API Aggregators — The Success of PSD2

With deadlines inching close for PSD2, Implementers are ready to open up sandbox environments for developers, kickstarting a new era of financial apps.

This is great news, but as third parties are interested in onboarding with different specifications and banks, the involvement necessary is apparent.

With Open Banking Specification groups hell-bent on increasing granularity of data offered and having up-most security is in the best interest of all stakeholders. With granularity and depth comes flexibility and freedom for a wide variety of opportunities, but hinders developer experience with after effects such as increased complexity.

This is made worse with the fact that third parties need to be compliant with multiple specifications such as Open Banking UK, Berlin Group, STET, etc. As a third party’s best interest is to be on-boarded with many banks as possible.

Complying to these specifications come with their own unique complexities.

• Onboarding process for specification.
• Authentication flow.
• Data model and API resource mapping.
• Complying with customer experience guidelines enforced by specifications.

With the above-stated processes repeated for each specification, It becomes a paramount task.

Enter API Aggregators

API Aggregators are in essence are a form of third part which exposes uniform abstracted financial APIs which allow interfacing with a wide variety of specifications and financial institutes with ease.

Shown above are two example scenarios, one where the third part directly integrates with the bank, denoted by “1” and an API aggregation scenario where third parties are on-boarded with the aggregator, denoted by “2”.

1. Third Party onboard with the bank implementing specification A. Extra effort is now needed to support Specification B and to enroll with the other two banks.
2. Third Parties are enrolled with the API aggregator and instantly support specification A and B and all of the banks enrolled with the aggregator.

With the above illustration, it’s clear why a third party will opt-in for an API aggregator to ease the integration process and to support many banks as possible.

How API Aggregators play a key role in Open Banking

In summary API Aggregators will be the enabler of PSD2, allowing third parties to scale throughout the EU and even beyond. Given below are some key points stating the benefits for different stakeholders.

For Banks

• Small scale banks with a little foothold on the market will be not left behind as third parties are more interested in complying with the major players.
• More third-party application traffic with API Aggregator adoption.

For Third Parties

• Instant access to many banks and specifications.
• Not necessary to keep track of specifications for updates and depreciation of API’s.
• Not necessary to track API depreciation or updates.

Now It’s clear how API Aggregators will play an important part of PSD2 and bring it to masses. Making the developer experience smoother and also truly leveling the playfield with third parties and banks.