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Open Banking API: A Bliss to New Era

Open banking refers to the advanced technological advancement of APIs enabling you to share financial data and services with third parties. These third parties offer services, technologies, or a seamless application that uses shared financial data and services. These shared financial data indulge all the transactions and statement records of customers in the bank. However, this data can't be publicly available to everyone as it is fully secured and only shared with the people when they get an explicit request from customers themselves.

In 2020, the global open banking market was valued at $ 13.9 Million, and by 2031, it is estimated to reach $ 123.7 Billion ( expanding at a CAGR of 22.3% from 2022 to 2031).

What Are the Impacts of the Open Banking APIs?

Technology has developed tremendously within many industries, including the financial sector. The financial industry's landscape is sprouting with the modification in consumer behavior and the emergence of regulatory compliance. The advent of open banking API has impacted the banking industry positively.

1. Empower Clients to Welcome Open Banking APIs: When customers interact with financial institutions, it usually involves their savings accounts. Accessing their account's data has become a cakewalk with the open banking APIs, even though all partners can request the account's details to get insights into the budgeting, reporting, and reconciliation. Furthermore, the work pressure of filing the paperwork has been mitigated to a greater extent. The world of digital inquiries has come into play.

2. Developing New Partnerships: The primary challenge of the API for banking is that most financial institutions have been commoditized. As a result, brands may lose precious relationships with their customers. That's why most financial institutions are switching to the more premium-level services offered to the partners in the market. This drastic shift calls for a structured ecosystem along with strategic partnerships. Additionally, financial institutions seek various ways to expand their services in the industry. They'll use these partnerships to expand their services. They also offer loans to assist people in purchasing new vehicles. However, before the advent of PSD2, getting loans was a far cry. But now, loans are readily available after the approval or consent of financial data sharing.

3. Informed & Real-Time Decision Via Open Banking APIs: When you get the API access of multiple vendors using the market analysis, a business can quickly have informed real-time decisions and easily spot the latest or upcoming marketing trends. Furthermore, detecting fraud issues is also possible via APIs and real-time data streams. With APIs integration, a business gets push notifications, and on the contrary, clients can also get notified of fraudulent activities if it's happening. As a result, one can easily take action at the drop of a hat to address any suspicious activity. Doesn't that sound interesting?

How API Management Platforms Curb the Challenges of Open Banking APIs?

With the help of API for banking integration, financial institutions can easily access their products and services to a broad customer base and partners. They use various digital channels embodying chat, voice, web, and mobile. Alongside this, it stimulates automation in the workforce among third-party systems and internal departments. As a result, it brings forth numerous opportunities in the financial institution industry and also aids in expanding the business all over the world. One APIMarketplace (API management platform) for banking let you create a Banking API Ecosystem that is active, lively, and hyper-personalized. Moreover, when financial institutions embark on the journey of the API, they experience various technical challenges.

1. Banking Standards Have a Sound Impact on the API Ecosystem.

There are various regulatory requirements when we expose audited data using APIs. Did you know that API segmentation is one of the one-stop solutions to all your requirements? The auditable operations offered by APIs often get segmented into the API gateway. If financial institutions select the API management layer (APIM) that eventually synchronizes the various occurred configurations helps in combating all the head-on problems.

2. Protecting the Data via Entitlements

All financial institutions need to put additional security on data access, and the best part is that vendors get a plethora of benefits from this API gateway. However, several banks are interested in implementing their data entitlements. Furthermore, if they formulate their entitlements, they must be meticulous and add additional checks in the API gateway.

3. Restrict the Outbound Data to Third-Party APIs

While integrating APIs with third parties, financial institutions should keep their data encrypted by limiting privacy, and they should also limit data exposure. Subsequently, this bring-forth the implementation of the API gateway by protecting all the traffic outbound to the third parties' APIs. The best part is that reverse gateways shun exchanging the sensitive information or tokens of the third-parties APIs with the developers and other communities. Moreover, they can easily detect fraud and decline outbound traffic issues, especially when the data is quite sensitive.

Wrapping Up

Since many financial institutions (FIs) have been reluctant to take action because open banking will ultimately result in competition, regulators have been the primary force behind the expansion of open banking. The primary reason behind the exponential growth and development of APIs is a more significant innovation. Additionally, it enhances the positive customer experience. If you are looking for the best API integration service provider, look no further as you are called away from them. DigitalAPICraft is the best platform for the API ecosystem and management. We help you rejoice the API for banking services in your business seamlessly without any bottlenecks.