Report

The
Titel Open Banking
Chapter xx
Preface
1

revolution needs
flexible API
00
connectivity
Tekst

2023 / BPC & Payments Cards Mobile

1.1 Heading

Text
Introduction
A revolution in convenience,
choice and security
Already being implemented in many markets
around the world, Open Banking promises to
revolutionise customer choice, convenience and
security over the next decade.
In Europe, this revolution began when the European
Commission (EC) passed its second payment
services directive (PSD2) into law on 1 January 2018.
This directive mandated the region’s banks to make
their customer channels and customer data open to
1
Polaris Market Research, September 2022, “Global Open Banking Market”:
https://www.polarismarketresearch.com/industry-analysis/open-banking-market
access by competitors, and followed a similar move
by the UK’s Competition and Markets Authority
(CMA) a year earlier designed to introduce more
competition to that country’s banking market.
Polaris Market Research estimate1 that the Open
Banking services market was worth $16.14 billion at
the end of 2022, and project year-on-year growth
of 26.8% out to 2030 to reach $1.34 trillion by the
end of the decade.
Introduction
3
A revolution in convenience, choice and security

Open Banking services to hit $1.34 trillion

world-wide by 2030

16.14

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Polaris Market Research North America Europe Asia Pacific Latin America Middle East & Africa

“In the UK, there were 21 million Open
Banking payments per month last year,
growing at 10% each month.”
Open Banking is already having a dramatic effect
on consumer finance, with services such as instant
payments, credit scoring, refunds and subscription
payments being implemented from China to
Norway. The UK’s Open Banking Implementation
Entity (OBIE) report that adoption of Open Banking
2
services doubled in that country between 2021 and
2022, and that more than 11% of British consumers
now use at least one Open Banking service, with
Open Banking payments – to take one example –
rising at around 10% every month.
Open APIs: making Open Banking
work
Central to success in Open Banking is the concept
of open application programming interfaces, or
Open APIs. As they relate to banking and payments,
Open APIs are sets of software code made
available to third-party providers (TPPs) to facilitate
interaction between a bank, its customer and the
third party. In this scenario, the bank functions as
an enabler or platform for its customers to engage
with third parties that have been security-vetted
and are therefore trusted by the bank. In Europe,
designation as a TPP is a status which must be
applied for and approved by a national “competent

