enabler for connectivity and innovation is an API management platform. It offers security and agility, connects legacy systems, integrates digital channels, and supports the growth of partner ecosystems.

Banco Original

BaaS strategy adopter, Brazil’s Banco Original (BO), is already reaping the benefits of Open Banking.

In 2016, the personal and corporate bank was one of the first to connect BOT to its Facebook Messenger, Instagram, and WhatsApp accounts. BO launched its BaaS platform in 2019; the same year it introduced the first 100% digital account.

Having digitalised its services, to share them across a wider ecosystem, BO partnered with Sensedia.

Sensedia helped BO structure its BaaS model and open APIs for third parties to connect to, focusing on governance, standardising exposed APIs, and migrating APIs and services associated with bill payment, card operations (including BOT-connected systems), and account management. 

After moving everything onto a single interface, Sensedia formatted, structured, organised, and documented all BO’s APIs, enabling BO to maintain and build new APIs in the future. 

The bank now has an API management platform that’s flexible and simple, and in addition to its service provision, which includes money withdrawal using QR codes, investment platforms, insurance, mobile phone top-ups, and payment machine supply, BO supports PicPay – Brazil’s largest digital wallet provider (34 million users) – and runs an Original Hub Unit, managing 50+ partnership arrangements with fintechs.

In January 2019, at the start of its digital journey, BO had 700,000 account holders; by early 2021, this had grown to 4 million, an increase of 571%. It’s clear, Open Banking will change the global financial services landscape.

Sensedia has contributed to the Open Banking Report 2021. Click here to download the report.

About Marcilio Oliveira

Marcilio is Chief of Growth and one of the Co-Founders of Sensedia. He has a Masters’ degree in software engineering from the University of Campinas and is an Associate Professor at the University and Metrocamp. Marcilio has also been a Research Lead at the Campinas University innovations lab.

About Sensedia

Sensedia is a leading integration solutions provider with more than +120 enterprise clients across a range of sectors. Its world-class portfolio includes an API Management Platform, Adaptive Governance, Events Hub, Service Mesh, Cloud Connectors and Strategic Professional Services' teams. Winners of Wealth & Finance International’s ‘Best Open Banking Solutions Provider 2021.