And indeed, many TPPs (including Yolt!) advertise the number of banks they are connected to, in order to help kick-start conversations with prospects looking to scale their offerings.
But there are several problems with looking at the largest number of bank connections as a key consideration. First, in many markets a small number of banks cover the vast majority of accounts – in the UK, for example, the nine largest banks account for over 90% of the UK’s consumer and small business bank accounts. Therefore, it is critical that your TPP is connected to the big nine, but it may not be necessary for them to have connections to the smaller banks. Second, in markets including Germany, France, and Spain, a couple of big networks are split with regional entities. This makes it easy for some TPPs to claim they are connected to tens or hundreds of banks, whereas in reality there is a much smaller number. And third, the number of connections to banks means nothing if the stability, security, and maintenance of connections are not up to standard. With these questions in mind, if you are looking at scaling your open banking innovation across European markets let’s talk about how you should approach your conversations with TPPs, as well as discuss what Yolt offers in terms of API connections across Europe.
The quality of API connections is critical – so treat that as a priority
While banks across the EU and UK are mandated to open accounts to share data and initiate payments via API, they are not mandated to do it within strict specifications. In fact, API standards vary quite widely across the continent, including the Open Banking standard in the UK and Ireland, STET in France, PolishAPI in Poland, COBS in the Czech Republic, and Berlin in other markets. Furthermore, most banks have different API specifications or requirements, including differences in payment flows, fields, statuses, and IDs, and bank connections need to be monitored constant for both planned and unplanned outages.
This means that although your prospective TPP partner may claim connections to many banks in a wide range of markets, it isn’t a given that all these connections are stable or reliable, and you really need to test connections to be sure. Furthermore, it is imperative that your TPP not only builds stable connections according to the different standards and specifications, but also maintains communication with banks to be aware of upcoming changes and minimise downtime as much as possible.
Yolt made its first bank connection in 2017, and first open banking and payments connections in 2018. Today the API handles millions of API calls per week, with error rates that are consistently lower than the industry average. In addition, we have a sandbox environment to test the API out, strong documentation, and a support team to manage your enquiries, ensure your connections have maximum uptime, and respond to any issues as they arise.
Security is a fundamental consideration
From a security perspective, not all APIs are created equally. For example, reverse engineering involves the TPP building its own API to gain access to the customer's account, via analysis of information shared between the customer and the bank on the bank's customer interface. This enables TPPs to interact with the bank’s server in the same way as the bank’s app does. However, it means that the TPP needs to store user credentials on their own servers, which is an extra security risk and also counter to the spirit of PSD2, which should ensure that customer credentials are never shared with any party other than the bank.
By contrast, TPPs can also build their own APIs to strict PSD2 standards – such as Yolt - which do not store customer data on their servers. This has a number of benefits, including greater privacy for end users, and greater security for all stakeholders.
If you are looking to partner with an open banking TPP, it is wise to ask whether they reverse engineer their APIs, and to think critically as to whether the risks involved are worth it. Or you can partner with a TPP such as Yolt, which always builds APIs to PSD2 standards.
Make sure you partner with a TPP with the right license, that can connect to the right banks
Assuming you have a plan to launch and expand across certain markets and target groups, how the coverage of your TPP matches those requirements is also important – not only today but in terms of where both you and your TPP want to be in the next 3-5 years. Furthermore, it is also important to know where your TPP is licensed, since separate licenses are required for the UK and the EU.
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 key banks in all major and many smaller EU markets. Furthermore, we hold dual licenses, from the FCA in the UK as well as in the EU, making us one of the few TPPs to do so.
Look for a strategic collaborator
And finally, there is still an enormous amount of white space in open banking innovation. Start-ups, scaleups, and established businesses alike are all discovering new applications for account data, from automating small business accounting tasks or internal processes, to resolving consumer debt, and accelerating leasing processes. In addition, there are also opportunities to combine account data and open banking payments to drive down the costs of doing business while making smarter decisions for your customers.
You may have a good vision of what you want to do with open banking data. But even your internal vision can be sharpened and expanded. Furthermore, with the right partner you can help shape products and services, or provide input into which banks or markets they may prioritise connecting to. If you’d like to discuss new innovations, European expansion, or just find out more about how open banking can help your business, don’t hesitate to contact us.