2
OBIE, “Open Banking Impact Report”, June 2022: https://www.openbanking.org.uk/
insights/open-banking-impact-report-may-2022-key-insights-on-adoption-and-business-use/
Introduction
A revolution in convenience, choice and security
authority”, typically a regulator such as the autorité
des marchés financiers (AMF) in France. Once
approved, TPPs are licensed to engage with banks
and develop services such as:
Charities & societies: organisations that collect
monthly donations or membership fees are
now able to use open banking to collect these
fees directly from accounts. New Open Banking
products planned for 2023, such as variable
recurring payments, will also offer consumers
more choice in how and when they pay their
subscriptions.
Merchants are now able to receive funds in a
matter of seconds to their IBAN following consumer
4
payments, improving valuable day to day cash-flow,
compared to traditional card-based transactions in
which funds are available only after the clearing and
settlement process.
Gaming companies can make faster, less
expensive player payouts by using the gamer’s
IBAN to deliver payments direct to their account
using faster/instant Open Banking payments.
Acquirers no longer need to bulk pay merchants
using SEPA or e-banking batch files, but can
make the payments rapidly and at lower cost via
open APIs. In this scenario, acquirers debit their
master account for each merchant and credit the
merchant’s own account.
Europe
Leading the world
A recent study from Mastercard3 rated Europe
the world’s best-performing region when it
comes to Open Banking – not just because of its
ground-breaking regulatory stance in PSD2, but
also thanks to initiatives like the SEPA (Single
European Payments Area) SPAA, a set of rules
designed to drive open payments into European
banking, unlocking and creating value for banks,
their customers and intermediaries such as
fintechs and other financial services firms.
These innovations have been supported by robust
digital identity platforms across the region such as
Norway’s BankID, which provides citizens of that
3
Mastercard, January 2021, “Open Banking Readiness Index 2021”:
https://b2b.mastercard.com/reports/open-banking-readiness-index-2021/
country with access to everything from healthcare
information and welfare payments through to
a means of securing e-commerce. As covered
above, the UK has been a leader in Open Banking
implementation, and looks set to further that
reputation with the introduction of variable recurring
payments (VRP) in 2023.
But Open Banking is more than a European
phenomenon. Around the world, countries
are learning from European Open Banking
implementations and creating advanced Open
Banking platforms.
Europe
Leading the world
The United States
The finance industry has taken the lead in
developing open banking in the U.S. Having started
with legacy connections, Open Banking platforms
have signed bi-lateral agreements with U.S. banks,
wealth, payroll and core technology providers to
open APIs and establish connections for consumer
consent based on agreed to standards set by
bodies like the Financial Data Exchange (FDX),
a nonprofit group seeking to unite the industry
around a common technology standard, the FDX
API, to secure data access.
Brazil
Brazil has seen extraordinary progress since
launching its Open Banking legislation in 2021.
The country is in the process of implementing a
four-stage plan, including information sharing by
financial institutions (first phase); consumer data
sharing with Third Party Providers (second phase),
access to financial products from a single platform
(third phase) and finally the roll-out of Open
Banking into new product areas such as foreign
exchange, investments, insurance and pensions.
So far, significant implementations have included a
partnership between WhatsApp and card operator
Cielo to enable in-app P2P payments and instant
B2B payments from PIX.
6
Asia: China, Hong Kong and Australia
China’s success in Open Banking has been built
on the back of enormous growth in P2P money
transfers led by WeChat and AliPay. This effectively
created platforms on which these companies
were able to add further financial services such
as microlending and credit facilities, which in turn
forced China’s regulator to move in and restructure
the relationship between fintechs and banks by
introducing open APIs to enable direct payments.
WeChatPay became so successful that the
company launched its own bank which now serves
more than 200 million customers.
Singapore and Hong Kong’s regulators have
created their own Open Banking platforms which
include monitoring of open API implementations by
banks in those markets, while Australia has learned
from the UK’s example, setting out an ambitious
program for its transition to Open Banking.
A technology revolution breeds change
What’s driving Open Banking –
and who’s involved?
Developments in computing power and
communications technology are driving a fourth
industrial revolution that’s changing every aspect
of our lives – and payments and banking are at
the very heart of this change. Smart phones with
several times more computing power than was
used to send man to the moon fifty years ago
now enable to shop, bank and be entertained
– alongside many other functions – all from a
hand-held device.
As the digital revolution takes hold, consumers
have come to expect the same convenience and
speed they experience in other areas from their
banking and payments. That expectation has led,
in turn to the development of early Open Banking
services such as instant and faster payments. In
Sweden, more than nine in ten Swedes4 now use
the Swish instant payment app for peer-to-peer
and retail payments, with new functions such as
bank transfers and bill-splitting being introduced
to further enhance the app’s utility, all driven by a
coherent open API framework between Sweden’s
banks and the Riksbank, Sweden’s Central Bank.
“Developments in computing power and
telecommunications are driving a fourth
industrial revolution – and banking is at
its heart.”

Swish: instant payments dominate in Sweden

95%
~coverage
ages 15-65
160k
Amount

80k

0k
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85

RIKSBANK/SWISH Age Switch users Inhabitants

Great as this success may be, it pales in comparison everything from credit cards to insurance and
with what WeChat and AliPay have achieved in micro-lending, all from one platform. The potential
China, aided by government-mandated digital ID digital technologies hold to offer banking services
for all citizens. These so-called “super-apps” offer of all kinds 24/7/365.

