Why connecting to open banking APIs is not as simple as it seems

Connecting to an open banking API appears to be quite simple. Everything should go well once you've established a link, right? Well, it isn't quite that straightforward. Making the link is only the first stage in a lengthy procedure. You'll also want to keep the connections up to date and make sure they're working properly.

QUICK SUMMARY (TL;DR)

• Services that use open banking connections can securely access financial data from banks (with customer consent).
• Connecting to open banking APIs is simply the beginning of a lengthy journey.
• Maintaining high-quality connections necessitates a lot of effort and money.
• When considering whether to establish relationships in-house or partner with a vendor, businesses should consider these difficulties.

You have a wonderful concept for using banking data to allow consumers to measure their carbon impact or manage their money, and you want to get started with open banking. As a result, deciding whether to engage in creating connections in-house or working with an open banking provider is critical.

But first and foremost, what exactly do we mean when we say "open financial connectivity?" Third-party providers (TPPs) can connect to a bank or financial institution via an open banking API because of this connectivity. Simply put, it entails establishing connections with banks to gain secure access to financial data — with the customer's permission, of course.

While the idea is to make connections, this is only one step in the process. There are further difficulties in establishing communication across numerous institutions and nations. Let's have a look at a few examples.

Testing and requirements for open banking

Banking institutions must provide TPPs access to collect account data and start payments under PSD2. Banks, on the other hand, are not obligated to follow rigorous criteria in this regard.

As a result, three major API standards have emerged in Europe: the STET PSD2 API framework, the UK Open Banking Standard, and the Berlin Group's NextGenPSD2 XS2A Framework Standard. For each location, each API standard has its own set of standards or requirements.

Not only that, but they differ from one bank to the next. Payment channels, fields, and identification verification, for example, are all different. This means that all data must be standardized before it can be aggregated and integrated with existing solutions, or new solutions must be developed.

After the connections have been formed, it's time to test them to make sure they're secure and functional. This entails using genuine credentials to test the connections, as well as opening accounts with every bank in the market and providing feedback on the end-user experience.

Monitoring connections – daily upkeep and the future

Now that the connections have been verified and everything is operational, there's nothing else to do but wait for the data to arrive, right?

No, not at all.

It's critical to ensure that the connections are operational daily. All connections must be regularly checked for downtime, upgrades, and enhancements. To keep on top of forthcoming changes, it's also critical to have an open discussion with banks and financial institutions.

It's not easy to keep a solution functioning while undergoing rigorous testing and keeping regular routines. This is a crucial part of establishing internal connections that are sometimes disregarded.

The benefits of collaborating

Building API connections is significantly more complicated than developing APIs alone, especially if the goal is to link with multiple banks and markets.

There is a significant and continual burden that necessitates significant time, technology, and personnel investments. Most organizations cannot afford to do so, which is why many choose to collaborate with a supplier who manages the connections and has committed personnel to test, monitor, and upgrade them regularly. This allows them to devote more attention to their primary business and clients.

You'll need a reliable partner to ensure you have adequate open banking connectivity. And collaborating with open banking platforms like Tink entails more than just having strong contacts. It also means having individuals who are up to date on the newest advancements in the ever-changing world of open banking, from research analysts to coders. They're there to take care of the heavy work so that businesses may focus on their customers.

Want to know more about the complexities of open banking connectivity and get a deeper understanding of how Tink is tackling some of the technical challenges? Check out our open banking connectivity guide for more details.