Articles

What is Open Banking and Is It Available in Canada?

If you’re a bank or financial institution, you should know what open banking is. Open banking consolidates your customers’ financial information. It allows them to access their financial data via a single banking or third-party app, allowing them to make smarter and faster financial decisions.

This guide explains open banking, how it works, and its benefits.

What Does Open Banking Mean?

Open banking is a secure framework that facilitates the exchange of financial data between financial institutions and third parties through APIs (application programing interface).

Think about the last time you wanted to check your investment portfolio. You probably had to log into multiple online portals and bank accounts to get financial information.

Open banking (also known as consumer-directed or consumer-led banking) can shorten this process to a few minutes by bringing all the information to a single dashboard.

When you try to access financial information via a fintech app with open banking, your bank transmits data via a secure online channel to the app. More importantly, you don’t need to provide login credentials when using open banking.

As you can imagine, being able to pull financial data securely from banks and other institutions will allow fintechs and the banks themselves to develop innovative products that enable Canadians to manage finances more effectively.

How Open Banking Works

Here is a typical scenario for how open banking works:

A bank’s customer downloads a fintech app to manage finances and wants to start using it.
The app needs to access financial data, so it prompts the customer to link their bank accounts.
The customer authorizes the bank to securely share financial data with the app.
The bank transmits customer data through a secured online channel.
The app provides financial insights and recommendations.

Isn’t that how apps operate anyway?

Well, yes, except for one key difference. Traditionally, when a person links an app to their bank account, it uses screen scraping and the person’s login credentials to log into it and pull financial data.

On the other hand, open banking uses APIs (application programming interfaces). In simple terms, APIs allow two systems (the banking system and the third-party app, in this case) to communicate and exchange information securely.

Banks or financial institutions are responsible for building, implementing and managing the APIs that will allow customers to connect their accounts with new and innovative apps.

Banks need to find the right API management platform and be mindful of some common open banking API challenges. Alternatively, you can book a discovery call with us, and we’ll take care of the technical aspect of implementing open banking.

Screen scraping is prone to privacy and security risks since you can’t control how the fintech stores or uses your data. The practice can also violate your bank’s electronic access agreement (EAA), which frees the bank of any liability in case of an unauthorized transaction in your account.

Screen scraping will likely become obsolete once open banking becomes available in Canada.

What is Screen Scraping?

Screen scraping is the process of capturing data present on a screen — from a webpage, document, or app — for using it in another system or app.

It’s generally used by apps that need to extract data from legacy systems that lack an API management system or any other source of data extraction.

Data accessed by apps through screen scraping isn’t regulated. Without a standardized system, all third parties use their own level of security and approach to handling data.

Screen scraping platforms also store login credentials as text strings. The lack of encryption leaves your data vulnerable to attacks from hackers.

Unfortunately, an estimated four million Canadians are accessing banking-style services via screen scraping. The growing popularity of financial planning apps strongly calls for a more secure, regulated framework like open banking.

However, open banking still has its limitations. For example, the bank might securely transmit the information to a third party, but if someone hacks the app itself, they might steal your data. So even though open banking is safer than screen scraping, it’s not fully secure.

Benefits of Open Banking

The implementation of open banking in Canada will benefit both you and your customers.

Here are four ways open banking will benefit your customers:

Gives an overview: Open banking provides a secure framework to pull information from your bank accounts, credit cards, investment partners, and other financial institutions. An open banking app can consolidate all your financial data and provide a complete overview in one place without switching between websites and manually extracting information.
Allows shopping around for the best deal: Comparing deals for personal loans, credit cards, or mortgages requires careful research. A comparison app using open banking can speed up the process and help you find the best deal. Apps can also help you understand how likely you are to qualify if you apply for a loan based on your financial information.
Speeds up the application process: Applying for loans or credit requires submitting information, including your financial statements and KYC documents. Instead of manually submitting these documents, an app can store them for you and submit them as necessary when applying for a loan or opening an investment account.
Helps make smarter financial decisions: Fintech apps can use artificial intelligence (AI) and machine learning (ML) to create financial roadmaps based on your financial data. You can use these apps to create a budget, understand your spending habits, and find the best investment options based on your risk appetite. Apps may also project cash flows based on your budget and financial obligations so that you can estimate the available balance in your account at the end of each month.

