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Buy versus build: What to consider with open banking

A dive into considerations around buying open banking with third-party providers (TPPs) such as Yolt, versus building in-house.

Open banking: buy versus build

Introduction to open banking

The principle of open banking is that banks must share account data with third parties, under strict regulations, including that the customer (whether they are an individual or business) must give their consent to sharing their data. With this access, businesses can gain accurate, complete transaction data from their customers, and/or initiate open banking payments - direct account-to-account transactions.

In this post, we will go into detail about:

  • some of the considerations around building and maintaining bank connections across Europe,
  • why you would consider partnering with an external party to build and maintain your connections,
  • some questions to ask about prospective providers,
  • and what Yolt offers.

Challenges with building and maintaining bank connections

1. Banks have different connection specifications and requirements.

The way that bank data is typically shared is via a connection known as an Application Programming Interface (API). While banks are mandated to open accounts to share data and initiate payments, they are not mandated to do it within strict specifications. Most banks have different API specifications or requirements, including differences in payment flows, fields, statuses, and IDs. In addition, you will need to standardise data if you want to aggregate and integrate it with existing solutions.

Even if you operate in one market, you will need to connect with a number of banks – and the bigger the market, the more API connections you will have to build.

2. There are a number of API standards used for open banking in Europe.

In 2020 there were almost 6,000 banks operating in Europe. While they are mandated to offer connections via Open Banking in the UK and PSD2 in the EU, the standards are not uniform across each country. This is how the market compares in terms of API standards:

Open banking API standards in Europe

API standards are different, but there are also other differences to consider. For example, in Italy, some banks require triple consent by users, and in Spain, double consent is required.

3. You need to monitor connections and maintain bank communication.

It is imperative to constantly monitor your connections once they are built, for scheduled and unscheduled downtime, and updates and improvements made the by the bank. It is also necessary to maintain communication with the bank to be aware of these upcoming changes and downtime as much as possible.

This is important not just to maintain connectivity, but also to proactively communicate to customers if a connection is down.

4. Getting licensed takes time and effort.

In addition to building and maintaining APIs, you must either also be licensed under PSD2 in the EU and/or by the FCA in the UK.

For both licenses, there are long application processes (nine months+), and operational changes required. Some things organisations need to look at include Know Your Customer (KYC) compliance, security risk management, anti-money laundering and combating financing of terrorism, and so on.

Buy versus build

As you can see, there are a wide range of challenges to building API connections with European banks, especially if your goal is connectivity across multiple banks or markets. This adds up to a significant and ongoing workload for internal staff, who will be building a product that is remarkably similar to many solutions that already exist on the market and come with the advantage of having been tried and tested by many other businesses. For most businesses, this does not make sense. Instead, it is better to partner with a third-party provider (TPP).

Advantages of partnering with a TPP

Most TPPs offer a number of similar advantages over building in house, including:

1. Building and maintaining connections for you.

This is the obvious advantage over building in-house. However, be sure that your prospective partner builds and maintains connections not only for the banks you currently need, but also for your future growth aspirations.

2. Outsource the need for a license.

TPPs are required to be licensed under the FCA in the UK and PSD2 regulations in the EU. You can outsource your need for a license to any TPP.

Questions to ask a prospective TPP, and what Yolt offers

With the two advantages above, you already remove the main headaches of building and maintaining bank connections. However, there are other considerations around choosing an open banking partner. Here are five key questions you may consider when choosing a partner, followed by some more information about what Yolt offers on each count.

1. Is the API stable and reliable?

Perhaps the most important thing in an API is its reliability. Yolt made its first bank connection in 2017, and first open banking and payments connections in 2018. Today the API handles over 26 million calls per week, with error rates that are consistently lower than the industry average.

2. What is their coverage (and coverage roadmap)?

This is a critical question for both domestic and internationally focused businesses. If you operate in only one market, you want to know that your provider is connected to all the banks you need – especially important in larger markets such as the UK, Germany, and France. And if you operate internationally, having a single reliable API across all markets can save a lot of time and work.

Yolt has one of the largest and widest number of bank API connections in Europe, and we are constantly building out more. Currently we are connected to more than 640 banks, including 95% of account volumes in the UK, Netherlands, France, Italy, Spain and Belgium, with countries including Germany, Romania, Poland, and Ireland in progress and reaching the 80-90% mark soon.

3. How easy is it to get up and running?

As stakeholders in your decision-making process, your development team will want to know how easy your provider’s API is to integrate with and what kind of documentation and support is offered.

Yolt has a sandbox environment to test the API out, and is supported by strong documentation. It takes about 30 to 60 minutes to connect to our sandbox environment, where you can play around with the technology to see what it looks like and what kind of information you are getting back from our API. The sandbox environment is very similar to production, making it easy to move.

4. Do they offer support?

This is a no-brainer. Yolt has a support team to manage your enquiries, ensure your connections have maximum uptime, and respond to any issues as they arise.

5. What other innovations or value-added solutions do they offer?

The key benefits you can get from any open banking API are account information and payments. But beyond these key services, companies such as Yolt are building frontend solutions and offering backend features to help provide better insights and service for customers. These include Cashflow Analyser, an online tool that helps lenders and leasing companies leverage open banking to provide immediate insight into the cash flow of your applicants, and connection monitoring, which shows any issues with bank connections in real time, enabling quick action.

Find out more

Building connections is challenging and for most businesses, the time and resources is better spent on building unique propositions in-house that cannot be outsourced.

Find out how open banking can help you

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