Understanding Open Banking Ecosystems

Open Banking (OB) isn’t a feature - it’s the blueprint for banks to stay relevant in an APIsed economy. But exposing a few APIs is not innovation. Here's what really powers OB - and some myth busting. OB is reshaping how we access and interact with financial services. At its core, it’s about unlocking data and making it securely available through modern infrastructure rails called APIs. But the impact goes far beyond banking. OB is becoming the key enabler of today’s two most dominant business models: —   Platform economics —   Embedded finance Banks play a critical role in this shift - because they hold the data. Enter: 𝗢𝗽𝗲𝗻 𝗕𝗮𝗻𝗸𝗶𝗻𝗴 𝗔𝗿𝗰𝗵𝗶𝘁𝗲𝗰𝘁𝘂𝗿𝗲 This is the invisible technical foundation that allows banks to expose data and services to fintechs and partners. Here’s a simplified breakdown of key components: 1. API Gateway – The secure front door that handles requests and and routes them properly. 2. Consent & Identity Management – Ensures only the right parties get access, with the customer’s permission. 3. Authentication Layer – Uses secure login methods to confirm the customer’s identity. 4. Developer Portal – A gateway where third parties discover, test, and onboard to the bank’s APIs. 5. Microservices Layer – Breaks banking functions into modular services for faster, flexible delivery. 6. Core System Integration – Connects modern APIs to banks’ legacy systems without needing to rebuild everything from scratch. This isn’t just about technology - it’s about designing trust at scale. 𝗛𝗼𝘄 𝗮𝗻 𝗢𝗽𝗲𝗻 𝗕𝗮𝗻𝗸𝗶𝗻𝗴 𝗿𝗲𝗾𝘂𝗲𝘀𝘁 𝘄𝗼𝗿𝗸𝘀: 1.     A licensed third-party provider (TPP) sends an API request to the bank to access account data or initiate a payment. 2.     The end-user is redirected to the bank’s interface to authenticate and provide consent. 3.     Once consent is verified, the bank issues a secure access token to the TPP. 4.     The TPP retrieves only the authorized data or completes the payment transaction. 5.    All actions are logged for traceability, audit, security and compliance purposes. 𝗪𝗵𝗮𝘁’𝘀 𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝗯𝗮𝗻𝗸𝘀 𝗯𝗮𝗰𝗸? 1. Legacy tech – Many core platforms were never built for external connectivity. 2. Security & compliance pressure – Exposing APIs while meeting regulatory requirements is complex. 3. Real-time readiness – Open Banking requires real-time availability and minimal downtime. 4. Governance and ecosystem management – Managing third-party access and maintaining oversight is operationally demanding. Banks should avoid treating OB as just a tech upgrade or a compliance checkbox. It’s a strategic opportunity to modernize infrastructure - something they would have to do anyway. In the era of AI and real-time digital ecosystems, not being able to communicate via APIs is like owning a smartphone without internet access. Opinions: my own, Graphic source: Blanc Labs 𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐛𝐞 𝐭𝐨 𝐦𝐲 𝐧𝐞𝐰𝐬𝐥𝐞𝐭𝐭𝐞𝐫: https://lnkd.in/dkqhnxdg

