Technical Architecture (Logical View) for Open Banking; Drivers of growth in embedded payouts; Blockchain-Based Identity Management Architecture and Protocols;

In this edition 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 

3️⃣ Monzo launches pension consolidation product

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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. 

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Insights

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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.

🔹 Identity Provider

- Manages digital identities of final consumers/users interacting with APIs.

- Exclusively accessed by the Identity and Consent Manager.

- Serves as a core banking system component.

🔹 Analytics Engine

- Offers visualization tools and BI systems, using data from the API Gateway.

- Supports data scientists in building analytical models for past operations and future forecasting.

🔹 API Portal

- Delivers a Developer Experience, bridging APIs and consumers.

- Educates developers on API usage and constraints.

- Communicates with the API Gateway for application provisioning and credentialing.

🔹 Enterprise API Manager

- Manages the API lifecycle from creation to discovery.

- Oversees API Gateway policies for security, rate limiting, and enablement.

🔹 Integration Strategies

- REST Based Integration: For downstream systems exposed as REST APIs.

- Legacy Protocols Integration: For services with legacy protocols (TCP/IP Sockets, Mainframes, RPC Web Services).

- Async Based Integration: For systems using messaging (IBM MQ, JMS, Kafka).

- Direct Data Integration: For direct access to data repositories (databases, file systems).

🔹 Downstream Systems

- Represents core banking systems storing financial information (credit, customer info, transactions, account data).

- Integrates these systems into the Open Banking Ecosystem without displacing them, leveraging Open Banking Optimized Microservices.

Source Blanc Labs