For as long as we know, banks have maintained exclusive access to customer data. And while this data was shared with other service providers through piecemeal approaches, a system where external parties were able to access this data was unheard of. And with the oligopolies in financial services, there was no leeway for other financial service providers to enter the market and create innovative products, services, and experiences for customers.
In spite of the above, financial institutions in countries like the US have been opening up their APIs to other providers for a while. Open banking was formally made a regulation in 2017 for Europe and the UK. This required providers of banking services to open up their customer data to authorized third-party providers via APIs. As a result, an ecosystem of APIs is created with various third parties integrating with banks to reinvent financial services by using customer data.
The immediate perceptions of open banking were negative. Banks had concerns that their identity would be lost and they would be reduced to being a commodity. As more education around open banking was created, customers are seeing its advantages and banks are looking at it in a more positive light. Banks now view open banking as the best way to initiate their journey towards digital banking.
Since its inception, open banking is now on its way towards global adoption with countries like Australia, Hong Kong and Mexico having moved towards regulation and with banks in several other countries looking to adopt open banking even without regulation.
WSO2 Open Banking is purpose-built to align technology infrastructure and regulatory needs with domain expertise to fully satisfy technology requirements for open banking.
It has a componentized architecture that enables banks to choose and integrate specific technology components to meet unique open banking needs. And, since the WSO2 solution is built on a unified integration platform, it helps banks become integration agile for any future digital initiative beyond compliance.
Figure 2: WSO2 Open Banking Architecture
WSO2 Open Banking comprises of the following components:
It comes with no surprise that banks who take on open banking will come across some challenges while doing so. We recommend that banks follow 4 key steps to simplify and expedite the process of opening up their APIs
Understand the key requirements of an open banking
There are several aspects of an open banking regulation that banks need to understand. Adhering to API specifications and extending existing security capabilities to enable requirements like customer consent management are a few examples. When banks take on open banking without a regulation there is an even greater need to understand the bigger picture. Banks in non-regulated regions need to figure out open banking standards to use and best practices for implementation in order to meet their goals. The first step to a successful open banking implementation is making sure banks have a thorough understanding of all these requirements so they can prioritize and allocate resources accordingly.
Identify how to make the best fit between Open APIs and legacy
If there is one thing that is common to any bank, it’s the dependence on legacy systems and monolithic architectures for everyday business. Over the last few years, technologies such as API management, microservices, and integration have taken precedence in financial services forcing banks to evaluate how they can use these technologies. Any bank who has an open banking agenda should look at working with technology that doesn't require reinventing the wheel. An ideal situation would be where a bank can reuse some of the existing technology, add on the extra components they require and integrate seamlessly with the current core banking system.
Appreciate the changing role of technology
Open banking expects banks to broaden their vision for technology by looking at it beyond its traditional role of being a supporting function of a business. If you consider the open banking requirement, it needs many technology components to work together such as API management, integration, identity and access management (IAM), and analytics. These are the very building blocks that banks require to keep up with changing consumer requirements. Open banking, therefore, encourages all banks to re-analyze their technical debt and revamp their technology stacks to stay relevant and agile.
Map your open banking strategy to long term vision
Once the open banking requirement has been established, the journey towards understanding the bigger opportunity continues. Banks must decide how far they are willing to take open banking and how will it align with their larger digital vision. For example, while being digital-first is on any bank’s agenda, open banking is the best way to get a head start on digital banking initiatives. The questions banks must ask themselves is, does their vision complement the ecosystem that open banking creates? Do they foresee the benefits open banking can provide in the next 5-10 years? And if so how can they bring the two together?
By choosing WSO2 Open Banking, your bank can enjoy more than a smooth implementation of Open APIs. Our subject-matter experts and technology ensure that the entire process, from the conversation with your account manager all the way to the deployment of the solution happens in alignment with your open banking vision. Here are a few reasons why you should choose WSO2 Open Banking.
A complete platform for technology that extends beyond open banking compliance alone
Backed by the WSO2 Integration Platform, WSO2 Open Banking can scale open banking initiatives and subsequent projects to fully-fledged API-first digital transformation initiatives all within a single-vendor platform.
A Strategic Open Banking Partnership
|Problem||How/Why WSO2 is Used|
PSD2 compliance across multiple entities of Société Générale (SocGen)
A Customized Open Banking Solution
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PSD2 compliance ahead of the March 2019 deadline for a subsidiary of a CMA9 bank
A Digital Transformation Initiative Driven by Open Banking
|Problem||How/Why WSO2 is Used|
An open banking initiative to enable collaboration and data sharing in the financial services industry in Sri Lanka
WSO2 is the world’s #1 open source integration vendor, and a Leader in the Forrester Research API Management Wave Q4 2018 report. We help digitally driven organizations become integration agile; customers choose us for our integrated platform, our approach to open source, and our agile transformation methodology. Today, 100’s of leading brands and 1,000’s of global projects execute 5 trillion transactions annually using WSO2 integration technologies. Visit https://wso2.com to learn more.
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