What the use of open banking means for identity networks

By connecting identity data from multiple sources through APIs, the open banking concept can help verify identity more reliably and improve the customer experience.

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When you think of Payment Services Directive 2 (PSD2), what likely springs to mind is the implementation of the Secure Customer Authentication rule (SCA). SCA was brought in as an additional check during certain financial transactions to help prevent fraud. However, PSD2 also ushered in the era of “open banking” through APIs.

Can digital services benefit from open banking, or is it all marketing and hot air?

The whole is greater than the sum of the parts

In my time in the tech industry, one of the most noticeable changes has been the drive to interoperability. Back in the day (i.e., more than ten years ago) connecting different components usually meant a lot of custom coding. Now, we have application programming interfaces, or APIs, built on standards. The creation of what is often termed an “API economy” has been very important in facilitating a globally connected commercial world. APIs and standards have facilitated the creation of multi-functional ecosystems. These ecosystems or ‘networks’ draw on specialist services – the result being the whole is greater than the sum of the parts.

PSD2 has a seemingly simple remit: Provide an interface to allow customer data to be shared in a secure and standardized format. The result of this directive is the potential to open up the banking marketplace to drive new services. This is all part of the general move of banking to digital delivery of banking services. A 2020 survey by Finder states that in the UK, 4.5 million adults have a digital-only bank account and 12% want to open a digital-only account in the coming years. While not everyone can take advantage of digital, digital-only is popular with a lot of folks.

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