Whether it is PSD2 across Europe, the Open Bank Project in the United Kingdom or the Unified Payments Interface in India, it is the regulators who are pushing the open banking agenda. With banks instructed to allow third parties to access some of their data, the scramble for Application Programming Interfaces (APIs) – one of the key ways to provide that access – is on. The problem, however, is that every bank is defining its own set of APIs, thereby hampering connectivity, easy integration and openness, which sort of defeats the purpose.
BIAN (Banking Industry Architecture Network), a collaborative not-for-profit ecosystem of banks, technology providers, consultants and academics has been trying to address this issue with a series of measures.
At its heart is a service landscape that serves as a reference model of a bank and comprises all possible business functions. One of the important features of this model is its taxonomy, which lays out clear, standard definitions for these banking business functions, so that they mean exactly the same thing to every person and every bank.
After creating the service landscape, BIAN identified the different information flows between the 300 or so banking capabilities within their model. This enabled banks to see how far the capabilities were connected, while helping BIAN decide which of them should be taken up for API enablement. Armed with a set of approx. 100 API candidates, BIAN teamed up with Carnegie Mellon University to figure out how to standardize them all as well as define standards for all future APIs to follow.
In April 2016, a representation of BIAN’s members deliberated on building a vendor agnostic IT model that would be acceptable to all vendors, which would – going forward – make it easier for banks to replace one vendor’s product with that of another. Once there is agreement on the model and its components, the next step for BIAN would be to define the interactions between those components, which could be facilitated by internal APIs.
Being part of BIAN, technology companies, such as Infosys, have a key role to play in accelerating the shift to open banking. They are the trusted parties for their clients so it’s their role to help the banks in finding their way in this new era by showing and providing them the best practices based on an industry standard like BIAN. This will enable all to move, in a controlled and proven way, into the desired future direction.
Regulatory push apart, there are strong business compulsions for bringing about standardization and interoperability among APIs en route to open banking. Convinced that a visual is worth more than a thousand words, Rabobank built a 3D model of its organization and IT systems to contrast the complexity of the current spaghetti-like landscape with an improved, layered, and simpler version that it is targeting in the future. From the model it is apparent that migration is imperative, but will be anything but easy; at the same time one can understand the importance of initiatives, like those from BIAN, in helping banks make the transition. Here again, the role of technology vendors who must work jointly with banks to plot a roadmap to the future, and create modularized offerings to help them get there, cannot be overstated.
As banks move to the new paradigm, they would also need to decide whether to maintain the various business capabilities in-house, or simply consume them off the cloud as and when required. For those deciding to go with the latter, the good news is that there are a number of supportive factors in play – the availability of an increasing number of standardized APIs, and cloud solutions from software- and infrastructure – providers envisaged by BIAN.