How Open Banking will benefit API Providers
With the absence of existing open APIs, or even reasonable API banking from most banks, there has been an emergence of smart banking API providers like Mono and Okra (in Nigeria), Stitch in South Africa, Plaid in the US and Tink in Europe. They provide simple APIs which anyone can use within minutes and at reasonable pricing.
The APIs from these fintechs now serve as the fabric linking personal financial management apps, lending services and others to customer bank accounts. Their API coverage includes balances, transactions, statements, direct debits, and even identity.
While many think these fintechs have some special relationships with banks or have access to some special APIs, in reality, most of them are using screen scraping, leveraging the users’ own credentials to access their banking services. Of course, there is a significant risk to these practices but it has been sanctioned by the courts in the US and Europe.
However, the question on everyone’s lips has been — what’s the fate of Mono and Okra when open banking goes live? Why would any fintech connect to them when they can simply connect to the banks? After all, open banking would allow banks to offer APIs easily and in a consistent manner.
The truth is, Mono and Okra would have significant advantages over other fintechs when open banking becomes an operational reality. The first advantage is that these API providers have extensive experiences with playing with APIs. The second is that most fintechs don’t have the energy to talk to every single bank even if the API process is simple — it’s one thing to consume a single API endpoint, it’s another to integrate to 30 banks. Mono and Okra would provide a single API endpoint to which access to all the banks would be provided.
Nevertheless, the issue of regulation may be one that these providers would have to deal with. At the last check, none of them is licensed as a PSSP which means their ability to actively take advantage of the opportunities that open APIs will provide will be limited.