Here are four ways open banking benefits you as a bank or financial institution:

Collaborate with third parties: Collaborating with third-party apps can help you explore data-sharing agreements and identify new opportunities. You can streamline processes and offer more related services to stay ahead of the competition.
Prepare for the future: Open banking isn’t available in Canada, but it soon will be. Over time, your customers will likely demand the privacy and security that open banking offers. As data privacy laws evolve, open banking will ensure you’re in an excellent position to adapt to changes. Moreover, quickly becoming compliant with evolving rules without interrupting service improves customer experience.
Increase market share: Your customers crave convenience. Allowing them to consolidate financial information securely ensures excellent customer experience. Offering open banking is critical to fulfilling your customer’s demands. Over time, you might even lose market share by not offering open banking.
Lower operating costs: Open banking ensures banks’ data lives in a centralized, digitally accessible location. This minimizes data silos and facilitates automation. Automating banking processes like mortgage underwriting allows you to reduce operating costs.

Open Banking in Canada

While open banking is currently unavailable in Canada, it’s available in countries like the UK and Australia.

The Canadian government is working on safely implementing open banking in Canada. The government appointed Abraham Tachjian to lead Canada’s open banking framework development initiative in March 2022.

According to the Final Report of the Advisory Committee on Open Banking, the government had set a target to make open banking operational by January 2023, but implementation is still under process.

However, the government is committed to implementing open banking at the earliest and realizes the benefits it can offer to Canadians.

For example, when asked about how open banking can address the challenges facing BIPOC Canadians, small businesses, and rural/remote communities, Tachijan explained:

“While Canada’s banking framework aims to ensure all Canadians have access to basic bank accounts, some Canadians may be underbanked. Open Banking creates the opportunity for consumer-led banking, which gives consumers and businesses greater control and protection over their financial data, as well as more transparency on how it’s used.”

While the government lays the groundwork to implement open banking, you should ensure you have everything set up to offer customers open banking soon after it becomes available in Canada.

Is Your Financial Institution Ready for Open Banking?

Open banking is about to transform the financial services industry. Your customers will have the flexibility to choose how they interact with your bank, and your competitors will have the option to offer innovative solutions.

Implementing open banking can feel daunting, but partnering with the right team can simplify the process.

Blanc Labs helps banks implement open banking from scratch. Book a discovery call to learn more about our open banking solutions.

Articles

Finding the right API Management Platform

APIs are an integral part of today’s digital world. They are used for secure data exchange, integration, and content syndication. As APIs become more ubiquitous in enterprise businesses, it becomes necessary to manage them efficiently.

Banking and Payments ecosystems are converging with Open Banking and Finance. Whether regulatory or market driven, these digital interactions are happening already – and growing exponentially. Doing APIs and API Management right are central to the growing interdependence and interoperability between Fintechs, Banks and Consumers. Stakeholders are demanding secure access to financial data to drive better customer experiences. A key enabler to that end are the systems that surround APIs.

What is API Lifecycle Management?

API Lifecycle Management is the process of building, controlling, distributing, analyzing, and reusing APIs. It also can include capabilities around intelligent discovery; one pane of glass visible across multiple API gateways and API management systems; bringing to life the visionary end state of monetizing and marketing all these capabilities to external parties to operationalize the concept of “API as a product”. Thus, there are many API Management solutions in the market offering a variety of features. But at the very minimum, an API Manager should allow users to do the following:

Discover APIs

Before you can more effectively govern their lifecycle, you need a simple and configurable tool to find, filter and tag all your API assets into a centralized repository. Simplify complexity and/or get better visibility and facts to position your organization to “open itself up” to the new business realities and opportunities emerging.

Design, build, and Test APIs

The API Management tool should provide everyone, from developers to partners, the ability to create APIs under a unified catalog and test their performance.

Deploy APIs

API Management tools should also allow you to publish APIs on-premises, on the cloud or in a hybrid environment. Additionally, the API Manager may give you a choice between managing the API infrastructure in the tool itself or on your own.

Secure APIs

By providing a central point of control, most API Management tools will ensure that you have full visibility of all your APIs across environments so you can mitigate any vulnerabilities.

