What Is Digital Banking?

Online services have become indispensable. More than a convenience, customers around the globe now actually rely on these services. These include online banking services, supported through online portals and mobile apps - anything to effectively allow secure online financial transactions.

Digital banking has been on the rise for a couple of years already. In some geographies, notably the UK and the European mainland, it has been given a boost by government-induced regulation like UK Open Banking and PSD2. Admittedly, these regulations have a limited scope in that they essentially target retail banking (account information and payment services, in particular).

Nevertheless, they clearly help to demonstrate the potential significance of a banking API channel, both in terms of the functional value it may offer as well as the conditions under which it can be offered. Financial data and transactions are highly sensitive, so they and the systems processing them need to be rigorously secured.

The opportunities offered through digital banking clearly surpass regulation. Digital and open banking initiatives have now been launched by banks throughout Asia, the USA, the Middle East and Australia.

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Akana Digital Banking Features

Open Banking

Documentation details for sample API products that have been configured according to the applicable open banking standard: UK Open Banking, PSD2, etc.

Security

Comprehensive implementation of the relevant security profile, including FAPI-required aspects like OAuth2.0 and OpenID Connect, JWS-based message validation, etc.

API Testing

API Sandbox for convenient API testing from a Third Party Provider (e.g. PISP, AISP) perspective. Allows for testing of API functional resources and API security features.

What Is Open Banking?

Open banking is the vision evolved into practice of sharing financial data across digital channels with third parties, subject to data owner consent (typically, the banking customer), paving the way for innovative products and services that are expected to provide an improved customer experience.

Open banking was accelerated significantly through European PSD2 (“Enhanced Payment Service Directive”), which was embraced by the Competition and Markets Authority in the UK as a means to create the more dynamic and competitive financial landscape they were already aiming for. UK Open Banking required the UK’s nine largest banks to allow access to account and payment  data in a secure and standardized form, even ahead of PSD2 coming into effect.

Read more about the Akana Open Banking Solution.

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Akana Digital Banking Portal

The Akana Digital Banking Portal provides a collection of sample APIs to support your digital banking environment

Create an account and review, test, and validate all published APIs for free!

Digital Banking Standards

In general, the development of these standards has been largely driven by data privacy and customer consent concerns on the one hand, and interoperability concerns on the other.

Many banks have now acknowledged the value-add that open banking can offer, taking the drive for open banking beyond regulation. In order to retain their significance in a rapidly changing world where a seamless online customer experience is essential, open banking allows banks to effectively collaborate with FinTech partners to attract new customers or retain present ones.

APIs represent the implementation essence of any open banking initiative, as they provide the means through which an external party can effectively interact with the bank’s systems in a highly secure manner. Consequently, the current open banking standards as well as the ones evolving across the globe provide detailed specifications for such APIs, with an initial focus on functions around account information and payment initiation.

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What Is PSD2?

The revised Payment Services Directive (“PSD2”) requires all payment account providers across the entire European Economic Area to allow third-party access to account and payment data – again, subject to customer consent and rigorous data access security measures.

Akana specifically addresses the requirements of PSD2 with a comprehensive API management platform focusing on interoperability, security, reliability, and scale. Read more about the Akana PSD2 Solution.

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Digital Banking in the US Market

Although no regulations exist in the US like those of Open Banking and PSD2 abroad, the same principles can be leveraged by US banks. Market forces, not regulation, have created an opportunity for API standardization in the US. With increased interoperability, US banks can grow their partner ecosystem, increase their footprint, and deliver a more seamless customer experience.

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What Insurers Can Learn From Open Banking

Read the Gartner Analyst Report to learn what insurance CIOs can implement into their API strategy.

Beyond Digital Banking: Open X

Digital banking initiatives like Open Banking have empowered financial institutions to digitally transform their services, leveraging their capabilities to offer a seamless customer experience and grow their ecosystem of customers and partners.

The principles of Open Banking — security and authentication, growing an ecosystem of customers and partners, and encouraging innovation — can be applied across all industries. Consider the insurance industry, for example, which has already moved towards more openness in data sharing in recent years, leading to more robust product offerings and lower barriers to entry for customer growth. Read more about the Akana Solution for Financial Services.

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