After writing my very brief introduction to Open Banking API, I thought that the best idea is just to outline how it is used in practice for builders. At the end of the day, what is the most important for them is the implementation of Open Banking API solutions.
Looking from a broader perspective what you can get from Open Banking services providers (find the list here) can be divided into two categories:
Retrieving user information called AIS (Account Information Service)
Initiating user’s transfer of funds called PIS (Payment Initiation Service)
The value proposition of Open Banking API is the standardization and security of these actions. In theory, it is possible to build similar solutions using screen scraping and automation while holding the user’s credentials. But not only it is more difficult and time-consuming to build this kind of service from both a technological and legal perspective but also it is a less secure option.
Basic features
Let’s take a look at the general list of basic features Open Banking API enables. Not all of them work in all of the countries and jurisdictions.
AIS (Account Information Service)
Identity and account verification
Examples of usage:
Identity check
KYC (Know Your Customer)
By retrieving user data from an authorized bank account, we get information about the linked account data and its owner. That gives a certain level of reliability with regard to the user personal information. It can be even more credible if associated with an event (such as a bank transfer from a linked account) or extra verification (such as photo/ID one).
Retrieving account balances, information and history
Examples of usage:
Data aggregation from many accounts
Income verification
Affordability or credit check
Personal finance management
Product comparisons
User’s account information is the goldmine of data that could be used for many different purposes such as verifying income or conducting an affordability or credit check. It is also common to build solutions that enhance user experience. Some apps aggregate the data from different user’s accounts bringing everything into one place. Saving advisors help people to wisely put some money aside. Let alone more sophisticated wealth management solutions which facilitate more optimal investments. By accessing the financial history of users, it is possible to help them to make better choices by suggesting more profitable offers from the market.
PIS (Payment Initiation Service)
Payment Initiation
One-off payment
Recurring payments
Being able to pay through Open Banking API, enables many potential enhancements to other services. What is more, this kind of payment is a bank transfer. Therefore, it is not subject to card fees.
Going beyond basics
Using pure Open Banking API could be automatically associated with the solutions for product augmentations and user experience apps. In the former case, it could be an integration of a user bank account with an eCommerce service in which the user would be paying directly from an app by a bank transfer. An example for the latter case is the previously mentioned account aggregation app.
Some Open Banking providers, however, go beyond that. They build infrastructure projects on the top of basic Open Banking API which gives incredible possibilities for builders to create the products much faster or even white-label some solutions such as money manager.