Manage APIs

API Management tools should give you a central plane of visibility into APIs, events, and microservices. Most API management tools will allow you to govern APIs across all environments (on-premise, hybrid, cloud) and also allow you to integrate with other infrastructures, including AWS, Azure, and Mulesoft. A good API management tool should also provide multiple predefined policy filters to accelerate policy configuration.

Analyze APIs

An API Manager should give you real time metrics in a unified catalog. By providing data on the business performance or operations across your APIs, you can make better decisions leading to improved business results.

Extend and Reuse APIs

By giving you a single, unified catalog, an API Manager can eliminate duplication and extend the life of APIs through reuse.

The need for API Management

API management centralizes control of your API program—including analytics, access control, monetization, and developer workflows. It provides dependability, flexibility (to adapt to shifting needs), quality, and speed. To achieve these goals, an API Manager should, at the minimum, offer rate limits, access control, and usage policies.

Essential features of an API Manager tool

1. API Gateways

A gateway is the single entry point for all clients and is the most critical aspect of API management. An API gateway handles all the data routing requests and protocol translations between third-party providers (TPP) and the client. Gateways are equally important when securing API connections by deploying authentication and enforcement protocols.

2. Developer Portal

The primary use of the developer portal is to provide a hub, specifically for developers, to access and share API documentation. It is an essential part of streamlining communications between teams. Typically, developer portals are built on content management systems (CMS), allowing developers to explore, read, and test APIs. Other features of a developer portal could include chat forums for the internal and external developer community and FAQs.

3. API Lifecycle Management

As the name suggests, API Lifecycle Management provides an end-to-end view of how to manage APIs. API Lifecycle Management is a means to create a secure ecosystem for building, deploying, testing and monetizing and marketing APIs.

4. Analytics engine

The analytics engine identifies usage patterns, analyzes historical data, and creates tests for API performance to detect integration issues and assist in troubleshooting. The information gathered by the analytics engine can be used by business owners and technology teams to optimize their API offerings and improve them over time.

5. API monetization and marketing

API management tools can provide a framework for pricing and packaging APIs for partners and developers. Monetizing APIs involves generating revenue and keeping the API operational for consumers. Through usage contracts, you can monetize the microservices behind APIs. An API management tool will offer templatized usage contracts based on predefined metrics, including the number of API calls. This empowers innovative external players to help drive your business in ways you have not dreamed up yet – and still do it securely.

How successful is your API management?

Now that we know the features of an ideal API management software, how do you evaluate its success for your API efforts? Here are a few ways to track your progress:

Speed
How rapidly can you launch your APIs to meet your business goals? Latency and throughput are ways to measure the speed of deployment. Other areas to measure speed would be onboarding and upgrading APIs.

Flexibility
Flexibility is the breadth of options available to developers when adopting APIs. The greater the flexibility, the higher the cost and effort to manage the API.

Dependability
How available your APIs are to developers. One way to measure dependability is downtime. Quota is another way to restrict how many API calls can be made by a developer within a certain timeframe. Enforcing quotas makes API management more predictable and protects the API from abuse.

Quality
Stable APIs with consistent performance reflect higher quality. It is a way to measure a developer’s satisfaction with the API.

Cost
The above four factors contribute to cost. If your API management software provides a better view of all your APIs, it will reduce duplication and costs. Reuse of APIs is another way that you can save costs.

How are you managing API complexity?

If you are a business leader concerned about how to meet market demand through the creation and deployment of APIs, or you would like to monetize and reuse your existing APIs and reduce costs, then you need structured API management.

In partnership with Axway, Blanc Labs offers a way to manage your APIs to bring maximum business value. Axway’s API Management Platform enables enterprises to manage and govern their APIs for developing and applying their digital services.

Book a discovery call with Blanc Labs to learn more.

News

Blanc Labs and Axway partner up to provide integrated open banking solutions for all

Posted on 5 October 2022

Axway (Euronext: AXW.PA), a leading provider of open banking built on the Amplify API management platform, is proud to announce its partnership with Blanc Labs, a trusted financial service and healthcare innovation partner.

