As we have already covered Open Finance and Open Banking concepts in our last blogs, let’s uncover the details about Open APIs. Open APIs is an application programming interface made publicly available to external parties to drive innovative and collaborative partnerships and enable banks to leverage their existing infrastructure and data to unveil new opportunities.
As we have already covered Open Finance and Open Banking concepts in our last blogs, let’s uncover the details about Open APIs. Open APIs is an application programming interface made publicly available to external parties to drive innovative and collaborative partnerships and enable banks to leverage their existing infrastructure and data to unveil new opportunities.
With the help of increased API connectivity between third-party firms and financial institutions, it has become easier to drive innovative and collaborative partnerships by leveraging the existing data and infrastructure to unlock new potential opportunities. As Open Banking grows, Open APIs have become the principal component of digital strategies to grow in a financial ecosystem.
According to the reports of March 2022 exhibiting API Performance Stats, Open APIs are driving business values:
These are deemed the essential technology enabler for banking-as-a-platform, application integration, innovation, and customer connectivity.
Open Banking catalysts the innovation of open finance to enable the integration of traditional banks and product-centric applications with FinTech’s through an API and orchestration layer.
A retrospective view of the banking was quite different. The evolution of open banking nurtured the relationship between financial institutions and third-party providers (TPPs) to exchange data and services for delivering enhanced capabilities and experiences to customers.
However, Open Finance goes beyond the scope of services and data available at the bank, covering the entire financial footprint. With the customer’s consent, financial data related to pensions, tax, and insurance could all be accessed by a trusted third party.
The Financial Conduct Authority (FCA) of the United Kingdom acknowledged its vision of Open Finance for consumers and businesses as follows:
Let’s first jot down the difference between both the buzzwords before opening the curtains exhibiting benefits of open finance and open banking.
| Categories | Open Banking | Open Finance |
|---|---|---|
| Data Ownership and Control | The financial institution has the control over what information should be shared with the third-party providers | Customer decide what information to share with the TPP |
| API providers | Banks’s API (open application programming interfaces) is used | Other financial organizations such as fintechs may also essay the role of API providers |
| Contract | There is no need to build contract between customers and API providers | Customers’ consent is required |
| Legal Regulations | European Parliament issued a PSD2 directive that facilitated safer and more innovative payments | No legal regulations are sanctioned yet |
Multiple evolutions in the banking industry drive the rapid adoption of open banking:
Open Finance brings more transparency for the customers letting them handle all the financial data such as mortgages, savings, pensions, insurance, and consumer credit – basically on their entire financial footprint
Open Finance consolidates all the customers' financial services to manage their financial accounts and transactions in one application saving time and effort.
As financial literacy is a giant leap for the longer-term investment goals, implementation of open Finance through APIs leverages more robust authentication mechanisms and access control systems, allowing for enhanced data security.
Open Finance promises financial inclusion for gig economy workers (34% of the US population) Who typically invest in fintech services or digital wallets in lieu of bank cards.
The concerns regarding the data protection policies shouldn’t be overlooked when implementing open finance systems. Banks and corporates seeking to capitalize on open finance should first ensure that the products and services are complied with the highest security standards to mitigate any future risks.ECS Fin offers a complete solution for open finance and open banking, enabling the financial institutions and customers to enjoy simplicity, secure infrastructure, agility, and speed under the hood.
Innovate technology to expedite your digital transformational journey with ECS Fin robust solutions:
Open finance can radically enhance the payment industry if financial institutions and fintech take the command to educate consumers and embrace its opportunities. Stay tuned with us!
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