Technical Architecture (Logical View) for Open Banking; Drivers of growth in embedded payouts; Blockchain-Based Identity Management Architecture and Protocols;
In this edition of Fintech Wrap Up, we’re diving into the intricacies of Open Banking architecture, exploring actionable strategies for omnichannel banking, and discussing the latest trends in embedded payouts.
Insights & Reports:
1️⃣ Technical Architecture (Logical View) for Open Banking
2️⃣ Banking: Actionable Lessons from Omnichannel Leaders
3️⃣ Brazil: Strategies adopted for open finance
4️⃣ Drivers of growth in embedded payouts
5️⃣ Demystifying Cards: The Licensing Question
6️⃣ Blockchain-Based Identity Management Architecture and Protocols
Curated News:
1️⃣ Revolut receives long-awaited UK banking license
2️⃣ Stripe acquires payment processing startup Lemon Squeezy
TL;DR:
Firstly, we explore the technical architecture for Open Banking, highlighting key components like the API Gateway, which acts as a reverse proxy and enhances security with policies such as MTLS and OAuth 2.0. The Data Grid Layer stores data in memory for high performance and resilience, ensuring low response times and continuous availability. Meanwhile, the Identity and Consent Manager ensures secure API access with robust authentication and authorization measures.
Next, we examine actionable lessons from leading banks in omnichannel services. A key takeaway is the importance of optimizing the tech stack to avoid massive backend system overhauls. Leading banks focus on integrating digital front-ends with core capability modules like design systems and customer 360, enhancing both personalization and customer experience. The approach involves careful segmentation and targeted digital adoption tactics, with frontline staff in branches and contact centers acting as digital evangelists.
In Brazil’s Open Finance ecosystem, we note the challenges posed by a restrictive market and a tough macroeconomic environment, particularly for fintechs facing a venture capital shortage. Incumbents focus on optimizing existing services and leveraging data aggregation, while neobanks and fintechs introduce new products like credit profiling and insurance.
In the embedded payouts arena, platforms are moving beyond just acceptance to capture new fintech opportunities. Embedded payouts, especially card-based ones, are highly monetizable, with platforms earning substantial margins from commercial card interchange sharing. The expansion of Visa Direct and Mastercard Send illustrates the growing global reach of these services.
For those navigating the complexities of card licensing, we demystify the process by breaking down the key considerations and strategic decisions involved. Whether it’s defining your objectives or understanding your resources, a clear path to licensing is essential for a successful card program.
We also delve into blockchain-based identity management, discussing the architecture and protocols needed to secure digital identities. This includes the crucial components of membership service and smart contracts, which provide governance and transparency within the network.
Finally, we cover some of the latest news: Revolut’s newly acquired UK banking license, marking a significant milestone for the fintech giant; Stripe’s acquisition of Lemon Squeezy, a startup that handles global sales tax for digital products; and Monzo’s launch of a new pension consolidation product, aimed at simplifying pension management for users.
Insights & Reports
Technical Architecture (Logical View) for Open Banking
🔹 API Gateway
- Acts as a reverse proxy, exposing compliant REST APIs per OAS specs defined by FDX.
- Intercepts, processes, aggregates traffic, and returns results.
- Enhances security with policies such as MTLS, Open ID Connect, OAuth 2.0, and FAPI.
- Provides monitoring tools to understand API usage.
🔹 Data Grid Layer
- Stores data in memory for high performance and resilience.
- Manages shared objects across microservices with low response time, scalability, and throughput.
- Supports continuous availability and information reliability through redundancy and synchronization.
- Handles potentially outdated cached data.
🔹 Identity and Consent Manager
- Ensures authentication and authorization for secure API access.
- Implements access control and security profiles like FAPI.
- Provides administrative tools for managing customer consents.
Banking: Actionable Lessons from Omnichannel Leaders
Many banking executives avoid transformation programs for fear of creating an omnichannel monster. We have observed programs failing when governance is diffused and too many priorities result in fragmented delivery and diluted impact. But it doesn’t have to be like this if banks deploy the right framework and establish a fully dedicated program tribe.
By making the necessary changes to the tech stack, banks can avoid carrying out massive backend system overhauls and approach transformation with surgical precision. This is done by systematically optimising the technical and operational stack, defining which systems need to be added, replaced or refactored.
In addition to the digital front-end technology, leading omnichannel banks focus on other core capability modules like the design systems and common component libraries. The omnichannel service layer, the personalisation stack, and customer 360 are other top priority areas.
We are now seeing omnichannel leaders focusing on workflow (BPM) and PFM, as well as authentication and authorisation. Designing modern CRM and integrating sophisticated personalisation is of paramount importance, as is accelerated building with the right operating model in place.
Curated News
Revolut receives long-awaited UK banking license
Revolut has been granted a banking license from the Prudential Regulation Authority (PRA) in the U.K. This is a significant milestone for the London-based fintech company, particularly since it has been trying to secure this license since 2021.
