BBVA API Market
All the major actors in the banking sector agree that the traditional authentication system based on user names and passwords is now a thing of the past, and particularly with the imminent arrival on the scene of the new PSD2 directive (Revised Directive on Payment Services). PSD2 will totally transform the relationship between customers, traditional commercial banks and the fledgling fintech companies, who are coming to the fore as just another of many financial service providers with access to information on accounts and payments. The scenario where banks looked after our money and data is gone for ever, and managing digital identity has now moved to center stage.
Some banks have been working hard to prepare for the day when they will be just one more provider within the European market. This is the reason some of them are reinventing themselves as a platform as a service (PaaS), or acquiring startups in the areas of mobile payments, design and usability in order to improve their operating experience with their customers. Banks will never again be the exclusive owners of their users’ sensitive information once these users give third parties access to their information and their accounts. Their capacity to compete depends on how they manage digital identity in a secure and agile way.
Within this change in banks’ global strategy –both the banks that are heading up this change and those that have yet to begin, but who know there is no alternative– application programming interfaces play a key role. APIs are generating business with the companies that use them in their DevOps strategy in three fields: pay-per-use, subscription model and resource usage and revenue sharing.
The most likely scenario is that in future the banks will continue –and even more so with the deregulated market proposed by the European Banking Authority’s PSD2– to be the sole providers of a trustworthy digital identity. In other words, they will become the providers of the technology and infrastructure that guarantee that each financial transaction with third parties meets the requirements imposed by the regulations. Of course, that service will incur a cost for the other providers who offer their services using the customers’ own authorization. ‘Identity is the new money’ is a statement that serves as the title of an interesting book by David Birch, which perfectly describes this future source of income.
Digital identity, customers and blockchain
Some digital identity experts argue that all the personal information in the users’ nontransferable footprint cannot be in the hands of banks or fintech companies, but can only be safeguarded by the customers themselves. This is the only way the financial world can provide crossed services for all users. If the user’s digital identity is under the control of an institution, this may pose the problem of having to have several identities for each service provider, for account or payment information.
The personal data must be visible and accessible to their owner regardless of the place they are held. Today it is the banks, tomorrow the fintech companies. This would in no case prevent financial companies from becoming the designated intermediaries for ensuring a verified digital customer identity as explained above, even though they may not be responsible for monitoring or managing the personal data. Even in this scenario, the banks would win out, as a verified digital identity in the hands of the banks would in most cases facilitate compliance with security and protection requirements. An intermediate alternative would be for banks and fintech companies to reach a consensus and use external blockchain technology as a single auditing system for customers’ digital identity.
Companies like Credits.Vision are working on creating customizable blockchain networks that would connect other blockchains –private in the case of banks, and public in the case of service consumers and cryptocurrencies such as bitcoins. In a practical case, the user would upload the personal details conforming their identity to blockchain in an encrypted package, which could be used by a bank, a state-regulated body or a telecommunications provider.
Various case studies are used to show how open finance enables the financial inclusion of SMEs and the economic growth of developing regions.