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Standardized Banking APIs and the Internet of Payments

September 2016

Introductions IFX Forum, Rich Urban, President

Traxiant, Roger Bass, CEO

© Copyright IFX Forum, Inc. 2015 Slide 2

IFX Forum is focused on serving the needs of the financial services industry, providing guidance and setting open standards to exchange data electronically through a variety of channels in a reliable, consistent manner. Standardized Banking APIs are an extension of work embodied in the proven foundation of content and messaging framework that is the IFX Standard.

Traxiant, and its Founder CEO / Principal, Roger Bass, provide consulting and software solutions to help financial and technology providers profit from the emerging Internet of Payments.

Are we ready for this?

The world in which banks must operate today… Increasingly interconnected Increasingly mobile Increasingly granular services Increasingly demanding customers Increasingly concerned about data security


The Internet of Payments


“Neither Rome nor the Internet was built in a day. Each grew organically once the necessary foundations were built. Our analysis concludes that the necessary conditions for an Internet of Payments (IoP) are in place and could emerge and grow faster than most suppose. It’s a good time for leaders to take the next steps to catalyze its growth and profit from its emergence”.

From the conclusion of our recently co-authored white paper Building the Internet of Payments for Business By Richard Urban (President, IFX Forum, Inc.) and Roger Bass (CEO, Traxiant)

The Internet of Payments

http://www.ifxforum.org/docs/Building_the_Internet_of_Payments_for_Business_Final.pdf

Banking Foundations


1840

Security

1930…

2030?

Stability

Infrastructure

Local Presence

Banking Today…


Branch Banking…

…or Mobile Banking?

Banking today is built upon historical foundations – business and technical

Technical Foundations


1984

1987

Neither Rome nor the Internet was built in a day. Each grew organically once the necessary foundations were built. *

In 1984 we didn’t yet have the tools** to

diagram the foundational OSI

model and couldn’t email it to many

people yet.

**okay, strictly speaking, flow chart templates and pencils did exist

*Building the Internet of Payments for Business By Richard Urban (President, IFX Forum, Inc.) and Roger Bass (CEO, Traxiant)

SMTP (Email) RFC 1982

Email Routing using Domain System 1986

Domain Names System RFC 1987

Open Systems Interconnect Model

Email Protocols


Technology Today

Worldwide connectivity SOA Mobility Cloud Services Smart devices Multi-channel Internet of Things


Can We Build the IoP Ecosystem?


Service App

Service App

Service App

Service App

Service App

Service App

Service Definition Service Definition

Internet of Payments: Innovation Platform

Internet Standards: Proven Framework

Legacy Infrastructure: Connect and Extend

Business Ecosystems: Service Innovation

Debtor Agent

Creditor Agents

Company A Company X

Company Y

Message Formatting

Data Access (APIs)

Message Channel

Encryption, Security, Identity and Authorization

Network Infrastructure

Legacy Data

Message Formatting

Data Access (APIs)

Message Channel

Legacy Data Proprietary Local Data

Proprietary Local Data

Business Ecosystems

IoP Framework

Person Q

Person P

Payments Today – Buying or Banking?


Many devices, many channels, many banking relationships…

Payments are not about banking to the buyer!

… or Networking?

Internet of Payments: Why Now? Explosion in Cloud APIs APIs already live enable interop

ERP/SMB software support Payments too in some key cases

Higher value B2B payments solutions now justify interop


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Number of Cloud APIs

Standards maturity – gaps can be readily addressed Customer expectations: “there’s an app for that” Industry focus on faster, better payments

Source: Programmable Web

Banking APIs: Variability a Challenge Banking APIs today have significant variability:

Varied national financial/ payments habits Varied regulations and market infrastructures Varied implementations Varied standards and specifications Varied bank and customer business priorities

Variability fragments the market, slowing adoption and time to value realization

How then, to accelerate adoption and time to value?

