Co-author: Amit Shukla
The banking landscape is being redefined by the open banking revolution. It has opened numerous opportunities for banks, financial institutions, and regulated third parties to offer connected banking experiences to the consumer and augment their revenue streams. In the UK, open banking has on boarded approximately 300 service providers. More than two million UK consumers are enjoying the benefits of open banking. ‘As per the report published by Allied Market Research, the global open banking market is expected to reach $43.15 billion by 2026, growing at a CAGR of 24.4% from 2019 to 2026’. Banks and FIs around the globe are enthusiastic about open banking and have strategic plans to enhance their existing services portfolio. Banks and FIs want to integrate banking into customer lifecycle by exploiting open banking opportunities. However, a big obstacle in capitalizing the potential benefits of open banking is the complexity caused by APIs as per diverse standards. There is no strictly defined global standard for open banking APIs.
In an open banking regulated economy, APIs are less diverse as they are standardized by the regulator. ‘In the UK, there is an OBIE standard for APIs, and in Europe we have local standards like STET and the Berlin Group’. In a non-open banking regulated market, APIs are widely diverse as every bank’s APIs are disparate. APIs from different banks differ in terms of the number of fields, kind of fields, mandatory fields, and size, validations, etc. This adversely impacts the time, cost, and resources needed for building downstream solutions.
Lack of single established API leads to implementation challenges and thwart the very core objective of open banking.
Having a single standard API to perform a specific banking function will be the key in taking the innovation further and will help in harnessing the true power of open banking.
To address this gap and to help banks and FIs in offering smart banking experiences to the customer, the HCL API hub has been created.
HCL API hub provides an online platform for consumers (banks, third party systems, etc.) to connect with multiple banks or corporate ERP systems through a single, consistent API per function. The APIs typically represent banking functions e.g. fetch balance from accounts, invoke payment against invoice, etc. HCL API hub takes away the burden from banks to integrate with multiple flavors of API exposed by different banks.
Figure 1: The API Hub Construct and possible Use Cases
The HCL API hub empowers banks with a single established API to get access to the customer data held across multiple banks and ERP systems in a fast and secure manner. It aggregates data across diverse APIs exposed by multiple banks.
As a proof-of-concept (POC), the API hub has integrated with six banks around the world including those in both regulated and non-regulated (for open banking) geographies. The POC concerned APIs are used to aggregate account balances and initiate payments in real-time. Banks can consume this single API and can build use cases on top of this to deepen their customer engagement – for example, by offering a 360-degree view to the customer. The API hub has also integrated and standardized APIs that fetch invoice details from ERP systems such as Quickbooks and Xero.
While designing the APIs, utmost attention has been given to the security aspect so that the confidential data is not exposed to non-intended recipients. It uses a secure connection with the bank’s data center using dedicated network tunnels. ‘Security first’ aspect in API design allows data at rest and data in motion to be encrypted, leveraging cloud-native key management services.
Figure 2: The API Hub Features
The API hub can be easily deployed and modified to cater to the tailored needs of the bank. Deployment is supported without downtime. APIs are available 24/7 so that banks can support customers at all times. The API hub supports elastic scalability; it adopts auto-scaling deployment patterns to cater to instant load. Banks can save on hardware cost as it auto-scales down when the load is low and can save development cost as it adopts CI/CD best practices in the cloud. APIs are well defined and documented which enables developers to build holistic digital experiences in no time.
Pre-built use cases in the HCL API hub:
- The API hub POC has been successfully executed for a cash concentration use case, where the corporate customer can fetch the funds from accounts held across multiple banks in real-time and can transfer funds within these accounts via API rails.
- The API hub integration with ERP systems such as Xero and QuickBooks empower banks to offer their corporate customers a truly integrated view of cash and liquidity, including business payables and receivables. A corporate treasury management system held by the bank can consume the standardized APIs published by the API hub to ingest data from these ERP systems.
Access to a single and consistent API across multiple institutions helps banks to reap the full potential of open banking by providing speed to market, removing friction, and reducing implementation costs. Banks can deliver innovative banking experiences like cash concentration on API rails, 360-degree holistic financial view, extend access to credit with people having thin credit files, and many more experiences to the customer in a much faster and cheaper way. Banks can leverage the API Hub solution and act themselves as AISP/ PISP providers without breaking their budget. HCL API hub pre-integration with banks and ERP systems enable banks to offer their corporate customers an integrated view which in turn will help in improved customer experiences, customer retention, loyalty, satisfaction, and an increase in revenues.
The HCL API hub can facilitate banks to leverage open banking, enhance service portfolio, deepen customer engagement, and create new revenue streams. The bank can plug and play to offer their customers a unified view of their financial journey across multiple banks.