Open banking guide:
Key element to
Consider before
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Ponto has been at the forefront of open banking, facilitating connectivity for 2000 banks and 200 partners across Europe. In our open banking journey, we encountered different challenges including unharmonized APIs, implementation methods and authentication flows.
Luckily, Open Banking standards, such as the NextGenPSD2 standard by the Berlin Group, have made our journey easier. In this blog, we will share our experiences and three key learnings for an advancement of the update and expansion of this standard within the openFinance API Framework.
The Impact of the Berlin Group’s NextGenPSD2 Framework on Banking Standardization and PSD2 Compliance
The Berlin Group’s NextGenPSD2 Framework represents a significant step towards standardization in the banking sector. Its consistent approach has greatly facilitated compliance with the Revised Payment Services Directive (PSD2) across the European banking ecosystem. Despite a few challenges, our overall experience with the Berlin Group’s standards has been encouraging.
The new Berlin Group’s openFinance API Framework plans to extend standardization beyond PSD2 scope. This evolution will allow for premium services, by expanding the scope to savings accounts, investment accounts, loans, or even insurance for example. By broadening the scope of accessible financial data to include additional account types and data sources, the framework will allow third parties to provide a more comprehensive view of a customer’s finances. In the corporate world, this can lead to improved cash management, and thus improved returns.
The openFinance API Framework will be rooted in open industry standards such as REST, JSON, and ISO20022. This approach promises a modern, harmonized, and interoperable API set. As a starting point, the Berlin Group will focus on developing new services that have been requested by market participants. These services include innovative payment functionalities like Pay by Loan, Request-to-Pay, Reservation of Funds, direct access APIs for corporates, digital contracting, and SEPA Direct Debit eMandates.
In collaboration with an Advisory Board, the Berlin Group is also exploring improvements such as supporting advanced customer journeys through subscription-based push notifications. The standardization efforts of the updated API Framework will align with the objectives of the European Commission’s Retail Payments Strategy and any relevant scheme definitions at the national or European level, like the SEPA Payment Account Access Scheme (SPAA).
Navigating the ASPSP Implementations With the NextGenPSD2 Standard
While most of our interactions with the NextGenPSD2 standard have been positive, we have encountered some specific issues related to Account Servicing Payment Service Providers (ASPSPs) implementations. We responded to the Berlin Group open market consultation and have summarized our feedback:
- Clarify that the openFinance API Framework is a guide, not a definitive ruleset
When connecting with ASPSPs who implemented the Berlin Group standards, we observed cases where ASPSPs limited their API scope according to the Berlin Group’s guidelines. This occurred even when their online channels offered a broader scope. Some of these ASPSPs did not address their limitations, citing adherence to the Berlin Group’s guidelines as the reason, despite not fully complying with PSD2.
Our recommendation is that the Berlin Group clarify in the initial sections of its documents that its openFinance API Framework is a guide, not a definitive ruleset. For example, this statement could read: “The Berlin Group openFinance API Framework is a standardization framework. It offers ASPSPs a set of implementation guidelines for compliance services and premium services. Although the Berlin Group has done its best to adhere to PSD2 legislation, the PSD2 law text and the EBA RTS are leading.”
- Provide additional guidance for error codes
There are also instances where the error feedback mechanism can be more detailed to clarify failure scenarios. We would welcome additional guidance from the Berlin Group on error codes.
- Provide clearer guidelines for handling multiple TPPs
In addition, the framework can benefit from clearer guidelines for users who represent multiple companies and wish to use several third-party providers (TPP) for Account Information Services (AIS). This is a particular case, which leads to authorization issues for ASPSPs.
Overcoming these challenges is key to enhancing the effectiveness of the Open Finance Framework. API aggregators like Ponto streamline TPPs’ connections to multiple ASPSPs, providing a standardized interface that simplifies integration. This allows TPPs to focus on delivering innovative services to customers, abstracting complexities, and differences in ASPSP implementations.
As API aggregators, we enhance transparency with detailed error handling and robust feedback. Our effective consent management enables seamless connections for natural persons representing multiple companies across multiple TPPs.
Finally, Berlin Group’s openFinance API Framework and API aggregators are crucial for the open banking ecosystem. We commend their work in standardizing APIs, fostering interoperability, innovation, and customer-centric services.
As we continue to explore the potential of Open Banking and PSD2, Isabel Group remains committed to contributing to the evolution of these standards while enhancing services to our customers. We look forward to continuing to collaborate with the Berlin Group and contributing to Open Banking standards evolution.