App-like vs Network-like Approaches

Network effects can be the accelerator

Application-like Network-like

Mindset Customers use my “financial app” (i.e. solution)

Customers connect to the “financial network” with my app

Interactions Unchanged. App automates Network, via financial app

Prioritization Valued customers’ needs Network effect opportunities

Product Process Product Process Ecosystem Product

Adoption Direct & indirect channels Viral and ecosystem channels

Growth Modest: existing customers Fast: existing & new customers

In consumer arenas (payments, etc), network solutions have driven exponential growth and change. In business, not so much… yet

What’s the Big Win?

Viral Distribution: a Big Win for Today’s Scale Players Proprietary network effect defense against fintech upstarts Open IoP solutions Once only IoP solution set onboarding Once only onboarding early mover IoP solution “land grab” Enhanced on-boarding new trade finance, card revenue Global supply chains accelerated distribution of world class

solutions

On-boarding payees / suppliers goes from problem to opportunity. Mass supplier reach paired with an ecosystem of solutions can create a new, viral channel for financial and network solutions

Alignment = Acceleration We seek alignment along multiple dimensions…

Buyer-Supplier processes Bank-Corporate processes Banks and Software solutions Payments initiatives Relevant standards Cross-border and globally

Four major payments initiatives with similar goals in US, UK US UK Standardized Banking APIs

Open Access

IoP Messages, Remittance Std’zn

Enhanced Data

Business Payments Directory

Confirmation of Payee

e-Invoicing WG Request to Pay

IoP as “Umbrella” Framework = Alignment and Acceleration along ALL of these dimensions

Opportunity With Payment APIs

Source: The Payments Innovation Jury Report 2013

Payments APIs are a way to better enable electronic payments: Mobile services retail, corporate, branch

Corporate access corporate ERP connectivity

Bank/FinTech/Partner collaborative innovation Fintech innovations, hackathons,

innovation labs

Payments as a service Payments utilities, payment hubs,

payments clouds

Regulation European PSD2 XS2A

16

Valuable, New, Emerging Ecosystems


Service App

Service App

Service App

Service App

Service App

Service App

Service Definition Service Definition

Internet of Payments: Innovation Platform

Internet Standards: Proven Framework

Legacy Infrastructure: Connect and Extend

Business Ecosystems: Service Innovation

Debtor Agent

Creditor Agents

Company A Company X

Company Y

Message Formatting

Data Access (APIs)

Message Channel

Encryption, Security, Identity and Authorization

Network Infrastructure

Legacy Data

Message Formatting

Data Access (APIs)

Message Channel

Legacy Data Proprietary Local Data

Proprietary Local Data

Business Ecosystems

IoP Framework

Person Q

Person P

Ecosystems of APIs + Internet of Payments deliver Accelerating Value on Banking and Technology foundations

Standardized Banking APIs In our view it is not really an question of whether

banks should develop standardized APIs, it’s a matter of which banks will partner with which providers to develop them.

The IoP requires banks and businesses to share data on demand; this implies messaging.

To scale and interoperate, these messages must be narrowly focused on one hand, easily assembled into service offerings on the other hand; this implies standardization.


Process Stack Category Technology Examples SDOs and FinTech

Service Definition Business Definition, Enterprise Architecture

Business Capability Maps, FI Architecture

Service Application Application Definition Vendor and bank applications

In-house developers, Product and Service vendors

Service Message Definition Message Architecture FI Business Definition

Identity and Authorization Application Security OAuth, OpenID

Service Message Delivery Delivery Protocols, Channels

REST, JSON, XML, SOAP, etc

Web App Security User Agent Security Certificate validation; browser, mobile app

Encryption Security Security 3DES, RSA

Network Infrastructure Network Protocols Wire protocols; (eg. http, tcp/ip)

Application

Transport

SDOs bring expertise to bear in specialized layers…

Mapping SDOs

…interacting with each other in adjacent layers.

Call to Action

Requires executive level sponsorship, support and investment Bank collaboration in IFX sponsored Open APIs projects can generate

critical mass needed to deliver real results rapidly. Questions should be asked and answered

...where do open APIs fit in your investment strategy? …regarding IoP, where do B2B Payments fit in your investment strategy? …would you be willing to invest in the IFX open API project and to what extent? …what are the barriers to progress? …how can these barriers be addressed?