4
Swish, 16 June 2022: “Historical milestone for Swish” : https://www.swish.nu/nyhetsrum/
nyheter/historical-milestone-for-swish-now-more-than-8-million-users?lang=en
A technology revolution breeds change
What’s driving Open Banking – and who’s involved?
Collaboration – and regulation
“The intense creativity seen in Open
Banking has generated complexity and
risk, and regulators have moved to help
manage growth.”
More than a decade ago, telecommunications
firms recognised the transformative power
of technologies such as WiFi and mobile
communications. As early as 2008, the first peer-
to-peer (P2P) payment systems were launched in
Europe and North America, initially by telecoms
companies but with the increasing participation
of banks and a new category of company – the
financial technology company, or “fintech”.
Since then, the fintech sector has rocketed
in importance, providing services either in
collaboration with banks, telecommunications or
technology companies, or in their own right. Plaid, a
US Open Banking integrator that provides services
in payments and verification technologies, offers
its services in collaboration with banks, insurance
companies and in other sectors such as real estate.
Open Banking has vast potential for collaboration
8
between companies from a wide range of sectors,
whether that’s a utility company offering insurance
services, or a bank offering a loyalty scheme.
However, such intense creativity generates
complexity and risk. Responding to this increased
risk – which has seen fraud attempts in the digital
channel rise by more than 300% over the last ten
years – regulators have introduced frameworks
like PSD2 in Europe to define and manage growth
in Open Banking. As one example, the EU’s PSD2
mandates that any transactions over €50 must
be supported by additional authentication from
consumers in a process known as Strong Customer
Authentication (SCA). While this regulation has
led to complaints of additional friction and slower
transactions from consumers and merchants alike,
it has proven effective in helping to reduce fraud.
Looking ahead, we can expect banks to develop
existing open API infrastructures to enable faster,
better consumer verification technologies based
on digital “passports” held by the banks or third
parties. These techniques will speed up user ID and
verification, leading to faster, easier onboarding,
transactions and better access to other services.
Not all open APIs are equal
Although Open APIs are vital to success in
Open Banking, their adoption has been variable
between different markets – and between banks
within those markets.
Some markets, such as Poland, the UK (and Ireland,
following the UK standard), or Germany via the
Berlin Group, have adopted interbank standard
Open API sets like NextGenPSD2 from the Berlin
Group. In other markets such as Portugal and Italy,
no common standard prevails and banks are writing
“one to one” API integrations that can be used only
by those involved in a specific product or service.
To overcome this problem and deliver Open
Banking’s benefits to users, Central Banks, fintechs
and financial institutions need to be able to cope
with variations in API templates.
Solving the problem – Open Banking
in action
There are two main models that can be used to
solve this problem.
“Many to Many” networks. The first option is to
build a “many to many” network of modern and
safe APIs between banks and TPPs, including
other financial institutions, telecommunications and
utilities companies and retailers. In this scenario,
banks provide services to customers through
open APIs that are shared with other banks and
TPPs. These open APIs are used to create a
range of digital services such as balance inquiries,
money transfers, and bill payments from within
the applications they use. By allowing third-party
providers to build applications on top of their
banking infrastructure, banks can extend their reach
beyond traditional brick-and-mortar branches and
offer more convenient tailored services to their
customers and those of their third-party partners.
A “many to one”, or “National Switch” network.
This is the model being developed in Denmark,
the UK and other countries with central payments
platforms. In this scenario, Central Banks create
a platform and a single set of centralised open
APIs for use by all parties that can be adapted
for specific use cases. Such centralised networks
enable customers of all the banks and third parties
in that market to send funds to each other in real
time, 24/7 and with very low risk. By extension, this
enables Open Banking services such as account
to account payments (A2A) for consumers and
businesses, as well as Variable Recurring Payments,
Request to Pay and more. In this scenario, service
integrations are made relatively simple by adhering
to a common set of APIs that can be adapted for
specific use cases.
Banks lead on “Many to Many” networks.
Around the world, banks are embracing
Open Banking and launching their own
platforms. Spanish multinational bank
BBVA’s Open Platform allows third-party
developers to build financial applications
using BBVA’s banking infrastructure and
data. In the UK, Barclays has launched its
own API platform, Barclays Open Banking.
This platform allows third-party developers
to build applications using Barclays’ banking
infrastructure and data. Meanwhile, in the
Middle East, Emirates NBD has implemented
open banking APIs that allow third-party
developers to build applications for
integration with its banking platform.
Building Open Banking with BPC
BPC’s SmartVista system and other solutions are
tailored to manage complexity and deliver Open
Banking services in both the “many to many” and
“many to one” scenarios outlined above.
In the Philippines, BPC has
delivered the country’s first
virtual bank, including cloud-
enabled infrastructure. Tonik Financial received its
banking license in 2020, the first bank in South-
East Asia to be licensed for operations on a purely
digital platform. The virtual bank launched publicly
in March 2021 in the Philippines, with support and
R&D functions based in Singapore and India and
payment functions hosted by BPC. It provides retail
financial products including deposits, loans, current
accounts, payments, and cards on a highly secure
digital banking platform, all available to customers
from their mobile phone.
“Supported by BPC, Tonik Bank is
building a greenfield bank in months -
offering the key services that customers
expect from a modern digital bank.”
With a population of 100 million, of whom 70%
are unbanked, the Philippines was a greenfield
opportunity for Tonik, but the bank needed to scale
up its services rapidly to be successful. Accordingly,
they decided to build their user interface layer in-
house while plugging in specialist capabilities from
the best providers available.
After a thorough market review, Tonik selected BPC
as its exclusive payment partner, leveraging BPC’s
payments processing centre and its SmartVista
solution. BPC services are delivered through a
software as a service (SaaS) model and include
payment switching, fraud management and card
lifecycle management powered by SmartVista’s
digital banking platform. This enables Tonik to
efficiently route transactions and provide a secure
environment for its customers while gaining in
speed to market and performance. Tonik chose
BPC for its 25 years’ experience in handling large
payment volumes across more than 100 countries,
as well as the efficiency of its service integration
processes.
Specifically, Tonik opted to outsource its payment
processing requirement to BPC and used BPC’s API
infrastructures to enable user onboarding and the
instant availability of an e-card linked to the user
account to enable users to get started right away.
With payments taken care of by a team of BPC
experts, the bank can now focus is on delivering
simplified services to the customer and innovation
through the use of smart technology. Supported
by BPC, Tonik Bank is focusing on building a
greenfield bank in a matter of months - offering the
key services that customers expect from a modern
digital bank.
Established in 2011,
Ethswitch S.C. is a
national switch fully
owned by all banks in Ethiopia. It was established
to provide simple and efficient e-payment
infrastructure services to retail payment service
providers, and through them, to end users among
Ethiopia’s 112 million population. EthSwitch was
established as an alliance among all the banks
in Ethiopia, supported by the Ethiopian Bankers’
Association and the National Bank of Ethiopia.
Ethswitch wanted to unify the payment system
Building Open Banking with BPC
and consolidate all of Ethiopia’s banks into the
system. These banks operated in part through
international payment processors and thus incurred
large transaction fees. The sole existing TPP
hosted payment processing for just six banks, and
the central bank wanted to centralise control of
bank payments to provide flexibility to end users.
Ethswitch also wanted to maintain the ability to
issue and acquire internationally-branded cards and
create a new instant payments facility alongside an
interbank transfer option.
“EthSwitch experienced a 47% increase
in the number of interbank transactions
with SmartVista instant payments.”
BPC introduced SmartVista to provide the
functionality EthSwitch needed and delivered
11
interoperability and a unified payment system for
Ethiopia. This helped retail and commercial banks
to access ATM cash withdrawals, bill payments,
mobile-top ups, and POS acquiring throughout the
country, as well as offering banks the ability to issue
and acquire local and international cards without
recourse to international payment processors.
Over an 18-month period, solutions introduced by
BPC included switching, card personalisation and
production, alongside an interface to the central
bank for settlement, clearing and acquiring. BPC
also launched an interoperable platform shared
between banks to enable the introduction of new
payment functionalities, including account-to-
account transfers.
Summary
Open Banking is lowering the cost of banking for
consumers around the world, introducing innovative
services that are faster, easier to use and more
secure. New services, such as bank-generated
merchant payouts that don’t rely on an external
cash management provider, consumer refunds and
personal financial management tools are all being
enabled by Open Banking.
Yet if Open Banking is to realise its promise, existing
and future Open API sets need to be managed by
platforms that can cope with variability and interface
with international systems while delivering the
payments and banking services today’s users are
looking for, from instant payments and instalments
through to variable recurring payments (VRP) and
request-to-pay solutions.
For a discussion about how your institution
can benefit from open APIs that are better
managed to deliver in the Open Banking era,
please get in touch:
info@bcpbt.com
https://www.bpcbt.com/contact
About the authors
13