While the largest banks are already well along their digital journey, many others are still tasked with competing in what can feel like an uneven playing field. Financial institutions must have a clear strategy for implementing, governing, monetizing, and marketing APIs to ensure a frictionless customer experience and better business results.

“We want to help all banks – anyone who has something to bring to the table – to strategize and compete in the open banking arena,” said Eyal Sivan, Head of Open Banking at Axway. “They will thrive as they embrace open APIs, build on trusted customer relationships, and meet their customers’ needs wherever they are.”

“At Blanc Labs, we help our clients achieve extraordinary results by accelerating their digital transformation journey,” says Blanc Labs CEO Hamid Akbari. “APIzation will enable secure data interoperability within the financial services ecosystem. Open banking and Banking-as-a-Service pose a disruption challenge as well as a massive growth opportunity for banks and fintechs.”

The specialized solutions offered by Blanc Labs together with Axway make API integrations more efficient and cost-effective thanks to universal API management. Benefits of the unified API platform include:

Increased productivity as developers easily find and repurpose APIs, eliminating duplication of efforts
Less technical complexity by unifying and simplifying API services across the organization
Stronger security thanks to a unified, vendor-agnostic view of all APIs
Faster legacy system upgrades through an API-first layer, which simplifies the addition of new services
More robust governance through centralized documentation for multiple developer teams

“Partnering with Axway, a pioneer in API management and the open banking space, is a natural fit for us. Out-of-the-box support for open banking and common data standards will significantly reduce the cost of building next-gen financial services and will accelerate time-to-market for our clients,” Akbari adds.

As banks gain confidence with Axway and Blanc Labs open banking solutions, they can move from optimizing processes and keeping up with industry standards to unlocking new business models, discovering richer customer data insights, and building highly personalized services to delight their clients.

Learn more about the Axway-Blanc Labs partnership and how they can help banks fully participate in the growing open banking ecosystem, here.

About Blanc Labs

Blanc Labs is a preferred partner for enterprises looking to digitize and build the next generation of technology products and services. To help companies rapidly deliver on their digital initiatives, Blanc Labs has developed expertise and bespoke solutions in a wide variety of applications in financial services, healthcare, enterprise productivity and customer experience. Headquartered in Toronto, Blanc Labs serves the Americas through operations in Toronto, New York, Bogota and Buenos Aires. For more information on how Blanc Labs is building a better future, visit www.blanclabs.com.

About Axway

Axway enables enterprises to securely open everything by integrating and moving data across a complex world of new and old technologies. Axway’s API-driven B2B integration and MFT software, refined over 20 years, complements Axway Amplify, an open API management platform that makes APIs easier to discover and reuse across multiple teams, vendors, and cloud environments. Axway has helped over 11,000 businesses unlock the full value of their existing digital ecosystems to create brilliant experiences, innovate new services, and reach new markets. Learn more at axway.com.

Articles

5 Factors to Evaluate Open Banking Readiness in Canada

By Steven Chung and Rishi Khanna

Open banking’s first phase is almost upon us. Now more than ever, banks will need to address their digital and core systems if they wish to participate and gain from the new banking regime. The need for seamless digital experiences, especially post Covid, is shaping customers’ expectations from banks and financial institutions too. Roughly $416 billion is up for grabs and if the prediction holds true that open banking adoption will increase by 76% in the next three years, then incumbents should begin preparing themselves without delay.

What is Open Banking? 

Open banking is a way for financial services customers to securely share their financial data with other financial institutions and third-party providers using APIs governed and regulated by universally accepted protocols. Open banking exists in several countries around the world including the UK, Australia, Brazil, and Singapore.

The Benefits of Open Banking

Open banking is pushing banks to innovate and play nice with Fintechs. In the UK, where open banking launched shortly before COVD-19, the use of Fintech applications for money management rose by 20% for adults and 50% for young adults. Banks, as trusted custodians of customers’ data, can take advantage of the new Fintech technologies that have sprung up as a result of open banking to deepen customer relationships and retain them by providing valuable insights on their personal or commercial finances instead of just facilitating transactions.

5 Factors to Assess Open Banking Readiness in Canada

The first phase of open banking in Canada will begin in January 2023. Many banks and credit unions are in the midst of preparing themselves for open banking. But just how ready are they?