20

Standardization of Banking APIs and IoP should be a strategic priority •Standardized, open APIs, publicly available, developed and maintained by

recognized under the aegis of industry standards organizations. •Available to partners and developers to gain secure, controlled, programmatic

access to business software applications and data connected via IoP standards.

The IFX Banking API WG

Leveraging the rich content of the IFX Standard Leveraging the SOA Framework of the standard Building a cloud-enabled service library of APIs for the

industry to adopt and enhance Ensuring interoperability with other standards


IFX Forum is forming a Banking API Work Group which will work in parallel with the IFX Architecture Committee to define and deliver Standardized Banking APIs

From Definition to Design to Delivery

Parallel work streams – Business and Technology Business needs drive what needs to done in what order Technology needs to drive how to implement and interoperate Both need to drive operational efficiency and cost management

Deliverables will likely include: Best practices guide(s) Working code – JSON/REST and perhaps others Improved tool support and cloud service access to standard APIs Interoperability with ISO 20022 payment and remittance messages IoP: New use cases and/or messages for ISO 20022 to address gaps


Participation Goals

At least 5 banks of varied size and geographic reach At least 3-5 vendor companies Both business and technology participants are required Of these, 1-3 early leaders to ensure successful launch of the effort

o Early Leaders’ Press Release?

IFX has a jump start on this critical mass with banks and key vendors and service providers already enrolled as members; many more using the standard as paid subscribers using our tools.


A critical mass of banks, FIs and vendors should commit to work on this initiative in order to avoid the risk of a single company or bank trying to promote their solution as a standard.

Participation Qualification

IFX by-laws dictate that participation is limited to IFX members. Corporate membership is $9995/yr.

The IFX Board set guidelines for API Work Group participation One time Work Group participation fee: $5000 Minimum resource commitment of 20hr/mo. No limit to # participants – ideally 1 business + 1 tech. resource

Early mover advantage Access to materials during development is limited to participants Head start on building proprietary IoP ecosystems and platforms


Dual track – Define and Deliver


• Gather Bank requirements • Conduct Executive round tables • Prioritize capabilities • Coordinate with other SDOs, etc.

Business Definition

• Adapt IFX messaging • Incorporate business requirements • Prioritize pilot opportunities • Document best practices

Technology Delivery

Introduce Assess and Plan

Organize and Formalize

Recruit Leaders

Define and Deliver

Today - May May-June June – Aug Sept– Dec? Early-mid 2017

We’re taking the lead to get commitment from banks to support the initiative -and- We’re adapting the IFX standard to meet implementation requirements

NACHA Board Meeting API Round Table Conversations IFX Arch – API-Focused meeting Define

Deliver

Today Early Leaders’ Press Release?

Additional Resources

More detail can be found using these resources and we will make these slides available as well.

Reference Documents Topic Type of Document Reference to Document Building the Internet of Payments for Business White Paper - PDF http://www.ifxforum.org/docs/Building_the_Internet_of_Payme

nts_for_Business_Final.pdf IFX Standards IFX Standard Online http://www.ifxforum.org/standards/standard/ Education and Orientation materials Narrated presentations http://www.ifxforum.org/html/standard/orientation.html Membership information Forms and details http://www.ifxforum.org/html/membership/membership.html General information about IFX Forum Web site www.ifxforum.org

Direct Inquiries To Organization Name IFX Forum Judith Vanderkay, Director, Public Relations [email protected] IFX Community Forum http://www.ifxforum.org/standards/discussion/ Available to Guests, Subscribers and Members IFX President Rich Urban [email protected] Traxiant Roger Bass [email protected]

Slide 26 © Copyright IFX Forum, Inc. 2014



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http://www.ifxforum.org/html/membership/membership.html

http://www.ifxforum.org/

mailto:[email protected]

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Questions and Discussion