In this edition of Fintech Wrap Up, we're diving into the intricacies of Open Banking architecture, exploring actionable strategies for omnichannel banking, and discussing the latest trends in embedded payouts. 🔥 Firstly, we explore the technical architecture for Open Banking, highlighting key components like the API Gateway, which acts as a reverse proxy and enhances security with policies such as MTLS and OAuth 2.0. The Data Grid Layer stores data in memory for high performance and resilience, ensuring low response times and continuous availability. Meanwhile, the Identity and Consent Manager ensures secure API access with robust authentication and authorization measures. 🔥 Next, we examine actionable lessons from leading banks in omnichannel services. A key takeaway is the importance of optimizing the tech stack to avoid massive backend system overhauls. Leading banks focus on integrating digital front-ends with core capability modules like design systems and customer 360, enhancing both personalization and customer experience. The approach involves careful segmentation and targeted digital adoption tactics, with frontline staff in branches and contact centers acting as digital evangelists. 🔥 In Brazil's Open Finance ecosystem, we note the challenges posed by a restrictive market and a tough macroeconomic environment, particularly for fintechs facing a venture capital shortage. Incumbents focus on optimizing existing services and leveraging data aggregation, while neobanks and fintechs introduce new products like credit profiling and insurance. 🔥 In the embedded payouts arena, platforms are moving beyond just acceptance to capture new fintech opportunities. Embedded payouts, especially card-based ones, are highly monetizable, with platforms earning substantial margins from commercial card interchange sharing. The expansion of Visa Direct and Mastercard Send illustrates the growing global reach of these services. 🔥 For those navigating the complexities of card licensing, we demystify the process by breaking down the key considerations and strategic decisions involved. Whether it’s defining your objectives or understanding your resources, a clear path to licensing is essential for a successful card program. 🔥 We also delve into blockchain-based identity management, discussing the architecture and protocols needed to secure digital identities. This includes the crucial components of membership service and smart contracts, which provide governance and transparency within the network. 🔥 Finally, we cover some of the latest news: Revolut's newly acquired UK banking license, marking a significant milestone for the fintech giant; Stripe's acquisition of Lemon Squeezy, a startup that handles global sales tax for digital products; and Monzo's launch of a new pension consolidation product, aimed at simplifying pension management for users. #fintech #payments #cards Prasanna Marcel Richard Panagiotis Tony Efi Nicolas Arjun Dr Ritesh

Flick (Techstars ‘22) is quietly building something historic. And I’m fully persuaded: this may just be Africa’s first open banking unicorn. But first, how does open banking work? In Chapter Thirteen of my book 𝑭𝒊𝒏𝒕𝒆𝒄𝒉 𝑳𝒂𝒘 𝒂𝒏𝒅 𝑷𝒓𝒂𝒄𝒕𝒊𝒄𝒆 𝒊𝒏 𝑵𝒊𝒈𝒆𝒓𝒊𝒂 (cheap plug! 😄), I explain how open banking empowers customers to view all their financial accounts, initiate payments, and manage budgets—all from one platform. It eliminates the friction of hopping between banking apps and gives users control, clarity, and convenience. Globally, we’ve seen open banking play out through fintechs like Plaid and Tink, who enable direct-from-bank payments, bypassing card rails and reducing fees. These platforms connect securely to banks via APIs and allow users (with consent) to share their financial data or initiate transactions. Now here’s the exciting part—Flick is doing that and more. Led by Ruth Olojede, Flick (Techstars ‘22) recently launched its global payments infrastructure across North America and Europe, and it’s not just processing payments. It’s redefining how African fintechs integrate with global systems. What exactly is Flick doing? - Flick connects to local and international bank APIs, enabling users to initiate direct payments from their bank accounts across borders—no cards, no intermediaries. - It provides secure data pipes that let users and businesses access, move, and manage money with real-time visibility. - It offers compliance-ready API layers that help merchants, banks, and fintechs plug into local and international payment systems without building from scratch. - Most importantly, it is leveraging open banking rails to reduce costs, shorten settlement times, and improve trust in digital payments—both for consumers and businesses. In a space where many African fintechs still struggle with interoperability, manual reconciliations, and regulatory fragmentation, Flick is solving for: ➡️ Global interoperability ➡️ Real-time consumer data exchange ➡️ Cross-border payment experiences that feel local This is open banking in action—not theory. And what makes Flick stand out isn’t just the tech stack. It’s the alignment with emerging global regulatory standards, including Nigeria’s 2023 Open Banking Guidelines—the first of their kind on the continent. In a world where data is currency and integration is strategy, Flick isn’t building a wallet—it’s building the rails. Infrastructure. Compliance-aligned. Globally ambitious. This isn’t just another payments startup—it’s infrastructure in motion. If you're interested in fintech on the continent, keep an eye on Flick. The road to Africa’s first open banking unicorn may have just begun. For more on how open banking is reshaping fintech law and product development, check out 𝘊𝘩𝘢𝘱𝘵𝘦𝘳 𝘛𝘩𝘪𝘳𝘵𝘦𝘦𝘯 of my book 𝐅𝐢𝐧𝐭𝐞𝐜𝐡 𝐋𝐚𝐰 𝐚𝐧𝐝 𝐏𝐫𝐚𝐜𝐭𝐢𝐜𝐞 𝐢𝐧 𝐍𝐢𝐠𝐞𝐫𝐢𝐚. Link in comments.