Here are 5 Factors recommended by Blanc Labs to evaluate if you are ready for open banking:

Factor 1: Your core and digital banking systems are up to date

Your financial institution’s core and digital banking systems are scalable, compatible with other new technologies. You have web-banking and mobile banking platforms for retail and commercial customers. Most processes are automated, minimizing manual intervention. The core banking and digital channel systems are cloud-native.

Factor 2: You have identified business use cases for open banking

You have identified use cases for open banking at your institution and you would now like to invest in an API-led ecosystem to monetize your data. Open banking use cases could include Account Aggregation, BNPL (Buy Now Pay Later), and Tax preparation.

Factor 3: Your organization is united in reaching its transformation goals

You have a non-traditional approach to growth and view open banking as a strategic imperative towards creating new lines of revenue for your business. As such, you have budgets dedicated to open banking efforts. You are looking at ways to improve how to use your data through TPPs (third-party providers) to create relationships with other financial institutions and non-banking entities and turn them into new offerings for your customers.

Factor 4: Your API-ecosystem is mature

Your organization has been creating APIs for internal and external consumption for some years. There is a standardization and documentation around maintenance, governance, security, and management of APIs. There is visibility over the entire API catalogue and tooling to track and monitor API performance. You participate in agile data partnerships with Fintechs, which means your onboarding processes are thorough, but quick.

Factor 5: You can operationalize APIs and use them as products

That leads us to the final step. Your organization can support third-party use, both in terms of system bandwidth as well as security. Your systems can take high traffic load. You are primed to use API-as-a-Product.

Do you have an Open Banking strategy?

Still unsure? Apart from readying the underlying enabling technology considerations, Open Banking is fundamentally a business decision and a discussion about how to best compete and win in the new banking environment. Here is a handy Digital Maturity Assessment from Axway that can help you figure out what stage you are at and what to do next. Blanc Labs in partnership with Axway offers an Open Banking Strategy Workshop that can help you:

Define your financial institution’s goals for growth
Analyze the current state of your organization and what you need to meet your long-term goals
Identify challenges that you need to beat to ensure you can take full advantage of open banking
Zone in on use cases that will give you the biggest ROIs and the fastest time to value

Book an Open Banking Strategy Workshop with Blanc Labs to learn more.

Articles

Open Banking in Canada: How Banks and Customers Can Benefit

By Bob Paajanen & Steven Chung

Open banking benefits Canada

Exactly a year ago, the Department of Finance released the final report from the Advisory Committee on Open Banking. It set an ambitious 18-month roadmap for Open Banking implementation in Canada. With 2023 just a few months away, it is crucial that financial institutions understand the advantages of open banking and the possibilities it can bring, not just for themselves but also for their customers.

What is Open Banking?

Simply put, Open Banking is a way for business owners and customers to share their data with their financial institution (and connected third-party providers or TPP) securely using APIs governed and regulated by universally accepted protocols. Customers will have full control over how much and with whom they would like to share this data. They will also have a unified view of all their balances, credit cards, mortgages, investments, and any financial transactions across all banking entities. For this reason, open banking is also sometimes referred to as “consumer-permissioned data sharing” or open finance.  

Open banking started in 2016 with European governments pushing for more open financial data and laying the foundations for banking evolution. The EU’s second Payment Services Directive (PSD2) was a powerful legislation that made an impact on the UK’s Competition & Market Authority (CMA) which mandated that nine of the country’s largest banks develop an “open banking standard” and enable customers to share data with Fintechs and third parties.

Open banking is now present in several parts of the world, including Australia, Brazil, India, and South Korea, where it is government-led, and in countries like China and the US, where it is primarily market-led.

Data Sharing in Open Banking 

Before open banking, banks would share data with third-party providers (TPP) or applications using a process called ‘screen scraping’, where data is taken from one app through user details, copied and pasted for another purpose. A good example of this might be a typical finance aggregator app that sends a bot to the bank’s website on behalf of the customer and uses the consumer’s bank login and password to access all their financial information. About 3.5 to 4 million Canadians currently use apps that employ screen scraping. Until now, these TPPs did not have a formal relationship with banks and had access to more information than was necessary. Banks often were unaware of which data was scraped, yet they would be accountable if and when there were data breaches.

