The imminent arrival of PSD2 legislation in Europe has got banks thinking about APIs properly for the first time. It will create a new era of ‘open banking’ where financial institutions must share customer data with any approved third party provider, driving up competition and creating new products and services that can be delivered via a bank account.
Open banking is a team effort and it’s worth looking at two quite different developments that demonstrate progress.
While Europe is pressing ahead with PSD2, the British government is going a stage further by actively championing the open banking principle.
Last November the government set up the Open Banking Working Group (OBWG) with the remit of establishing how data could be used to deliver better services for consumers.
Reporting back last month, it made two key recommendations:
- Bank data, including information about banks’ products and services, should be made available as open data, so that services can be built allowing customers to get more out of their financial relationships (for example, through product comparison services);
- Open APIs should be created to enable services to be built using bank and customer data. These would include open data about products and services as well as shared data about bank transactions that individuals or businesses can choose to share themselves through secure and controlled means.
Essentially it’s talking about the sort of changes we’d expect to see rolled out with PSD2.
As an example, customers could apply for a mortgage without needing to scan, print and post bank statements, payslips and so on. Instead the mortgage provider can use an API to access all the relevant data from the customer’s bank account directly.
OBWG co-chair and Barclays head of client and customer experience Matt Hammerstein, says: “Banking as a service has long sat at the heart of our economy. In our digitally enabled world, the need to seamlessly and efficiently connect different economic agents who are buying and selling goods and services, is critical. The Open Banking Standard is a framework for making banking data work better: for customers; for businesses and; for the economy as a whole.”
While the focus here seems to be on making use of the financial data for a range of purposes, Visa has unleashed something that demonstrates another important facet of APIs – transaction controls.
Visa has launched a new service that promises to give customers the ability to monitor and control how, where, and when their Visa credit, debit, and prepaid accounts can be used.
Visa Consumer Transaction Controls will be delivered through an API to issuing banks and is a great example of how payment services will improve through open banking.
It gives consumers an on/off switch for their cards so it’s possible to immediately take action if a card is lost or stolen. They can set up alerts or just block certain transaction types, from online to the ATM. Cardholders can limit transaction size, set spending limits and ask for alerts based on transaction amount. Finally, it also lets people manage companion cards – for example a parent can have control of their child’s spending by setting controls on their card.
“By putting the account holder in charge, Visa card issuers can provide their consumers peace of mind through innovative spending controls, and more effective fraud prevention,” said Mark Nelsen, senior vice president of Risk Products and Business Intelligence at Visa.
“With new digital commerce experiences emerging daily, it’s important that we provide easy and convenient ways for consumers to direct and monitor how their accounts are used and help better secure the payment system.”
Transaction controls will be a great weapon in the war against fraud and demonstrate one of the many advantages of bringing APIs to the table.