Building an Open Banking Architecture 💡 In Open Banking, banks use an API messaging framework to securely share their customer data (with consent from customers) to third-party developers and service providers, which allows for automated and secure access to the data in their core banking environment. While Open Banking initially started as a regulatory requirement in the United Kingdom (UK) and other regions around the world, it has now transformed into a new revenue stream for banks, as they look to monetize their data and core functionality by exposing their core environment through APIs and building new business models such as Banking as a Service (BaaS) and embedded finance on top of the APIs. Open banking architectures supporting these use cases share the following characteristics: 🔹 Data is shared to third parties only after consent from the customer using OAuth 2.0. 🔹 Secure and limited third party access (with mutual Transport Layer Security (mTLS)). 🔹 API-driven infrastructure and an elastic and scalable environment. 🔹 Instant or near-instant access to customer account data. 🔹 Tamper-resistant logging and audit capabilities. Architecture description 1️⃣ A consumer accesses the licensed or accredited third-party application and provides consent to the third party to access consumer data or make a payment submission request. 2️⃣ Third parties in open banking can be defined as authorized institutions that provide value-added services in addition to the consumer's regular banking needs, such as accounts information (balance check, recent transactions, and statements) and payments (payment to merchants, people, and registered payees). This approach creates use cases such as spend analysis, credit decisioning, and payments for e-commerce transactions. 3️⃣ A trust service provider (TSP) is a trusted entity authorized by a supervisory government body to verify the authenticity of banks and third parties and issue digital certificates to third parties. 4️⃣ A bank's IT environment consists of its cloud environment and data centers. Source: Amazon Web Services (AWS) - https://t.ly/n6c1G #Innovation #Fintech #Banking #OpenBanking #EmbeddedFinance #BaaS #API #FinancialServices #Payments #Microservices #Cloud 

𝐖𝐡𝐚��� 𝐢𝐬 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 — 𝐚 𝐧𝐞𝐰 𝐢𝐧𝐟𝐫𝐚𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 𝐥𝐚𝐲𝐞𝐫 𝐟𝐨𝐫 𝐩𝐚𝐲𝐦𝐞𝐧𝐭𝐬 👇 Open Banking is not a product and not a new type of bank. It’s an API-based data and payment layer that allows customers — individuals or businesses — to securely share their bank data with third-party applications, only with explicit consent. Instead of financial data being locked inside one institution, it becomes portable, permissioned, and usable in real time. That shift is already changing how merchants handle payments, onboarding, and risk. — 𝐓𝐫𝐚𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐯𝐬 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 In traditional banking: → Customers interact directly with each bank → Data sits in silos → Every new service requires a new integration With Open Banking: → Customers authorize access once → APIs connect banks to fintech and merchant apps → Data and payments move securely between systems — 𝐇𝐨𝐰 𝐦𝐞𝐫𝐜𝐡𝐚𝐧𝐭𝐬 𝐮𝐬𝐞 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐭𝐨𝐝𝐚𝐲 • Direct bank payments at checkout Merchants like Zalando and Ryanair enable account-to-account payments by connecting directly to banks such as ING, Santander, or BNP Paribas, reducing card fees, fraud exposure, and chargebacks. • Faster onboarding and credit decisions Platforms and marketplaces use live bank data from institutions like Barclays or HSBC to verify income, cash flow, and business activity — removing manual document uploads and accelerating approvals. • Real-time reconciliation and treasury visibility Large merchants and PSPs pull transaction and balance data directly from banks like JPMorganChase or Deutsche Bank to automate reconciliation, improve cash-flow forecasting, and reduce operational overhead. — 𝐓𝐡𝐞 𝐛𝐢𝐠𝐠𝐞𝐫 𝐩𝐢𝐜𝐭𝐮𝐫𝐞: Open Banking laid the groundwork for: → Open Finance → Embedded finance → Real-time payments → Programmable money flows The global Open Banking market is growing fast — with payments, value-added services, and data-driven products leading the expansion. A ~27% CAGR through 2030 isn’t hype; it reflects real adoption across banks, PSPs, and fintechs (DashDevs LLC) Open Banking didn’t replace banks. It opened the data layer — and merchants are already building on it. — Source: DashDevs LLC ► 𝐓𝐡𝐞 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 𝐁𝐫𝐞𝐰𝐬: https://lnkd.in/g5cDhnjC ► Connecting the dots in Payments... | Marcel van Oost