About the Report

The Open Banking revolution needs flexible API connectivity report

has been developed in collaboration by BPC and PCM. We ramain
at your disposal for any futher information and to guide you in the
wonderful world of Open Banking.

About BPC

Founded in 1996, BPC has transformed over the years to deliver

innovative and relevant solutions which fit today’s consumer lifestyle
Naam - Functie Naam - Functie
when banking, shopping, or moving in both urban and rural areas,
bridging real life and the digital world. With 350 customers across
Jeroen is the Founder and Director of Fincog. Jeroen can build Jeroen is the Founder and Director of Fincog. Jeroen can build
100+ countries
upon vast globally,
international BPC
banking andcollaborates with Prior
fintech experience. all ecosystem players
upon vast international banking and fintech experience. Prior
from tier-oneFincog,
to establishing banksJeroen
to neobanks,
worked as payment
a corporateservice
strategy providers to
(PSPs)
establishing Fincog, Jeroen worked as a corporate strategy
advisor at De Volksbank, retail banking & payments senior analyst
to large processors, eCommerce giants to start-up merchants,advisor
and at De Volksbank, retail banking & payments senior
at The Boston Consulting Group (BCG), senior consultant at PWC analyst at The Boston Consulting Group (BCG), senior consultant
government bodies to local hail riding companies. BPC’s SmartVista
and payments consultant at Innopay. Jeroen has strong domain at PWC and payments consultant at Innopay. Jeroen has strong
suite comprises
expertise cutting-edge
and is a thought-leader onbanking, commerce,
the future of banking andand mobility
domain expertise and is a thought-leader on the future of
neo banks. email@fincog.nl
solutions including digital banking and neo banks. email@fincog.nl
banking, ATM & switching, payments
processing, card and fraud management, financial inclusion, merchant
portals, transport, and smart cities solutions.

