Example of the use of APIs in EU banking and payments

Dario Delle NociProject Manager - CBI S.c.p.a.Payments Expert – UN/CEFACT Finance & Payment Domain

UN/CEFACT 34th Forum

30th October 2019 – London, IMO Building

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Open Banking in EU

CBI Globe: the EU Best Practice

Open Banking Use Cases

Agenda

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Open banking is a financial services term as part of financial technology that refers to:

1.The use of open APIs that enable third-party developers to build applications and services around the financial institution

2.Greater financial transparency options for account holders ranging from open data to private data

3.The use of open-source technology to achieve the above

Executed properly, open banking preserves the security and stability of the financial system while empowering customers and accelerating opportunities for innovation

Open banking economy comes from consumer demand and needs to share financial data to third parties that enable a whole new set of innovative financial services

THIRD PARTY

APIs

BANKUSERS

access their Bank Accounts through the

interfaces of Third Parties (TPPs)

offer innovative services to customers

using their bank account information

and services

make available Open APIs to enable Third

Parties to access Users’ Bank Accounts

Open banking and APIs

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Europe• UK: Competition and

Markets Authority (CMA) initiative

• EU: Revised Payment Service Directive (PSD2)

North America• Canada: Advisory

Committee on Open Banking

• USA: Office of the Comptroller of the Currency’ explores a Fintech Charter

Mexico• Fintech Law

South America• Brazil and Chile: Central banks

issue new banking rules• Peru and Argentina: Fintech Bill

Africa• Nigeria: Open technology foundation• South Africa: SA’s Reserve Bank Started

researching the establishment of a regulatory sandbox to fostercollaboration with emerging tech startups

Asia• Hong Kong: HK Monetary Authority’s

Open API Framework• Singapore: Monetary Authority of

Singapore’s API Playbook

Australia• Australia

Securities and Investment Commission (ASIC) endorsed open banking guidelines

Open banking regulatory initiatives

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EU Regulation boosting open banking (1/2)

The 2015/2366/EU Directive, known as PSD2, aims to define a common legal framework for the payments market in the European economic area with the aim of increasing the level of integration and efficiency in the market, as well

as increasing the level of trust and protection of consumers through the use of new authentication principles.

Define a common legal framework to execute/receive payments between consumers and companies in the European economic area, in order to:

(i) increase the level of integration and efficiency in the market;

(ii) guarantee market openness;

(iii) increase the level of protection for the consumer.

Objectives

• Transparency for consumers, obligation for Banks and extension of the application scope with respect to the PSD1

• Strengthening of security requirements (e.g. Strong Customer Authentication)

• Application of the infrastructure i.e. "Access to Account", which requires Intermediaries to expose the account information and payment initiation services to third parties, using a technical method (e.g. API) which provides the possibility for customers to authorize third parties to access their own account in real time and without prior consent from the Intermediary itself.

Intervention areas

• There is no single standard of reference.

• Significant technological fragmentation is expected and consequently a high level of necessary investments

Points of attention

!

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EU Regulation boosting open banking (2/2)

The PSD2 identifies two main market operators:

• Banks/ASPSPs (or Account Servicing Payment

Service Providers) with online payment accounts

offering access interfaces (i.e. APIs) that enable

secure communication with

• Payment Service Providers (PSPs): Fintech firms

offering customers access to their bank accounts (i.e.

information service providers, payment initiation

service providers, payment service providers that issue

card-based payment instruments).

Traditional BankingOpen Banking

Online service that initiates the payment order at the request of the payment service user for a payment account held with another payment service provider (ASPSP).

Online service providing

consolidated information on

one or more payment

accounts held by the payment

service user with another payment

service provider or with several

payment service providers

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The European Open Banking tech initiatives

CBI Globe is the most used platform

in Europe

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Collaborating to compete: why a collaborative platform stimulates the innovation

Possible relationship models - among them non-alternative - between banks, Fintech and other non-bank players

Competition Co-opetition

Collaboration

The creation of a dynamic information ecosystem can represent a keystone to link all the actors of the new value chain of payments, to avoid fragmentation and to guarantee

consumer protection. Inside the new ecosystem the element that can link the different actors will be identified as

a modular collaborative platform that can guarantee at the same time the competition between the single participants through the customization of value-added services.

Fintech's growth is significant: in 2018, global investments in the sector reached almost $ 40 billion in venture capital, with growth of over 120%*

Banks still count on consumer confidence**.

*CB Insights 2019

** based on The European House – Ambrosetti elaboration

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Open Banking in EU

CBI Globe: the EU Best Practice

Open Banking Use Cases

Agenda

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CBI S.c.p.a. (Public Limited Consortium Company)

For over 20 years, CBI has been serving the entire Italian financial industry in the evolutionary frontierof the payments market, guaranteeing a prompt reply to specific service requests from our customers,also at an international level. We support over 420 Payment Service Providers, as members andcustomers.

