Open banking initiatives built around PSD2 were designed to create greater competition, innovation, and consumer choice across financial services, but inconsistent API standards continue to slow adoption and limit interoperability. Research from Mercator Advisory Group highlights how uneven security models, inconsistent functionality, fragmented data structures, and weak developer testing environments remain significant barriers to a seamless open banking ecosystem. As financial institutions and fintech providers increasingly rely on APIs to power digital payments and cloud-based services, the need for more standardized and scalable open banking frameworks has become increasingly apparent.
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Data for today’s episode is provided by Mercator Advisory Group’s report – The Emergence of API Platforms: Open Banking and Payments Drive New Business Models.
5 API standards PSD2 still hasn’t refined:
- Because PSD2’s requirements aren’t specific & interfaces not-standardized, open banking needs refining:
- Inconsistent security models across banks; some limit sessions to just their bank
- Inconsistent functionality; many are read-only
- Inconsistent interface and data models require bank-specific coding
- Ineffectual sandboxes for testing; currenct security model has no “guest” function
- Inconsistent documentation, few are multilingual and few work across banks
About Report
Mercator Advisory Group has released a report describing the technical and regulatory challenges delaying the implementation of the European Union’s PSD2 Open Banking mandate and contrasts that with the rapid growth in new application programming interface (API) driven platforms that operate in the cloud. There has been a surge in platform-as-a-service (PaaS) solutions utilizing APIs.
The report, The Emergence of API Platforms: Open Banking Drives New Business Models, identifies the technical and regulatory issues that continue to be challenges to lift-off for the European Union’s open banking vision and contrasts that situation with the structures that have driven a surge in the availability of cloud platforms that utilize APIs to enable similar services, such as payments.
“In a past report we identified the game-changing value proposition associated with internet-based application programming interfaces. This report identifies why the implementation of APIs has failed to help the EU Open Banking initiative gain liftoff even as these APIs have created a surge in the number of cloud-based platforms recently announced,” commented the author of the report, Tim Sloane, VP, Payments Innovation, and Director, Emerging Technologies Advisory Service at Mercator Advisory Group.
This research report has 20 pages and 10 exhibits.
Companies and other organizations mentioned in this report include: Bank of America, The Berlin Group, Citibank, Citizens Bank, European Banking Authority, Fidor, Financial Conduct Authority, Mastercard, Railsbank, solarisBank, Visa, Vyze, and Wells Fargo.
