APIs are everywhere. In fact, APIs (application programming interfaces) are the driving force behind digital transformation. With the emergence of PSD2, open banking APIs exposed a range of data to third-party FS solution providers including payment initiators, account aggregators, and other fintechs. Leon Muis, CBO of Yolt Technology Services (YTS), elaborates on the impact of APIs on open banking. “I’m excited for what lays ahead.”

Open banking was implemented in the UK to drive innovation in the financial landscape, ultimately giving consumers more choice, and control over how their financial data is used – and in turn, the financial tools and services available to them. Leon Muis: “And whilst we’ve seen plenty of new third party providers (TPPs) enter the market directly off the back of the open banking initiative (such as Yolt, the money app that YTS technology powers), it’s clear more needs to be done to improve the quality of APIs to take us to the next step and actively drive switching.”

What needs to be done to improve the quality of APIs?

“I think it’s important to remember advancing technology and reforms, such as open banking, have expanded the financial options on offer, and customers are turning to a broader range of providers to address their needs. Where consumers used to purchase a suite of products from the same bank, now the market is much more fragmented and consumers can buy specific products from niche players, such as insurance, investments, savings, loans, etc.”

“Consumers are seeking speed and convenience, as well as personalised experience, and they want it all on their own terms. Therefore, all players in the market will need to maximise the quality and stability of their APIs, so that they can be accessed and sold outside of the bank’s boundaries, to retain their current customers and attract new ones.”

The point of open banking is to improve consumers’ experience and the value they get from specific banking services by letting them share their data with third-party providers securely. Can you give us a quick update of how YTS is already working with banks in the UK and across wider Europe towards realising the full potential of open banking and improving consumers’ experience ?

“YTS is currently live in the UK, Netherlands, France, Italy, and Spain, and we were pleased to recently announce over 90% API coverage for potential clients in those markets. We’ve expanded quickly since our launch in 2019 and we don’t plan on slowing down. We’ve seen great variances in the level of open banking adoption across Europe, and that’s ultimately down to differing macro environments, consumer behavior, and regulatory bodies driving the initiative forward.”

“In the UK, the FCA and OBIE were responsible for setting the standards that put the customer in control of their finances and therefore we were able to work very closely with all CMA 9 banks to develop APIs – because the regulatory framework and collaboration between the FCA, OBIE, TPPs, and the banks was there. Through the Yolt app, we made the first API call in 2017 with Lloyds Bank - fast forward three years and we’re now making an average of 18 million a week for our clients.”

“Thanks to the impressive level of open banking adoption in the UK, businesses around the globe are starting to see its potential, and how transformative it can be for their businesses – improving efficiency, reducing transaction costs, and improving their front-end customer experience, with an overall growth of their revenue. All elements that are key survival qualities in a challenging economic climate. France is definitely a prime market for YTS, it’s a market where disruptive fintechs and neo-banks are normally very well received and that says a lot about the level of innovation in the market. Our mission is to empower more businesses to feel the benefits of open banking, sharing our key learnings and experiences as experts.”

How are UK-based incumbents generally reacting to the concept of APIs and open banking? Are they setting up ‘innovation departments’, hiring new competences, or is there a genuine evolution of their mindsets?

 “The use of open APIs to share account data with TPPs might have originally been seen as a threat to incumbents, but I can confidently say it’s now seen as a positive driver of innovation for all players in the market. Incumbents can see the tangible impact that APIs have in delivering improved overall customer experience.”

 “Open banking technology has totally transformed the lending model available to incumbents for example. By accessing alternative data sources via APIs, incumbents can responsibly lend to people who really need it, but who might not have qualified for a loan previously, based on old credit scoring methods alone. This is just one example of the how incumbents themselves have been able to utilise open banking to grow their customer base, improve their customer experience, and increase their revenue model.”

 “Incumbents have also recognised that the best way to manage risk is by engaging with fintechs, regulators, and other institutions to create a solid framework which protects data and enables development. In practice, this means that you see a lot of banks moving into the API consumption space, either themselves of via a partner like YTS.”

 Can you describe the role of the regulator, and what does the FCA do to support the adoption of APIs for open banking in the UK?

“Every provider that uses open banking to offer products and services must be regulated and have the required regulatory permission from the FCA or a European equivalent. The FCA, alongside the CMA, was a driving force behind the inception of open banking and PSD2 – forming these legislations to promote effective competition in the financial services industry, for the good of the consumer. This in turn leads to more convenience and greater value for consumers. Now, it’s the FCA’s responsibility to protect customers using AIS and PIS technology. The FCA has always been very vocal about the benefits of APIs and how they can deliver benefits for market participants and consumers.”

“In 2019, the FCA published a ‘Call for Input’ to explore the opportunities and risks in moving to an open finance model. Open finance would extend open banking principles and increase the scope of APIs to give consumers and businesses more control over a wider range of their financial data, such as savings, investments, mortgages, insurance, pensions, and consumer credit. It has the potential to deliver transformative benefits for consumers and open finance participants alike.”

The demand for APIs will continue to grow as they seamlessly connect applications and devices. Advanced analytics to get real-time insights on API performance and usage will remain as major factors driving the growth of the API management market. What does the future of APIs/open banking look like and what does it take to get there?

 “Whilst open banking technology is already changing the way we engage with our finances in the UK, companies like YTS have a big role to play in terms of educating and assisting top financial institutions and ambitious tech businesses across Europe on the benefits of open banking and how they can utilise the technology within their business.”

“In terms of what the future holds, the real excitement for me starts when we shift to an open model of finance. PSD2 and open banking regulations broke open the silos around an important part of banking: payment accounts. For a full picture of a person’s financial status or for truly sophisticated financial services, however, more financial information and access needs to be available.”

“Consider the scope of opening banking increasing to mortgages, savings, credit and investment accounts, pension funds, and the broad variety of insurances that most people carry – ideally, the same freedom would apply here as well. This would take the benefits of open banking to the next level. Instead of being able to easily move money between payment accounts, people could manage their entire financial footprint with the same ease. Having access to the exact financial products people use, instead of merely their transactions on a payment account, could help people save money through true automated switching and renewal services. And of course, a more complete picture of a person or company’s finances would enable businesses to offer a more tailored, faster, more cost-efficient service to customers. The FCA’s Call for Input on Open Finance has undoubtedly got the wheels in motion and I’m excited for what lays ahead.”

Bio

As the Chief Business Officer at Yolt - an ING venture - Leon Muis built and is leading the YTS proposition; one single and secure API connecting businesses to the main banks across Europe. Leon made Yolt the first third-party provider to connect to open banking in the UK. https://yts.yolt.com/

Glossary

• AIS: Account Information Services

• AISP: Account Information Service Provider

• API: Application Programming Interface

• PIS: Payment Initiation Services

• PISP: Payment Initiation Service Provider

• TPS: Technical Service Provider

Check the Open Banking Glossary:

https://yts.yolt.com/open-banking