Financial Services is undergoing rapid change. Mobile banking and fintech systems are spurring the emergence of the European-led Open Banking initiative.
This is a significant development in existing regulations. While Open Banking aims to enhance customer protection and security, it also makes it possible for telcos, retailers and other companies to provide payment services. These organizations, with their ability to continually improve and differentiate their customer experiences, will likely disrupt the financial services industry. Competitive pressure will mount.
Runners in the race of Open Banking will jostle for position but, depending on which role they choose to adopt, the challenges they face will differ. Just qualifying for the race is tough enough, yet some traditional institutions, unable to move forward with the times, will barely make it off the starting blocks.
The field is open to three types of organizations:
- Account Service Payment Service Providers (ASPSPs)
- Payment Initiation Service Providers (PISPs)
- Account Information Service Providers (AISPs),
Account Service Payment Service Providers
The ASPSP service category is traditionally a core capability of banks. With Open Banking, retail banks must now serve up their customers’ data, on-demand. This new expanded role is not for the faint-hearted. It means exposing previously confidential data right down to transaction history and account balance levels, as directed by PISPs or AISPs (see below) to help consumers review their accounts and make payments. This level of openness will be a challenge for many traditional banks.
Payment Initiation Service Providers
Typically, fintechs, e-commerce platforms and retailers occupy the PISP category of financial services. Once authorized by customers via two-factor authentication, PISPs will initiate payments from an individual’s bank account without divulging their personal details. However, when things go wrong, pre-agreed remediation rules and processes for data corrections need to kick in, making thorough testing of workflows and APIs imperative.
Account Information Service Providers
Sometimes referred to as “ATMs in the cloud,” and also known as “cross-bank services,” AISPs are likely to be online comparison sites and new fintech services. For most EU banking customers, this will be a new service offering. AISPs will act as “marketplaces” recommending competitive offers from rival PISPs while holding and consolidating personal banking information from myriad organizations. They will also compete with each other on service levels, so maximum connectivity and uptime is critical.
No matter which role you undertake, it will demand more of your IT teams and infrastructure than ever. Creating a ‘single customer view’ via AISPs using disconnected systems becomes very costly. The need to manage multiple data pools and complying with bank-specific regulations dictates an agile approach. Maintaining maximum uptime requires a single technology platform like Boomi.
With features like automated data mapping and data stewardship, Boomi API management provides a unified and scalable platform to manage APIs through their entire lifecycle. This environment enables you to control the creation and deployment of APIs to improve how you manage and govern access to your data.