![]() PSD2 puts forth a similar mandate and associated regulations in member countries.īoth initiatives are expected to provide more competitive options for banking and payments in those markets. January also marked the start of the European Union's revised Payment Services Directive (PSD2). To be part of the new open-banking scenario in the U.K., companies need regulatory approvals. ![]() The term "open banking" was coined in the United Kingdom where a new set of regulations took effect in January 2018 that mandate the sharing of customer-authorized account information between different commercial entities to effect payments and other transactions. Open banking takes the process a step beyond simple data exchanges to support account-to-account payments, often in real time. "It's about extending banking to nontraditional places," Ramaswamy said.Ĭollaborative data sharing is pretty widespread already, thanks to APIs, intelligent conduits that banks use to support seamless integrations with third-party digital applications, such as financial management programs for mobile banking. Open banking is the moniker hung on a new service model that makes it possible for customers to authorize nonbanks they do business with to access their bank accounts in support of payments and other financial transactions. Yet initial steps toward this eventuality are occurring already with the emergence of application programming interfaces (APIs), particularly in places like the United Kingdom and the rest of Europe where open banking and related regulatory edicts have become hot-button issues. In an era when technology advancements are discussed in terms of months, not years, 10 to 15 years can seem an eternity. "You have to think in terms of 10 to 15 years from now," added Rod Hometh, Partner at RPY Innovations, the payment company formerly known as RocketPay. Banks first need to start thinking in terms of new partnerships, revenue models and technology investments needed to support these changes, he said. "It will move slowly," said Niranjan Ramaswamy, Vice President, Product Management, Bank Solutions, at banking technology firm Fiserv Inc. Credit and debit cards continue to replace cash and checks as preferred methods of payment, and many experts expect card payments will give way to new and faster ways to pay. We’ve had the advantage of seeing initial efforts play out in the marketplace and have applied the insights gained to our technology to help organizations become compliant, stay compliant and maximize the opportunities ahead.The ways consumers shop and pay for purchases have been in flux for years. “This transformation will extend well beyond the current race to comply. “The costliest mistake financial institutions can make in the move to open banking is to focus only on the immediate fix,” said Lee Cameron, senior vice president, FinKit, Digital Banking, Fiserv. Financial institutions also have the option to utilize FinKit for Open Banking to authenticate TPPs and gain required consumer consent for information sharing. The solution includes access to pre-built PSD2 and Open Banking APIs and facilitates ongoing compliance through API version control, release management and distribution, the company said.įiserv added that the white label developer portal enables financial institutions to engage TPPs. “Sound strategic choices taken while these regulations are in their infancy will allow institutions to manage their resources to ensure compliance today, and to focus on innovation and competitiveness long-term.”Īccording to Fiserv, FinKit for Open Banking is a complete, fully managed service to run, monitor and support the application programming interfaces (APIs) needed to share information with trusted third-party providers (TPPs), while also facilitating business services and enabling developers. “Though PSD2 and Open Banking are chiefly viewed as regulatory requirements, they represent a significant opportunity for banks to partner with trusted third-party providers to integrate financial services into their customers’ everyday lives, while also driving more innovation inside the banks,” said Ken Paterson, vice president, Special Projects, Mercator. Fiserv said FinKit for Open Banking is designed to enable immediate and long-term compliance with these regulations and put in place the capabilities required for banks to maximize the opportunity of open banking.
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