Implementing Open Banking APIs, PSD2 and More

European banks will need to have Open Banking APIs in place by January 2018. This whiteboard video explains how to be compliant and keep existing systems safe.

Open banking APIs have become a financial services industry hot topic, thanks to two regulatory decisions.

The first is in the UK, where the Competition and Markets Authority (CMA) started investigating competition in retail banking. In parallel with the CMA, the European Commission started its second review of the Payment Services Directive. That review also proposed that banks, with customer consent, should expose customer data to third parties, who could then potentially deliver superior services.

From talking to our existing banking customers, we have identified four challenges of introducing an open banking API. Compliance, customer experience, competition and operational risk.

No bank started life as they are today. The majority have built up core systems over many years through mergers and acquisitions. Furthermore, they’ve delivered lots of different services over those years too.

Those systems as a result have become interlinked, inter-joined, and incredibly complex. They are traditional architectures and they scale up.

Instead of using existing core systems, our view is that most banks will build a database extension or caching layer.

In this alternative when a customer consents and the bank exposes their data to third parties, banks will extract that data out of their existing core systems, transform it for the new style database, and then populate the database extension with the data.

Regardless of the approach a bank takes, it will need to support open banking APIs from the start of next year. This leaves little time to become compliant and because that’s just a cost to them right now, we do believe that quickly the more forward-thinking banks will want to extend the capability of those open banking APIs, to develop new revenue streams and monetise them.

If you would like to learn more about how Hitachi can help you introduce Open Banking APIs get in touch with via LinkedIn or learn more about our financial services offering.

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