Open banking: what apis can do for fintech

26 Jul. 22
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Every business conversation ends with the question, “I’m sorry but how much will it eventually costs?” Despite this, money cannot be considered a typical resource. Money is not a resource like fuels or physical materials. It serves a symbolic purpose, and can be used as a tool.

The ever-changing reality of our world influences the price of goods and services. Banks and related areas of financial services need to adopt emerging digital approaches like none other.

We’ll be trying to define the following “THEs” in this article:

  • What is the key difference between traditional and open banking?
  • APIs can bring benefits to banking
  • Any open banking company using APIs must be aware of the top challenges

 

Open banking vs. Traditional banking vs. open banking

 

Any industry that is focused on staying competitive and thriving is bound to go digital. Banks are no exception when it comes to providing reliable financial services.

Even though a bank can be accessed online and offers digital banking services, it can still qualify as a traditional bank if it meets the following criteria:

  • Operates in a closed environment
  • Is customer-centric more important than product?
  • The brick and mortar model is presented
  • Acts within strictly regulated licenses

 

How does open banking work?

Open banking allows users to share their financial information to third-party providers (TPPs) in a different way.

You can authorize your bank, or any other nonbank financial institution, to share your sensitive information with an open banking platform, application or other open banking company. This sounds scary. However, be careful not to make hasty judgments.

This approach can help to redefine the banking business model and improve consumer-provider communication.

Source: ThePaypers Blog

Let’s first briefly discuss another term that assists the industry in reorganizing and elevating to the next level of quality service.

 

API explained in plain English

 

An application programming interface (API), is a thread that connects different pieces of software. Although it is very similar to a GUI (graphical user interface), it shares the IoT concept.

Similar reading: Healthcare Market IoT: Why Should You Care?

End users are concerned that an API’s primary purpose is to allow interaction between endpoints, such as servers or databases. It also hides unnecessary details.

 

Source: Calameo Blog

It is possible to adjust and make it work with various communication protocols, subroutines, methods and more. All of this is usually described in an API specification.

Most API development requires more complex architectural solutions than when developing a GUI. An API is incomplete without a back-end storage system, well-planned logics and automation tools.

It all depends on the project’s volume and purpose, so there is a lot of debate.

 

What can an open banking API be for fintech?

 

What makes the open banking API so useful for fintech applications?

Let’s suppose your investment portfolio is getting bigger. A few long-term deposits at progressive interest rates are in your bank account, as well as a couple short-term loans and shares from promising start-ups.

Even though all of the institutions mentioned have user-friendly apps and excellent online support, you will end up with your smartphone packed. It seems like a small problem. However, if you have a lot of ideas in your head about how to best navigate around these mobile banking apps, it will cause some inconvenience.

As you can see, APIs allow software and equipment to have ‘a conversation’. It allows data to be bundled from different points and projected onto one viewport that a user can use in the appropriate form.

Source: Fortunesoft

You might also like: FinTech software development: Industry trends

Let’s now look at the most important advances in tech.

  • Cost-effectiveness

Open banking platforms and digital banking can both offer their services. This eliminates the need for customers to physically be present or interact with staff. API interfaces allow mobile banking to offer more services with a smaller amount of resources.

Consumers can customize their banking experience with just a few actions. They don’t have to pay extra fees to open banks.

  • Reliable response to requests

It is hard to deny that time is the most valuable resource. A properly configured open banking API platform allows one to instantly connect to different banking servers and retrieve required data. Direct transfers can be made between accounts using a single mobile device with payment initiation services. It is not necessary to contact each bank institution individually.

  • Extended functionality

Developers can make APIs very flexible because of their flexibility. Mobile banking services can vary greatly in their specificity and range. An open banking API allows customers to combine them in one place while still allowing for some flexibility.

  • Participation from the individual

It is as important as any other aspect to be the true owner of your belongings. The ability to access your financial information and make decisions from an open banking platform would provide you with the confidence, even if the technical details are not important.

 

The One Challenge

 

Cybersecurity is the greatest challenge for a technology that involves third-parties.

Given that the financial sector has been a haven for criminals since its inception, it is important to be vigilant about security breaches and possible security flaws.

There’s no reason to panic. An experienced team of security professionals will minimize the chances of unwanted elements getting into your system. You will also be able to sleep peacefully with the implementation of blockchain.

Continue reading: Digital IDs: How banks verify identity online

Fintech technologies are still protected by the government, even though they are less regulated than traditional banking. Payment Services Directive, which was introduced in 2015 by the EU, is an excellent example of this.

 

To sum up

 

  1. Over the last few years, the fintech industry has seen rapid growth. It is changing business models, workflows and the delivery of digital banking services.
  2. Open banking platforms, as well as the implementation of APIs within banking, have made it easier for users to see the whole picture.
  3. There is more competition in digital and mobile banking, which has given consumers more tools to manage their finances and expanded investment opportunities.

These are just some of the obvious benefits APIs in banking provide. The answer to the question “How far can it go?” is “The sky’s your limit!”

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