Open Banking - Not Just for Europe!

Posted by Andrew Price on Thu, Nov 22, 2018

Over the last few years Europe has seen a strong push towards open banking, with PSD2 (Revised Payments Services Directive) and UK directives including CMA Open Banking becoming prevalent.  The Hong Kong HKMA is being rolled out over the next 18 months, and the Australian Treasury Open Banking initiative was recently announced, with a roll out commencing July 2019. Other countries around the world, including Japan and Malaysia in APJ, the US and Canada, and Brazil and Mexico are also looking into how to implement open banking, and we expect to hear a lot more in this space over the coming months.

Industry analysts believe that open banking represents a seismic industry migration that will become clear over the coming years.  So what is open banking, what are its benefits, and why does it matter to NonStop users and applications?

Open banking is, quite simply, a system that provides users with a network of financial institutions’ data, where that data is provided via application programming interfaces, or APIs.  These APIs will allow banking data to be available in real-time, giving consumers a choice of ways to conduct transactions, and to save and invest their money.

Regulators are a large part of the force behind the drive to open banking, and see it as having three main benefits:

  • Increase competition and reduce costs: consumers will be able to compare products more easily, ideally resulting in reduced fees through additional competition
  • Encourage innovation: innovation potentially creates a competitive advantage for a given market, resulting in that market’s growth
  • Address consumer rights: customers own the data that their financial institution possesses, and have the right to share it with other third party providers

For banks and financial institutions, there are a couple of key benefits:

  • Extend financial services: Open banking allows financial institutions to expand their product offerings and include more services within their portfolio
  • Meet customer needs: As customers demand more of their bank, open banking provides an opportunity to offer more services, and keep customers satisfied

 As an example, a bank that runs a payment application on the NonStop server and an internet banking application on another platform, may use open banking concepts to quickly integrate these two platforms.  This could allow internet banking users new access to payment functions only available through the NonStop application. The reverse could also be true, with the payment application now able to access new transactions via the internet banking application.  

Like all new concepts and new technologies, there are also some risks to open banking.  Primary among these, at least for banks and FIs, is the potential for significant costs and project overruns in adopting new solutions to create APIs.

The HPE NonStop Server has always occupied a key position in large banks and financial institutions around the world, processing massive amounts of transactions, both in terms of number, and value.  As open banking gains popularity, NonStop users need to look at their core NonStop applications to determine how they might evolve into an API-centric world. Of course, new solutions could (and may) potentially be deployed to support entirely new transactions and APIs, but in many cases, existing transactions and capabilities can likely be API-enabled.  This will often be a less risky, and less costly approach for many users.

The LightWave product set from NuWave allows NonStop applications to be quickly and easily REST API-enabled, using standard technologies such as HTTP and JSON.  These new REST services can be immediately integrated into open banking environments, either directly from the NonStop, or via intermediate technologies like API Gateways (see our earlier API Gateway blog here).

LightWave Server works with existing NonStop applications to allow those applications to provide their transactions as REST services.  LightWave Server can be quickly implemented, and requires no changes to the NonStop application. REST services can be created from entire existing transactions, or those transaction may be broken up into microservices, as required by the open banking environment.

LightWave Client allows NonStop application to access remote REST Services.  In an open banking environment, these services might be exposed via local or partner APIs, allowing for new transactional capabilities to be quickly incorporated into the NonStop application environment.

Extending on the example earlier - a NonStop customer running a payment application like BASE24 could use both LightWave Server and LightWave Client to “open banking enable” that application.  LightWave Server would expose the BASE24 transactions as secure REST services, making them ready for open banking. LightWave Client would allow BASE24 to integrate with, and consume data from, open banking services.

Open banking presents some compelling opportunities for NonStop users. Banks and financial institutions that utilize the NonStop as a core part of their transactional environment should understand the impacts of open banking on their NonStop applications.  API-enabling NonStop applications will allow them to be part of the open banking ecosystem, ensuring those applications remain strategically placed within the enterprise architecture. This approach can also provide additional value to end customers.