The financial sector is undergoing a digital revolution. Conservative banks follow modern trends and begin to provide third parties with information that was previously considered bank secrets. Why this happens, who needs it and why – we’ll figure it out in this article.
In the UK, in September 2015, with the support of government authorities, the Open Banking Standard initiative was launched, which is aimed at increasing competition and accessibility of services in the financial market. According to the initiative, banks must provide third parties (so-called financial and technical companies) with data on customers’ balances and access to their current accounts. The application of the principle of open banking data has become mandatory for 9 large UK banks, which serve more than 80% of the country's citizens.
An example of the use of APIs is mobile banking applications that allow the client to check their balance, make payments and perform other banking transactions directly from their mobile device.
For example, it became possible to create a universal mobile application with which users can see information on each bank of which they are a client. Previously, the user needed separate applications for each bank, which made it difficult to select current offers and services provided by banks.
The multi-banking application allows you to:
As a result, clients do not need to use various communication channels and applications to carry out routine banking operations; banking becomes convenient, visual and comfortable.
Open access to the banking API is also beneficial for banks:
As we can see, the decision to open banking API brings benefits to all parties in the process. Now let's look at how this concept is applied in different countries around the world.
In the United States, there is no government regulation of the issue of open API banks. However, the favorable financial situation led to the creation of the banking aggregator company Mint, whose website was already used by about 20 million residents of the United States and Canada in 2016.
In Singapore, the Monetary Authority (MAS) supports the principles of open banking API. The Association of Banks of Singapore (ABS) and MAS have produced Finance-as-a-Service: API Playbook, providing information and guidance for the financial sector to enable the efficient exchange of financial information and pave the way for the launch of innovative banking projects.
India Stack, an open API information platform, has been created in India, which includes systems and services such as: Aadhaar - the world's largest digital biometric identification system; National Payments Corporation of India; Digital locker is a platform for generating and verifying documents in digital form, etc.
IndiaStack allows developers and technology satraps to enter the market of mobile applications for identifying and authenticating users of financial services.
Speaking about the prospects for the development of open banking APIs in Russia, it is worth mentioning the initiative launched by the Bank of Russia together with fintech organizations.
This direction involves developing scenarios for the use of open APIs, conducting pilot projects, as well as developing standards and documents for the use of open APIs in Russia. Already, the country's largest banks, such as Sberbank, Alfa-Bank, VTB 24, Gazprombank and Otkritie Bank are ready to provide their APIs to third-party organizations.
Trends in the development of open banking APIs indicate that the direction of developing mobile applications for the business of fintech organizations, namely multi-banking applications in Russia, will become relevant in the near future. According to the Markswebb research agency, 18 million people use mobile banks in the Russian Federation, which is about 33% of the country’s total Internet audience. 35.3 million people, or 64.5% of all Russian Internet users, use at least one Internet bank. The age of Internet and mobile banking users ranges from 18 to 64 years.
Wellsoft clients from the financial sector are already showing interest in this area and are exploring the possibility of developing a multi-bank application using open APIs.
Wellsoft's experience in developing mobile applications for banks allows us to implement such solutions at the moment if the client wishes.
Disclosure of banking data
The trend originated in Europe, for example, in Germany, the Open Bank Project has been developing since 2010 - a project that supports the disclosure of banking data and is supported by the largest banks in the country.In the UK, in September 2015, with the support of government authorities, the Open Banking Standard initiative was launched, which is aimed at increasing competition and accessibility of services in the financial market. According to the initiative, banks must provide third parties (so-called financial and technical companies) with data on customers’ balances and access to their current accounts. The application of the principle of open banking data has become mandatory for 9 large UK banks, which serve more than 80% of the country's citizens.
Using API technology
The transfer and provision of information is carried out using the API or Application Programming Interface, which in Russian means “application programming interface”. In simple words, this is a list of commands, requests, responses with the help of which computer programs exchange information with each other and interact, “forcing” each other to perform any actions.An example of the use of APIs is mobile banking applications that allow the client to check their balance, make payments and perform other banking transactions directly from their mobile device.
