Open Banking Rule was introduced in January 2018 with a prime motive to empower customers. Today where “Experience, Convenience and Priority” means customer service, Open API Banking is an initiative to streamline the banking services and put the customer first.
Open Banking protocol advises financial institutions to use Open API to allow the flexibility of sharing individuals data with other financial companies, once a customer provides consent to share the data. It offers the customer the stability and control over their financial data, assisting in making informed decisions about the various financial products available.
While PDS2 was incepted to benefit banking sector, Open API services are also helpful in other areas like Health, Insurance, Telecommunications, and Energy. So how do you plan to prep your firm with Open API Banking? Let’s explore –
Prepping Your Firm To Offer Open API Banking Services
Traditionally, Banks were always symbolized as four thick walls made of hard concrete, with a chained gate that was armed by a security guard. Today Modern banking is much different, and could be availed from the “neighboring grocery store”. Urban banking marks the fundamental shift in technological and operational thinking. Additionally API services are another way of advancing into availing secured yet convenient banking services.
With API in the picture, Banks could collaborate with third parties or fintech firms to offer its customers best-in-class plug and play services. However, the plug-and-play model does raise some questions to its customer like – Who owns my data? How should I connect to a third party app? Would it be secured? What type of charges be applied?
To answer these questions, a firm needs to have a proper framework documented for its customer to ensure API Banking reaps benefits for the very purpose, for which it was ideated. Let’s take a closer look at the Open Banking checklist a firm should follow –
With PSD2 in place, Data is the new driving force in the banking sector. Unlike in the olden days when a customer name, amount to be withdrawn, amount to be deposited, interest earned in such fields were sufficient for record keeping. Today the urban customer is more keen to know his spending habits, the best interest rate a Bank could offer or the deals floating in his/her neighborhood. Each transaction could build a new use case for the firm. So make sure to include Data-driven strategies while planning to launch your open API’s.
Trust is the major key to any business. Modern customer is smart enough, not to fall up for your 50$ signup or one Google login for all applications. He knows how each byte of data shared could cost him with spams, hacks or those marketing calls. So make sure to responsibly, securely manage the data while acquiring, using or redistributing it to your downstream applications. At each step mention the type of data you would be accessing and the rights you purchase, for mutual trust and earning a loyal customer.
If we look at the history of Open Banking Standards evolution, it was initiated in Berlin with an API developer portal that is open-source, open-standards, and open data. Later in September 2015, United Kingdom[UK] formed Open-Led Banking Group [OBWG] to streamline new framework and create an open banking standard. Finally, the European Union [EU] launched PSD and PSD2 directive to push Bank out of their comfort zone and strengthen digital offerings.
The standards laid by these groups narrates how an API specification should be drafted. They help in regularizing how fintech firms or other third party API providers connect to the financial institutions, safely and securely. The standards assure consumer protection and transparency.
Following standards would help your firm in setting a benchmark and trust from Bank, financial institutions and customers.
Technology has opened up new doors; potential customers are now at every place be it urban or rural areas. So while your firm may be building an API for urban customers to track his location and order the best food near the client’s location. You may also need to work for a client sitting in the remote area whose only need is to manage his financial portfolio.
Hence the team needs to evolve to become a hybrid blend of skills and individuals that are agile ready while working together. So at one hand when an individual might be working on urban customer needs, after a few days he might need to communicate with a rural person. Or the IoT technology that is handy for urban client, might need a work around to work without internet for a remote area.
The hybrid approach helps to cut down the traditional approach of working on one skill/task for years. With ever-changing customer demands and needs team and firms need to evolve and fulfill their expectations.
Another crucial point of open banking is – Data Sharing, while the game is all set legal side could be a twist for many firms. Hence you need to have regulatory permissions, documents and deeds mentioning the activities and ownership about each task, Business continuity plan, incident reporting processes, cyber security policies, protection against risks, fraud and illegal use of data.
Quite recently, to tackle data protection and liability, EU’s General Data Protection Regulation (GDPR) came into existence. The regulation helps customer to be fully aware, in a clear, concise and transparent fashion, of how their personal data will be used and by whom.
How Teknospire is progressing with APIs?
Teknospire has always taken advantage of Open API, be it when they launched their first product – Salary Automation for civil servants of Zimbabwe, or when their API design has helped these civil servants to get connected to a platform to pay bills or initiate transfer. Post the first leg we geared up to help solopreneurs or banking agents to use the digital platform and help in last mile banking. With a stable ecosystem, rich customer base, and tested platform we then approached small and cooperative Banks to extend their reach to rural areas. With a lean banking layer or Agent Banking solution as a new addition to our offerings Banks trusted us as the technology provider, and started collaborating with us where they get Merchant Banking, Agent Banking, Automatic Reconciliation, Micropayments as solutions.
A Big Thanks to API!!
Recently Teknospire API were listed with Oracle marketplace and is available for use of Payments. Teknospire has recently collaborated with Latin American APIs aggregator “Finconnecta” that is a Fin Forward Accelerator to help inclusion and digitisation
While the benefits of Open Banking to customers are abundant, firms, Banks and other financial institutions need to sail safely. There are some risky avenues but Open API’s are helping Banks to expand, and responding to customer demand for providing Experience, Convenience, and Priority.