Time to sharpen your API strategy, the EU Open Finance Framework is on its way
If you are working for a financial institution, you might be aware of the European Commission’s project to adopt an Open Finance Framework in the near future. You might also be aware that many financial institutions have already adopted an API product strategy or are on their way to doing so - and this is perhaps also the case for your company.
The adoption of APIs was perceived as a burden by most institutions when PSD2 was initially published. Nevertheless, many of them seized this opportunity to develop additional API products, enabling a diversification of their products and the establishment of new partnerships.
No legal obligation yet…
With the exception of those institutions subject to PSD2 obligations (and/or local obligations, as the case may be), the publication of APIs is not a legal obligation. But it might soon become one.
Indeed, in its Digital Finance Strategy Communication, the European Commission announced its intention to adopt an Open Finance Framework, based on the rationale:
"Open finance can lead to better financial products, better targeted advice, and improved access for consumers and greater efficiency in business-to-business transactions.
“Access to more customer data would also enable service providers to offer more personalised services that are better tailored to customers’ specific needs.
“A balanced regulatory Framework for the sharing of data on financial products will support the financial sector in fully embracing data-driven finance, and effectively protect data subjects, who must have full control over their data.”
Exploring the scope
The exact scope of this Open Finance Framework is yet to be defined, but banking, insurance, and investment services seem to be the targeted institutions - confirming this possible impact on the insurance industry, the EIOPA published an Open Insurance consultation which is open for comments until 28 April 2021.
With respect to the scope of data that might be covered by the Framework, there is also no clear delimitation defined as of yet. It is, nevertheless, worth exploring the responses provided to the consultation carried out by the European Commission in relation to the Digital Finance Strategy Package. In this context, the respondents raised the relevance of a large range of data:
The implementation timeline for the Framework should be as follows:
These different milestones are fast approaching, and financial institutions should already begin to envisage the best way to take advantage of the forthcoming Framework.
Fast becoming a must have!
If not (yet) legally mandatory, APIs will most probably become a business necessity for all financial institutions.
Creating additional value based on data; distributing products through new channels, together with new partners; and enabling a better customer experience thanks to embedded finance, are just a few of the opportunities created through the adoption of API products.
Several financial institutions have already seized this opportunity and published a variety of API products:
[Links to the above sources: Platformable and Robosque]
A wide variety of API product enabled business cases are thus already in existence and have already been tested on the market - with many other still to come.
Each financial institution should analyze the products and data available internally and identify for each whether there is an opportunity to:
- ease and accelerate the processes and interactions,
- commercialize differently (e.g. through new distribution channels, with new partners, and to new customer segments),
- provide to third parties (e.g. regulators, statistic agencies).
How LUXHUB can help
LUXHUB has developed extensive expertise in relation to API products, and provides a platform through which clients can easily publish, manage, and commercialize their API products. Even if your API project is still in its infancy, do not hesitate to contact us.
If you wish to learn more about the Open Finance Framework, you can read my recently published article on the subject in full here => https://bit.ly/3dNINrh