Opportunities and benefits of open banking API
A trend that is gaining popularity around the world is to provide banking APIs to all organizations intending to operate in the financial sector. This approach opens up a number of advantages for both banks and consumers.For example, it became possible to create a universal mobile application with which users can see information on each bank of which they are a client. Previously, the user needed separate applications for each bank, which made it difficult to select current offers and services provided by banks.
The multi-banking application allows you to:
- See your balance online and conveniently manage your accounts in different banks.
- Simplify trading operations (selecting a bank for payment, quick credit check, making payments from the application).
- Implement mortgage/credit applications that can confirm the solvency of citizens from a mobile device, simplify the process of obtaining a mortgage/loan.
As a result, clients do not need to use various communication channels and applications to carry out routine banking operations; banking becomes convenient, visual and comfortable.
Open access to the banking API is also beneficial for banks:
- Banks will expand distribution channels for their financial products and services with the help of third-party organizations and information systems.
- Expanding distribution channels is a potential for expanding the bank’s customer base.
- Banks will have access to information and services from third-party organizations, which will enable them to better navigate trends emerging in the financial services industry.
- And finally, an open API will make it possible to monitor the new market from the inside and, perhaps, buy out the organization behind the most successful developments in this area to strengthen its own position in the market.
As we can see, the decision to open banking API brings benefits to all parties in the process. Now let's look at how this concept is applied in different countries around the world.
Experience in using open banking API
In the countries of the European Union, the PSD 2 (European Payment Directive) standard has been in force since January 2018, which obliges banks to provide client databases and program interfaces (APIs) for third parties intending to work in the financial sector. Thus, it is planned to increase competition in the mobile online payment market through the entry of technology companies into the market.In the United States, there is no government regulation of the issue of open API banks. However, the favorable financial situation led to the creation of the banking aggregator company Mint, whose website was already used by about 20 million residents of the United States and Canada in 2016.
In Singapore, the Monetary Authority (MAS) supports the principles of open banking API. The Association of Banks of Singapore (ABS) and MAS have produced Finance-as-a-Service: API Playbook, providing information and guidance for the financial sector to enable the efficient exchange of financial information and pave the way for the launch of innovative banking projects.
India Stack, an open API information platform, has been created in India, which includes systems and services such as: Aadhaar - the world's largest digital biometric identification system; National Payments Corporation of India; Digital locker is a platform for generating and verifying documents in digital form, etc.
IndiaStack allows developers and technology satraps to enter the market of mobile applications for identifying and authenticating users of financial services.
Experience in using open banking API in Russia
In Russia, in 2016, on the initiative of Sberbank, Alfa Bank and other financial companies, the FinTech organization was created, the purpose of which is the development of financial technologies in the country. Also developing in Russia is FintechSmart, an association-trade union dedicated to developing an environment for financial startups, and the RusFinTech community, which organizes seminars and conferences on financial technologies.Speaking about the prospects for the development of open banking APIs in Russia, it is worth mentioning the initiative launched by the Bank of Russia together with fintech organizations.
This direction involves developing scenarios for the use of open APIs, conducting pilot projects, as well as developing standards and documents for the use of open APIs in Russia. Already, the country's largest banks, such as Sberbank, Alfa-Bank, VTB 24, Gazprombank and Otkritie Bank are ready to provide their APIs to third-party organizations.
Trends in the development of open banking APIs indicate that the direction of developing mobile applications for the business of fintech organizations, namely multi-banking applications in Russia, will become relevant in the near future. According to the Markswebb research agency, 18 million people use mobile banks in the Russian Federation, which is about 33% of the country’s total Internet audience. 35.3 million people, or 64.5% of all Russian Internet users, use at least one Internet bank. The age of Internet and mobile banking users ranges from 18 to 64 years.
Wellsoft clients from the financial sector are already showing interest in this area and are exploring the possibility of developing a multi-bank application using open APIs.
Wellsoft's experience in developing mobile applications for banks allows us to implement such solutions at the moment if the client wishes.