• Over 2,6 millioncustomer companies*

• 5 billion transactions/year

• Over 10 Tera bytes of annual data transmitted

• 7 active services• 3 PA directlyconnected

• 2 Public interchangenodes connected

•400 activePSPs•180 Billers and 13.000 PAs•about 20 mln payments

• 5 billiontransactionsper year

• 55% increase in predictive analysis

• ~ 80% market share involved in onboarding

• over 40 value -added services

• 50+ PSP are testing CBI Globe sandbox

• 6 member institutions

• Compliance tests already carried out with banks and Notartel under the guidance of ABI

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The international engagement of CBI

“Financial Services” of National Strategic Table on International Trade Facilitation

European Payment Council (EPC) –Task Force to ERPB WG on a SEPA API Access SchemeSEPA Proxy Lookup Working Group

Member of Board of ISO20022 RMG (Registration Management Group)

API EBA (European Banking Authority) Working Group

Berlin Group: Task force NEXTGEN PSD2

“Liaison Rapporteur UN/CEFACT to ISO TC68 Financial Services”

UN delegate at UNECE-UN/CEFACT as Domain Coordinator Finance in Program Development Area Supply Chain

ISO Technical Support Group (TSG)ISO Payment SEG (PSEG)ISO Trade SEG (TSEG)

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What CBI Globe is

70+

80%

Over 300 banks are members

70+ TPPs

The CBI Globe platform facilitates theinterconnection between Banks and ThirdParties (TPPs) through APIs, in accordance withthe new PSD2 regulation.

All participants can make customer relationshipmanagement simpler and more efficient byoffering information and payment services, takingadvantage of the business opportunities enabledby Open Banking.

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CBI Globe: Two-sided platform for ASPSP and TPP

Bank/Fintech (TPP)

• In production from 1st June 2019

• ~300 ASPSP onboarded (80% market share)

• 50+ Fintechs operating on the platform

TPP Enabler

Open Agile RegTech Platform

Value Added ServicesVAS

ASPSP Interface

• Implementation Guidelines API PSD2 CBI

• Single Point of Access

• Sandbox

• Shared Services

• Shared operating frameworks

• Versioning API eChange management

• 1st level Help Desk

• System Integration

• Wiki and FAQ

• …

• Implementation in progress

• Go live by 1st quarter 2020

Next slide

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CBI Globe: TPP Enabler

This functionality is intended to support ASPSP in enabling Payment Initiation and Account Information services:

➢ to initialize Open Banking services

➢ to guarantee the connection to the end-points (ASPSP, Gateway, ...), both domesticand international

➢ to develop a single interface in place of the multiple connections

➢ to guarantee the constant versioning of the APIs, for the common functions and the definition of processes shared by the CBI Globe financial community

➢ to accommodate additional services (VAS) and proprietary APIs

During 2019, CBI analyzed the competitive scenario, identifying the opportunity to support ASPSPsby developing features to support "active" operations in the role of third party providers.

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Open Banking in EU

CBI Globe: the EU Best Practice

Open Banking Use Cases

Agenda

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Account Aggregation

Account Aggregation allows users to manage account information from differentbanks in one place, providing: overviews, budgeting guidance, productrecommendations, credit scoring and Personal/Business FinancialManagement to easily understand and manage their money.

Registrazione utente

Account

Bank AAccount

Bank B3.658,45€12,00€

Manage Liquidity

Total Amount:3.670,45€ TOTAL CASH FLOW CASHFLOW BALANCE

JANUARY FEBRUARY MARCH APRIL MAY

20k

40k

60k

80k

100k

120k

140k

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Payment Initialization

CROSS BORDER CREDIT TRANSFER

AMOUNT

BENEFICIARY

Choose one of your banks' accounts

18,901.78 €

Beta spa

Bank 1 – 138393A819****

Bank 3 – DE71928II*****Bank 2 – 9303731JY7****

Bank 4 – IT0012838*****

BENEFICIARY ACCOUNT

IT138393A81325465489

JANUARY

FEBRUARY

MARCH

APRIL MAY20k40k60k80k

100k120k140k

Payment initiation services allow users, through a third-party application, to safelyinitiate payments and money transfers from a banking account, overseeing theirmoney from any channel and receiving advices and forecasts on the finances (i.e.Personal Finance Management).

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Open Banking & Supply Chain Finance

Open Banking can enable, via API access to bank accounts and externaldatabases, the development of a whole new wave of financial services to enhance

processes connected to the supply chain in an international trade context.

Insurance Services

APIs to access and choose different insurance options

InvoiceTrading

APIs to sell invoices in order to improve cash flow

Financing Services

APIs to access and compare financial services offered by an Open Banking Solution

member banks in a centralized way

Risk Assessment

Delivery and enrichment of information useful to

companies for assessing the risk of commercial partners

(e.g. counterparty risk, country risk)

KYCCentralized Know Your

Customer tool powered by public and private databases

CertificatesExchange of information

between banks and public administration for the issuance of certificates

necessary for international trade

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34th UN/CEFACT ForumThank you

www.cbi-org.eu

www.cbiglobe.com

www.gotoapi.com

Dario Delle Noci

d.dellenoci@cbi-org.eu

cbiglobe@cbi-org.eu