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Open Banking and the magic illusion of 24x7 availability

 “The more things change, the more they stay the same.” The wisdom in this old adage appears to ring true when applied to the early phases of the evolution of Open Banking (or open payments). Especially when you contrast it with the early days of ATM withdrawals; particularly those made in the dead of night so you could pay cash for your after-party greasy feast.

In both scenarios, a real-time balance is essential to ensure cleared funds are honoured. Decades ago, consumer demand for accessible after-hours cash was resolved through the illusion of real-time account availability, made possible by clever systems like BASE24. These systems managed balances safely and securely, even when old-fashioned account systems retired overnight to attend to their batched-up housekeeping duties.

Over the last couple of decades, the magical illusion of 24/7 availability has been perpetuated, and it now seems that banks are obligated to conjure that same magic to provide the ‘always-on’ real-time balance data required by third parties in new Open Banking initiatives. That’s because many banks’ modern Open Banking capabilities, delivered using new technology constructs like Application Programming Interfaces (APIs) and real-time payments, are still dependent on core banking systems with the same old limitations.

Real-time authorisation for the digital era

It is an interesting paradox that many of the world’s biggest retail banks (and indeed a fair proportion of disruptive new banks) are investing in user experience-driven banking apps to support always-connected users – but taking the capabilities of core accounting systems for granted. New, easy-to-use, front-end apps are important, obviously, but it is a mistake to view the core authorisation systems just as rather boring ‘back office’ overheads. These services are a crucial piece of the ‘always connected’ design goal, and to offering high levels of personalisation.

The modern requirement for personalisation builds on traditional authorisation functions (i.e. “is the card valid?” “are there sufficient funds?) by layering on extra preferences, such as the ability to turn accounts on/off, creating geographical blocks and restricting usage by retailer segment. Further checks need to be made to avoid fraud and to comply with new regulations relating to authentication requirements, where multi-factor authentication (beyond traditional card and PIN) needs to be executed.

New “authentication ceremonies” will need to be supported – allowing consumers to approve transactions using safe and secure methods that feel most natural. These are needed when a consumer accesses a bank directly using the bank’s own services. But they are also needed for indirect access, for example, when a consumer uses a third-party provider’s app to access the bank via new Open Banking APIs. Modern authorisation and authentication systems are anything but ‘back office’ – they are about to become major customer service differentiators.

Understanding Open Banking transactions flows – what happens when it goes wrong?

The new world of Open Banking promises new innovative services, offered by both new companies and by established brands now able to aggregate information from consumers’ multiple bank accounts and to initiate payments on their behalf. However, there are some uncertainties in these new transaction scenarios – not a great surprise given the new and radical nature of some of these interactions, which is giving rise to varying interpretations of public policy and regulatory statements.

Arguably, new payment flows might be simpler; real-time (immediate) payments as an alternative to cards carry the promise of lower costs, faster settlement and no provision for disputes and chargebacks. But normal people can make mistakes and queries, so disputes and correction facilities will inevitably need to be provided. In the card payments world, the ownership of liability and risk for these scenarios is clearly prescribed by the card schemes. But, in the world of Open Banking, these operational support facilities still need to evolve.

The existence of equivalent rules and policies in card payments ensures the continued use of cards as the default payment rails – at least until we see improved definitions for liability ownership within the real-time and open payments market.

What new magic is needed to deliver modern Open Banking?

So, is a 24/7 illusion still needed in the era of modern Open Banking?

It seems evident (and somewhat surprising) that many contemporary financial institutions are still not operating truly 24/7 core processing systems. There are exceptions, particularly among the new breed of start-up banks dotted around fintech capitals of the world, but in general, the need for a resilient proxy to manage real-time balance information still exists.

It may no longer be sufficient to stick to the old magic tricks, however. In addition to the basics of safe transaction authorisation, modern transaction handling systems need to step up to the challenges of strong authentication, the complex logic of personalised financial services and being able to handle alternative payment methods.

It may be appealing to dispense with the magic and go to the core of the problem, although this would mean addressing and upgrading existing banking systems to become genuinely real time. This can be a high-risk strategy though, fraught with existential dangers that go beyond the world of payments. It’s also a high cost, long-term option. Tricky, if a business needs to keep their options open as consumer opinions (and the actions of regulators) start to shake out.

Ultimately, the trick banks need to perfect is ensuring their customers get what they want. No one needs to believe in magic for this to work – you just need to recognise that magical things can happen if you get the payments story staged right.


Comments: (7)

Melvin Haskins
Melvin Haskins - Haston International Limited - 14 November, 2018, 08:191 like 1 like

Excellent analysis

Paul Love
Paul Love - Konsentus - Nottingham 14 November, 2018, 10:561 like 1 like


Excellent treatment of a simple problem made complex by repeatedly kicking the issues into the long grass.

It is now not just balances, but full access and service that is expected to be 24x7! 

And dont forget the abiltiy to process and respond to all the addional payment payload that ISO20022 will bring!

"Smoke and Mirrors" is living on borrowed time as a viable option.

Melvin Haskins
Melvin Haskins - Haston International Limited - 14 November, 2018, 12:111 like 1 like


You have pointed out the problem, but not the solution.

João Bohner
João Bohner - Independent Consultant - Carapicuiba 14 November, 2018, 12:351 like 1 like

Technology, nowadays, allows the 'new magic' to provide the ‘always-on’ real-time balance data (among others), eliminating the legacies.
It's just a matter of reshaping the financial business Architecture.

Paul Love
Paul Love - Konsentus - Nottingham 14 November, 2018, 12:391 like 1 like


As we all know there is no easy solution for the incmbents with decades of legacy infrastructure to account for.

Building a modern, flexible, service oriented and real time platform accessible through APIs and cable of seamlessly integtrating with the other services required for the end-to-end custoer experience is a good place to start.

Finding the right migration path is much more difficult!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 14 November, 2018, 12:581 like 1 like

"In the card payments world, the ownership of liability and risk for these scenarios is clearly prescribed by the card schemes. But, in the world of Open Banking, these operational support facilities still need to evolve."

Once they're evolved and implemented, do you think Open Banking payments will continue to fulfill their "promise of lower costs, faster settlement" compared to card payments?

Lu Zurawski
Lu Zurawski - Lu Zurawski - London 14 November, 2018, 16:21Be the first to give this comment the thumbs up 0 likes

I do believe that Open Banking will fulfill the promise of more efficient, effective and integrated financial services, beyond the traditional view of card payments. Obviously it'll lead to a chaotic period of change, and a great gnashing of teeth (particularly about the lack of ubiquitous standards compared to cards). 

Lu Zurawski

Lu Zurawski

founder, iKnowMe

Lu Zurawski

Member since

09 Sep 2014



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