With new regulations around data sharing, banks will now share only relevant data with TPPs, with the customer’s consent, through APIs or application programming interfaces. Customers will no longer have to share their banking credentials with the TPP. Thanks to this change, many Fintechs that offer open API-led data-sharing networks have come to the fore.

As we move closer to 2023, several incumbents and challenger banks are partnering with data aggregators that provide API-led data-sharing networks, which will allow customers to securely share their data with several Fintech applications and provide them with financial insights in real time. Recent examples include EQ Bank’s partnership with Flinks, CIBC’s participation in the MX network and RBC’s partnership with the Plaid and Yodlee networks.

Why is this happening? An example will illustrate the opportunity and upside for industry participants. When a customer or their Fintech requests data from multiple financial institutions, aggregators like the entities named above will be able to monetize and sell via subscription the data to each financial institution. This can generate insights around where customers are at risk, or have relationships with other financial institutions, even though the details will be masked. Better customer profiling can be driven from empirical data through this data sharing model.

Open Banking and Digital Transformation

Nearly every, if not all, industries are going through a digital transformation. Long before open banking, many Fintechs had begun unbundling financial services. This trend has only accelerated thanks to open banking. In Europe, for example, TPPs grew from 100 to 450 in between 2019 and 2021. Financial services are now being restructured around “jobs to be done” rather than just products, creating better experiences and value for customers. Open banking will lead to two major outcomes when it comes to data: Interoperability and Automation. By making financial data interoperable, new customer value propositions could be created that offer better access and user convenience thereby creating new revenue streams for the bank. Once customers get a clear and unified view of their financial position, automation rules could take over to help with better decision-making to manage daily finances. This will make it possible for banks to cross-sell products and services without the customer ever leaving the bank’s ecosystem.  

How Open Banking Benefits Financial Institutions

It is obvious to see the customer benefits of open banking. But what about financial institutions? One of the major reasons why open banking is seen as a catalyst by many governments and markets, is that it will boost growth and increase economic efficiency. One report from McKinsey estimates that the adoption of open banking could result in “1 to 1.5 percent of GDP in 2030 in the European Union, the United Kingdom, and the United States, to as much as 4 to 5 percent in India.” Another study reveals that $416 billion in revenue is up for grabs for those financial institutions that are agile enough to jump in on the opportunity.

Hyper-targeting and faster onboarding

A more holistic view of an individual or SMB’s finances means that banks too can make more customized offerings to their customer. Open data sharing will also make it easier and faster for customers to switch accounts, purchase new products or get approved for lines of credit.

Reduced operational costs 

A lot of data remains in physical documents and disparate digitized sources. An open financial data system will ensure that the data is held digitally in a centralized location and make it easier for banks to adopt automation methods, thereby cutting operational costs. This is especially true for mortgage underwriting, where intelligent data processing and management can save between $7,000-9,000 per mortgage application. Here are more reasons banks can benefit from automating data intake and processing.

Better security

Fraud accounts for $4.5 trillion per year, which is equal to about 5% of global corporate revenue. Open banking may introduce a single-use digital token system compared to screen scraping, which is risky and open to misuse. Bad actors will have little to no access to customers’ login information during transactions, thereby reducing the risk of data breaches. Data sharing in real-time, could also provide a better view of suspicious activities and build predictive models to mitigate fraud.

Lead Generation

Banks acquire information from TPPs, such as credit bureaus, about potential customers during lead generation or mortgage origination. In the US, for example, nearly 50% of loan originators depend on third parties for information related to credit, KYC, and property valuation, costing banks up to $80 per application. Open data sharing enabled by APIs could potentially reduce the cost of acquiring this information and make it available securely to more financial institutions.

Are you ready for open banking?

Digital transformation has changed the way banks engage with their customers. With open banking, we are at the pivotal moment where customers can choose the services and products that work best for them, while banks and FintTechs can come up with innovative new ways to engage with them. Opening up banking systems can be a daunting change for banks that have operated through a linear chain thus far. Blanc Labs, in partnership with Axway Open Banking, offers a step-by-step approach for banks to:

Build on existing infrastructure to reach their open banking goals faster
Unlock the potential of their existing data to create new business opportunities
Create a security layer for identification and consent to comply with the latest open banking standards
Discover, Manage, govern, market and monetize their APIs

Book a demo or discovery session with Blanc Labs to learn about the impact of our Open Banking solutions. 

