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Open Banking Concepts |
Learn the core concepts of Open Banking |
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Open banking is a concept that enables banks, customers, and third parties to use and benefit more from the vast silos of data held by banks on their customers. Fundamentally, open banking allows bank customers to share their financial data with third parties with their consent. In technical terms, this is done via secure APIs that allow the customers or authorised API consumer applications to access data held by the bank.
An open banking accelerator provides the base technology for financial institutions to meet open banking compliance. It accelerates open banking adoption by providing the required technology stack to cater to open banking requirements so that you don't have to build a solution from scratch. This can accelerate your pathway of reaching defined goals in open banking compliance, technology, and business goals.
WSO2 Open Banking Accelerator is a collection of technologies that increases the speed and reduces the complexity of adopting open banking compliance. Instead of building a solution from scratch, you can use WSO2 Open Banking Accelerator to meet all legislative requirements with additional benefits beyond compliance.
The WSO2 Open Banking Accelerator runs on top of WSO2 Identity Server and WSO2 API Manager.
Use the accelerator capabilities and customize them according to your open banking requirements. You can easily implement a toolkit to customize the accelerator and help you comply with any regional open banking standard including PSD2, Open Banking Standard UK, Berlin Group's NextGenPSD2, Australia's Consumer Data Standard.
For more information, see WSO2 Open Banking Accelerator Documentation.
Following are the categories of stakeholders that actively participate in an open banking ecosystem:
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Customer - The owner of a bank account who can grant access to the API consumer applications to retrieve account information or initiate payments on their behalf. With open banking in the picture, the owner can use a single application to manage the accounts and initiate a payment on behalf of them. The customers have more control over their data as they can manage and revoke the API consumer applications’ access to the financial information.
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API consumer application - An authorized third-party financial service provider that uses standard APIs to access customer’s accounts. API consumer applications play several roles such as retrieving account information, initiating payments on behalf of the customers, and checking available funds.
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Financial institution - An entity such as a bank that provides and maintains a payment account for a customer. With customer consent, they share account and transaction data via API endpoints and let API consumer applications make payments on behalf of the customer.
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Merchant - A vendor who accepts online payments in exchange for their products or services. A merchant can use a single API consumer application to accept payments easily from multiple banks. Unless the customer wants to make a payment from their bank account, the role of a merchant is not available in all open banking use cases.
There are other stakeholders such as the government, technology providers, and consultancy service providers that are involved in open banking.
API consumer (TPP or Data Recipient) onboarding is the process of verifying an API consumer when they register with a bank to provide services to customers. It is important since the API consumer has access to the customer's financial information via their applications. The accelerator provides dynamic client registration for API consumers.
Consent management is the process of prompting, collecting, and managing bank customer’s consent before an API consumer collects or shares the customer's financial information. The accelerator includes a fully-featured consent management module that:
- securely exposes consent data through an API
- provides in-built consent management user interfaces for customers and bank staff
- manages the entire consent life cycle
Consumer authentication is an authentication mechanism with a layered defence. When a user initiates a payment or accesses information via an API consumer application, it authenticates the user using the following factors one at a time:
- Knowledge : something the user knows. For example: password
- Possession : something the user owns. For example: ATM cards
- Inherence : something the user is. For example: fingerprint
WSO2 Open Banking Accelerator offers a customizable Developer Portal that enables application developers to publish, republish, subscribe, and test APIs.
Use the integration capabilities of WSO2 Micro Integrator to help banks connect their core banking systems and overcome the challenges of legacy technology. With the help of the Micro Integrator, WSO2 Open Banking can support:
- different message protocols (HTTP/TCP), message types (REST/SOAP), and formats (ISO 8583, ISO 20022).
- mediation between a legacy or digital core and other banking systems, and the bank’s library of open banking APIs.
The accelerator mediates between the bank’s systems and modern analytics systems. Analytics allows banks to monitor user patterns and behaviours and to identify fraudulent activities. Furthermore, you can generate reports according to your regulation requirements.
API consumers invoke APIs to access customer’s financial information. Therefore, API security plays a vital role in open banking to mitigate data theft. There is built-in support for global industry-standards such as OpenID Connect Financial Grade API (FAPI), OAuth 2.0, Electronic Identification and Trust Services (eIDAS).
Provides an enhanced user experience for the banks, API consumers, and customers with self-explanatory and simple actions.
Using the capabilities in WSO2 API Manager, WSO2 Open Banking Accelerator allows:
- banks to publish highly-performant custom APIs for API consumers.
- banks to expose their performance and compliance data by integrating into analytics engines.
- banks to plug in any billing engines with subscription-based freemium, tiered pricing, or per-request pricing.
WSO2 API Manager offers standard API management capabilities, and you can customize the API templates according to your open banking and other requirements.