Open banking is a global movement empowering end customers to do more with their financial data. It opens opportunities for re-thinking business processes in many industries, extending its impact beyond financial services. Any organisation can now embed powerful banking capabilities into its own processes, to streamline customer onboarding, build better risk profiles and reduce transaction costs.
Figure 1 – Open banking drives business innovation
An online retailer, for example, can initiate a payment directly by invoking the APIs of the bank holding the customer’s account. It doesn’t need to go through a card scheme anymore and can significantly reduce transaction costs.
Figure 2 – Payment initiation scenario
Alternatively, consider the opportunities for insurance providers. Traditionally, they have to collect a lot of information directly from the end users. As a result, new insurance applications suffer from a high customer drop-off rate. With open banking the same organisations can just ask for user consent, automatically retrieve account information from all the institutions the customer is banking with, and quickly build a very precise risk profile.
Figure 3 – Account information aggregation
Open banking is just the start of a much wider open data revolution. Policy makers across the world are designing data strategies that apply the open banking model to other industries including health, energy, manufacturing, transport and education. Their aim is to promote competition, enable innovation and the creation of new value in an economy that is obviously more and more digital and data-driven.
Even in the context of the Covid-19 pandemic we can see examples of the value of data sharing. An unprecedented amount of data has been created and made publicly available by the scientific community, governments and the general public, improving our collective ability to respond to the emergency.
Figure 4 – From open banking to open data
The new role of integration
Over the last couple of decades, IT system integration has focused on enabling digital transformation by unlocking data stored in back end systems owned by the enterprise. That landscape is changing. The boundaries of data ownership are being re-shaped by a stronger awareness of end-user data and privacy rights. Policy makers are taking an active role in creating open ecosystems while, in the technology domain, APIs offer a mechanism for exchanging data in an easy and secure fashion. This opens new opportunities for expanding integration boundaries outside the data-sources owned by an enterprise and build solutions that leverage much broader data sets.
Figure 5 – The broader scope of integration
To get to those data is not always easy. You need to connect to a large number of endpoints that will change version, each one at its own speed. You need to move a large amount of information through an unreliable network and deal with all the security aspects of those interactions. You must also move fast and be agile: you have the opportunity of accessing all these resources, but you are also on a level playing field with all your competitors.
The IBM Cloud Pak for Integration is a collection of tools that empowers you to effectively address these use cases. It enables you to easily aggregate APIs, as well as any other type of data sources, into higher value services.
A practical example: a peer to peer payment app
To demonstrate the implementation of this type of use cases I have collaborated with Nearform and Yapily to build an open banking reference app: an example of end to end third party solution built on top of the public APIs exposed by banks.
Our main scenario involves two personas: Anne-Marie and her daughter Sophie. The app enables Anne-Marie to keep an eye on Sophie’s financial situation and help her when required. Behind the scenes the solution uses open banking APIs to access Sophie’s account information and initiate payments from Anne-Marie’s accounts. The brief video below walks you through the end user experience.
Video 1 – User experience
The technical solution
Figure 6 – Solution overview
Figure 6 presents the end architecture behind the reference app. The front end has been developed by Nearform as a React Native app, now available as an open-source asset (see “Resources and references” below). The app consumes APIs exposed by IBM API Connect. API Connect enforces access policies and gives you all the capabilities required to manage the lifecycle of a public endpoint. The logic behind those interfaces is configured in IBM App Connect. This aggregates the functionality of the APIs exposed by banks and controls the flow of data between the banks and Cloudant, the operational data store. Every bank has a slightly different set of endpoints. For this reason, we have integrated App Connect with Yapily which acts as a single gateway to any bank.
Building this reference solution was an eye opener on how effectively you can use these tools to implement new value propositions. We built all the data flows in just a few days and then use API management capabilities to control the contract between the integration space and Nearform’s the front-end components.
The IBM Cloud Pak for Integration in action
If you want a deeper insight on the tooling we used (and you can tolerate the product of a sub-optimal microphone quality) have a look at this video in which I walk you through the process of building one of the data flows of the solution.
Video 2 – Payment submission flow development
Summary:
Open banking is the example of an open data revolution that creates new opportunities for innovation. The IBM Cloud Pak for Integration gives you all the capabilities required to address the integration and security challenges linked to these emerging use cases. It helps you to build new solutions, faster, cheaper, and on a very scalable platform.
Anything you do in the API and integration layer has to go hand in hand with a compelling end user experience, so the assets created by Nearform enable you to build an end to end value proposition. If you want to know more, or discuss your specific use case, feel free to reach out to me by email, or send me a message on Linkedin.
Resources and references