Articles

Open Banking API Challenges: 4 Areas That Need Intervention

By Steven Chung and Bob Paajanen

As financial institutions find their way into the digital world, they face competition from several non-bank forces, including FinTechs and Big Tech companies like Apple, Google, and Amazon. FinTechs and Big Tech have begun rewriting the rules for the finance industry creating new ways of banking and new revenue streams. By offering speed, innovation, and unbundled financial services, digital non-banking entities are luring away customers from banks and credit unions. Open banking promises financial institutions an entry into the changing banking ecosystem by tapping into third-party application programming interfaces (APIs). But without the right strategy, banks may find themselves saddled with high costs, low time to value, vulnerable data systems, and no ROI to show.

API Challenges

As API adoption grows, so does the concern around how these APIs will be built or bought; how they will be managed; and the security and privacy risks that they present.

API Standardization and Documentation

The biggest concern around API adoption is standardization with more than 52% of organizations finding it a challenge. Unfortunately, there is no universal identity management framework which means that companies must rely on their developers to build their own management systems. Without proper documentation or style guides, different teams of developers within the organization may come up with varying standards for how the APIs are built and consumed, leading to issues with integration and management. The ‘State of Software Quality: API 2021’ study by SmartBear found that 54% of respondents pegged “accurate and detailed documentation” as the second most important characteristic they needed in an API as an API consumer, ease of use being the topmost. Yet, close to 40% of the respondents did not use API management software or were using an in-house API management tool.

API Security

As banks use more APIs to enable digital businesses and provide web and mobile experiences to customers, the chances of security breaches also go up. There have been several incidents of API attacks and data leaks this year alone. API security is made worse by the fact that many organizations lack an inventory of the APIs they create or use from third parties. Research firm Gartner found that the common theme among many of the API breaches was that “the breached organization didn’t know about their unsecured API until it was too late.” Sadly, there is no tool that will automatically discover vulnerabilities in the APIs. Implementing API threat protection and access control will require endpoint security (processes, infrastructure, and protocols). Without an API management platform in place, this will present further challenges.

“By 2022, API abuses will move from an infrequent to the most-frequent attack vector, resulting in data breaches for enterprise web applications.”

Gartner (2021)

API Governance standards and privacy regulations

Government-dictated compliance frameworks around APIs are still some time away for Canadian financial institutions. This means that developers at banks and credit unions must rely on varying standards, including security standards, when it comes to how API integrations will work and be used. Without governance standards, financial institutions run the risk of exposing themselves to fraudulent third parties and exposing customer information in ways that could be used against their interests.

API Reliability & Performance

To support new functionalities and user experiences, developers in financial institutions are relying more and more on third-party APIs, APIs from business partners, and from other business units within the enterprise. Many of these APIs are licensed from providers that also look after their daily operations. Due to the composite nature of these applications, an outage with one third-party API can impact any application that is using that API. As of April 2022, there were close to 7.8 million failed API calls in the UK according to Open Banking Implementation Entity (OBIE). The financial entities with the most failed calls are the big banks including Barclays, Lloyds, and HSBC. Frequent API errors create a negative impact on customer experience and may lead to discontinued product use.

Is your bank ready to adopt open banking?

API integrations are a necessity as we move towards an open banking system. Financial institutions must have a clear strategy on how they want to implement, govern, monetize, and market APIs to ensure a frictionless customer experience and better business results.

Blanc Labs has partnered with Axway to provide specialized solutions that make API integrations and management more efficient and cost-effective. Benefits of our unified API platform include:  

Increased productivity, as developers are easily able to find and repurpose APIs instead of duplicating efforts or wasting time searching for them.  
Less technical complexity by unifying and simplifying API services across the organization 
Better security through a unified view of all APIs 
Faster upgrades of legacy systems through an API-first layer allowing you to add new services more easily 
More robust governance through centralized documentation that multiple teams of developers can reference

Book a demo or discovery session with Blanc Labs to learn about the impact of our API solutions for banking. 