Open Banking: An Impending Revolution

Q: How does Afterbanks’ PSD2 method help make banking transactions and transfers safer and less expensive?

A: The Payment Services Directive 2 (PSD2) which applies only at the European level, is a regulation that forces the banks to open the financial information of their clients to third parties, and allows for the possibility of making immediate payments without an intermediary means of payment. These are the so-called account-to-account payments.

For example, instead of using a credit card to make a payment, one selects a source account and a transfer is automatically made to a destination account. This is done using the bank's infrastructure behind the scenes through regulated APIs and without an intermediary payment method, which reduces the cost of using the services.

Q: How does banking aggregation and real-time scoring provide added value to your clients?

A: One of the great use cases is the use of open banking when applying for a loan because it provides users with quick access to credit. With open banking, we obtain a real digital image of the financial situation of the client who requests a loan without the need to send information that later has to be reviewed manually. Reducing the waiting period it takes to obtain a credit score has a positive effect on the client, who obtains credit faster and under better conditions.

Q: Afterbanks just became a member of Fintech Mexico. How does it intend to utilize its membership?

A: We became part of the Fintech Association of Mexico late last year. We are grateful to be part of this association and of several of its working groups, including one that works on the regulation that includes the Fintech Law. The Fintech Law, which will soon be approved in Mexico, covers the sharing of transactional data information by the financial sector. Being part of this group will allow us to add our two cents to the regulation, taking into account our extensive experience in offering these services in both regulated and non-regulated environments, ultimately seeking to benefit users. 

Q: How will Afterbanks’ partnership with Alestra support the company’s ambition to provide open finance services within the Mexican market?

A: We offer our services to large financial entities. To better secure the financial data of Mexicans, we decided to work with Alestra for the installation of our servers within Mexico. Alestra is a benchmark in Mexico as an infrastructure provider, with extensive consulting experience in the implementation of solutions in the world of financial entities.

Q: How does open banking and the utilization of open application programming interfaces (API) stand to revolutionize the fintech industry?

A: A distinction should be made between regulated and unregulated APIs. Regulated open APIs allow for the extraction of certain financial information that is used by some businesses. But the regulatory framework does not consider other information that is essential for different business models. Considering the data required by our clients’ business models, Afterbanks will be able to access both types of APIs.

For example, in the EU, it is possible to obtain information regarding the bank transactions of a client through regulated APIs but obtaining information about the account holder has not been taken into account by regulators. A business model based on lending needs to know who the owner of an account is as well as the bank transactions of the credit applicant. Afterbanks retrieves the information and makes it available by accessing the regulated open API model to obtain some data and the unregulated API to obtain others, all with total transparency. 

Q: What is the importance of early adopters in the advancement of these solutions?

A: In an unregulated environment, such as Mexico, having companies that adopt open banking solutions without waiting to have a regulated environment is essential for the ecosystem to start creating these new business models. These early adopters will already have traveled down the path once the regulation arrives, positioning themselves as leaders in certain sectors.

Q: What objectives does the company look to accomplish in 2022 and how will it be measuring its success?

A: We aim to become a benchmark in the Latin American region as providers of open banking services. To achieve this, we are working on an ambitious plan to expand into new markets.

Success will be measured by the extent to which major players with high end-user traction in each of the regions where we are present adopt our open banking technology.