Before you dive into creating an Open Banking API strategy, you should analyze your business goals, customer experience, and security concerns. The best advice you could ever receive relates to determining the type of banking API that best suits your company. Below are some tips to help you get started, like accessing a reliable TSP partner and developing a secure connection to your financial data. You may also go to our api exchange for more information.
Getting access to a reliable TSP partner
With the advent of Open Banking, financial service providers have greater freedom to integrate their data with the services of other financial institutions. When determining whether or not to work with a TSP, there are a few things to keep in mind. For example, you must ensure that your TSP is compliant with the PSD2 and GDPR directives. Additionally, you should work with a partner authorized by an Open Banking Implementation Entity.
Account providers are the financial institutions that grant access to third parties. These providers, also known as Payment Initiation Service Providers or PISPs, can innovate with the newly-accessible data. Open Banking allows PISPs to use full-featured read APIs and collaborate with third-party TSPs to deliver the functionality of financial institutions.
Creating a positive customer experience
The benefits of Open Banking are not just for banks and Fintechs. The benefits of this initiative are equally beneficial for online retailers. For example, if you have a store that accepts credit cards, you can offer a payment initiation service that can help you complete the checkout process more efficiently. Also, you can use the cardless payment to improve your customers’ experience. This new system of financial services can provide both convenience and security.
While PSD2 empowers account holders to share their data with other companies, it also removes the bank’s role as a gatekeeper. Real-world evidence indicates that consumers do not value certain data elements as much as banks. Still, banks may be concerned about reputational risk and brand recognition. Open Banking APIs help solve these issues and give customers access to the data they need to make critical financial decisions.
Managing security risks
The number one security risk when using open banking APIs is Broken Object Level Authorization (BOL-A). This vulnerability occurs when an API does not allow the user to perform the action they’ve asked them to. It’s a common problem, and it has become even more widespread as many services under the open banking umbrella are a blend of different APIs with complicated logic. Broken Object Level Authorization is one of the most challenging security risks.
The risk of a TPP hacking your customer’s data is accurate. In a TPP-hosted open banking API, a hacker may issue fraudulent requests for information from a bank customer or make payments from the bank to a third-party service provider. If the data is not secured, it can result in fraudulent transactions, damage to the entity involved, and a potential legal challenge. In addition, if a TPP employee is disgruntled and starts issuing fraudulent requests for information or initiating payments without your permission, the financial institution will be held responsible for unauthorized financial transactions.
Developing a stable connection to financial data
Developing a stable connection to financial data for your app may seem like a simple task. In reality, it is a complex process that requires testing and development, which involves setting up accounts in every bank in the market and obtaining feedback from end-users. Testing must be continuous, and connections must be monitored for downtime and upgrades. When integrating open banking APIs into an application, it is important to consider the risks and complexities of building and maintaining a connection with banks.
Ultimately, the success of open banking relies on a robust ecosystem of partners. A good example is the Consumer Data Right, which is currently applied by banks in Australia and will apply to other industries. The right allows banks to share transactional and product data with third parties, as long as they comply with industry-recognized privacy measures. This data sharing enables businesses and consumers to improve their products and services and make them more useful.