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About PCM

Naam
In - Functie
business Naam
since 1994, Payments Cards & Mobile is an established - Functie
hub for global payments news, research and consulting. We work
Jeroen is the Founder
with recognized and Director
industry of Fincog.
experts Jeroen impartial,
to provide can build Jeroen
up-to-date andis the Founder and Director of Fincog. Jeroen can build
upon vast international banking and fintech experience. Prior upon vast international banking and fintech experience. Prior
relevant information and analysis on every area of payments.
to establishing Fincog, Jeroen worked as a corporate strategy to establishing Fincog, Jeroen worked as a corporate strategy
advisor at De Volksbank, retail banking & payments senior analyst advisor at De Volksbank, retail banking & payments senior
Personal relationships
at The Boston have(BCG),
Consulting Group beensenior
the hallmark
consultant of our business.
at PWC We at The Boston Consulting Group (BCG), senior consultant
analyst
and payments consultant at Innopay. Jeroen has strong domain at PWC and payments consultant at Innopay. Jeroen has strong
remain committed to working closely with our many long-standing
expertise and is a thought-leader on the future of banking and domain expertise and is a thought-leader on the future of
customers and welcome new customers in producing quality banking
neo banks. email@fincog.nl businessand neo banks. email@fincog.nl
intelligence and providing a variety of ways in which you can consume
this information. Our aim is to provide you with the highest quality
data so you can position your business and key personalities in this
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Additional contributors include: Angelo Bertini, Ilyas Berrajaa, Daniel Paltrinieri, Newraj Burton, Wilfred Waiganjo,
Oleg Patsiansky and Nadia Benaissa
https://www.paymentscardsandmobile.com/
About the authors
Naam - Functie
Jeroen is the Founder and Director of Fincog. Jeroen can build
upon vast international banking and fintech experience. Prior
to establishing Fincog, Jeroen worked as a corporate strategy
advisor at De Volksbank, retail banking & payments senior analyst
at The Boston Consulting Group (BCG), senior consultant at PWC
and payments consultant at Innopay. Jeroen has strong domain
expertise and is a thought-leader on the future of banking and
neo banks. email@fincog.nl
Naam - Functie
Jeroen is the Founder and Director of Fincog. Jeroen can build
upon vast international banking and fintech experience. Prior
to establishing Fincog, Jeroen worked as a corporate strategy
advisor at De Volksbank, retail banking & payments senior analyst
at The Boston Consulting Group (BCG), senior consultant at PWC
and payments consultant at Innopay. Jeroen has strong domain
expertise and is a thought-leader on the future of banking and
neo banks. email@fincog.nl
Want to find out more?
Request a free discovery workshop from BPC
and one of our experts will be in touch to book
your 1-2-1 workshop.
Additional contributors include: Angelo Bertini, Ilyas Berrajaa, Daniel Paltrinieri, Newraj Burton, Wilfred Waiganjo,
Oleg Patsiansky and Nadia Benaissa
bpcbt.com | info@bpcbt.com
14
Naam - Functie
Jeroen is the Founder and Director of Fincog. Jeroen can build
upon vast international banking and fintech experience. Prior
to establishing Fincog, Jeroen worked as a corporate strategy
advisor at De Volksbank, retail banking & payments senior
analyst at The Boston Consulting Group (BCG), senior consultant
at PWC and payments consultant at Innopay. Jeroen has strong
domain expertise and is a thought-leader on the future of
banking and neo banks. email@fincog.nl
Naam - Functie
Jeroen is the Founder and Director of Fincog. Jeroen can build
upon vast international banking and fintech experience. Prior
to establishing Fincog, Jeroen worked as a corporate strategy
advisor at De Volksbank, retail banking & payments senior
analyst at The Boston Consulting Group (BCG), senior consultant
at PWC and payments consultant at Innopay. Jeroen has strong
domain expertise and is a thought-leader on the future of
banking and neo banks. email@fincog.nl