The Symbiotic Relationship Between Open Banking, Banking as a Service, and Embedded Finance In the rapidly evolving landscape of financial technology, three independent but interconnected concepts have emerged as drivers of innovation: 1️⃣ Open Banking and/or Open Finance 2️⃣ Banking as a Service (#BaaS) and/ or other business models incumbents will assume to monetise the opportunity, and 3️⃣ Embedded Finance. These paradigms are creating a #symbiotic #ecosystem that is starting to reshape the entire financial services industry. ⏹️ Open Banking: The Foundation Open Banking serves as the foundation of this ecosystem. It refers to the practice of banks sharing financial data and services with third-party providers through secure APIs. This initiative, often driven by regulatory changes, aims to increase competition, foster innovation, and improve customer experiences in the financial sector. 🔼 Banking as a Service: The Bridge Building upon the #infrastructure of Open Banking, #BankingasaService (BaaS) acts as a bridge between traditional banks and innovative fintech companies. BaaS providers offer a range of banking functions—such as account management, payments, and lending—as white-label services that can be integrated into other products or platforms. This allows non-bank entities to offer banking services without the need for a full #banking license or infrastructure. 🔼 Embedded Finance: The Ultimate Expression #EmbeddedFinance represents the culmination of these trends, seamlessly embedding financial services into non-financial products, platforms, or services. By leveraging #OpenBanking #APIs and BaaS offerings, companies across various industries can incorporate financial products directly into their customer journeys, creating more holistic and frictionless experiences. This symbiosis drives innovation, improves accessibility to financial services, and creates new revenue streams for both incumbent banks and non-financial companies. It also empowers consumers by offering more choice, personalization, and convenience in managing their financial lives. As this #ecosystem continues to evolve, we can expect to see even greater integration of financial services into our daily lives, blurring the lines between banking and other industries, and ultimately reshaping the very nature of finance itself. Arthur D. Little #fintech #payments #insurance #investments #loyalty #savings

Open Banking: A Strategic Choice for the Future This year’s Money20/20 sent a strong message: Open Banking is a transformative force in financial services, offering significant advantages but also challenges for different players across the ecosystem. Each institution’s level of engagement will be a defining factor in shaping its future positioning. Success in this space hinges on carefully managing essentials like data governance, secure connections, and, most importantly, a commitment to customer experience. Here’s a high-level roundup of key take-aways and insights from industry leaders from Day One: Natalie Talpas from PNC underscores the importance of customer-focused experiences. By centering on seamless and user-centered journeys, Open Banking not only attracts business but also strengthens long-term relationships. In business banking, Brock Blake, CEO of Lendio, sees Open Banking as fundamental to keeping the sector running smoothly. Access to real-time data and streamlined transactions fosters an adaptive, efficient ecosystem that benefits businesses and institutions alike. Mastercard’s Global Head of Open Banking, Jess Turner, highlights that achieving real inclusion across the value chain is challenging yet essential. For this to work, Turner emphasizes the need for industry-wide collaboration and trust, with a strategic focus that extends beyond compliance alone. Paul LaRusso, Akoya CEO emphasized that compliance is crucial, yet remaining competitive is what will keep banks relevant in the long run. Many institutions still hold myths about Open Banking: that there’s time to adapt or that it’s someone else’s problem. As Paul notes, these misconceptions are risky in a rapidly evolving market. Nicole Elam, President and CEO of the National Bankers Association highlights that one of the biggest hurdles is the Open Banking rule itself, as it seeks to unite regulated and unregulated entities—a significant challenge with real operational impact. Meanwhile, Alex Johnson, Founder of Fintech Takes notes that regulatory moves, like the CFPB’s Section 1033, represent only part of the path forward. In his view, advancing a broader data economy is what will drive true progress and unlock Open Banking’s full potential. With major banks waking up to the strategic value of Open Banking, it’s evident that those who embrace a collaborative and data-centric approach are best positioned to lead in the evolving financial landscape. Regardless of your role in the Open Banking ecosystem, now's the time to assess your market position, understand your competition, enhance your customer value proposition, identify no-regret actions, seize commercial opportunities, and cultivate strategic partnerships. #Money2020 #OpenBanking #Innovation #CustomerExperience #FinancialServices #DigitalTransformation #DataEconomy #Banking