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PSD2: Open Banking with APIs
The document discusses PSD2, a European regulation enhancing consumer protection and security in payment services, allowing direct API connections between merchants and banks. It outlines new business opportunities for third-party payment service providers and highlights the technological requirements for compliance including secure API connectivity and two-factor authentication. The presentation promotes Fiorano's solutions for facilitating this new regulatory landscape in the financial sector.
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PSD2: Open Banking with APIs
- 1. Jason Bloomberg AtulSaini • A leading industry analyst and expert on agile architecture • Advises on Digital transformation initiatives • Popular books by Jason - “The Agile Architecture Revolution” - “Service Orient or Be Doomed! How Service Orientation Will Change Your Business” Speaker Introduction • Founded Fiorano Software in 1995, Currently CEO & CTO • Been at the forefront of integration, SOA & peer- to-peer distributed processing • One of the first entrepreneurs to realize the power of Microservices
- 2. PSD2: Open Banking withAPIs Jason Bloomberg President [email protected] @theebizwizard Copyright © 2017, Intellyx, LLC
- 3. About Jason Bloomberg •President of industry analyst firm Intellyx • Latest book The Agile Architecture Revolution • Published the Agile Digital Transformation Roadmap poster Copyright © 2016, Intellyx, LLC3
- 4. What is PSD2? •Payment Services Directive (PSD) – EU Directive, in force since 2007 – Regulates payment services & providers in Europe • PSD2 – Revises PSD, in the works since 2013 – Better consumer protection & security – Incorporates emerging payment methods – Direct connection between merchants & banks via APIs Copyright © 2016, Intellyx, LLC4 PhotoCredit:CharlesClegghttps://www.flickr.com/photos/glasgowamateur/
- 5. Global Impact • PSD2one of many examples worldwide • Modern payment mechanisms must be global – Smartphone-based payments must work anywhere! • Regulations mandate change but require compliance with safeguards Copyright © 2016, Intellyx, LLC5 PhotoCredit:jasonWilsonhttps://www.flickr.com/photos/hive/
- 6. PSD2 Introduces &Regulates Third Parties • Third-party payment service providers (TPPs) – Payment Initiation Services Providers (PISPs) – Account Information Service Providers (AISPs) • New business opportunities • More parties to integrate with • TPPs will all be SaaS Copyright © 2016, Intellyx, LLC6
- 7. Direct Connection viaAPIs? • Transactions between merchants and banks have always gone through intermediaries • With PSD2, retailers get permission from consumer, interact directly with bank – API support on both sides – Raises bar on security – Consumer permission essential to compliance – Transactions in real-time, high performance, resilient Copyright © 2016, Intellyx, LLC7 PhotoCredit:GarfieldAnderssenhttps://www.flickr.com/photos/78855484@N03/
- 8. A New World •The old way: – B2B financial transactions over highly secure, closed networks – Point-to-point, proprietary formats • The new way: – Open APIs – RESTful, Internet-based interactions – Modern security protocols Copyright © 2016, Intellyx, LLC8 Regulators Expect APIs to work & be fully secure
- 9. Compliance Still Paramount •Never forget, PSD2 is a set of regulations – Compliance is mandatory – Compliance must be verifiable – If you experience a breach, you are out of compliance Copyright © 2016, Intellyx, LLC9 Blaming the Hackers Isn’t Good Enough! PhotoCredit:TnarikInnaelhttps://www.flickr.com/photos/tnarik/
- 10. Every Interaction MustBe Secure & Verifiable Copyright © 2016, Intellyx, LLC10 AISP Customer’s Bank MerchantPISP Merchant Web Site Merchant’s Bank Merchant Mobile Back End Customer
- 11. Jason Bloomberg President, Intellyx [email protected] @theebizwizard Downloadposter at AgileDigitalTransformation.com Thank You! Copyright © 2016, Intellyx, LLC
- 12. PSD2:Open Banking withAPIs Fiorano Webinar EntireContents © 2010-17, Fiorano Software Inc. All rights reserved By: Atul Saini CEO & CTO Fiorano Software Inc.
- 13. Technology required for PSD2 Compliance APIs arethe pivotal technology in the PSD2 regulation
- 14. Impact on Banks Before PSD2Post PSD2 Banks need a secure gateway to expose customer account data and payment processes to 3rd parties.
- 15. What Fiorano can dofor Banks Open up bank’s systems to provide access to 3rd party players of PSD2 ecosystem API Exposure Simplify the flow of transactions and payments bypassing manual entry of customer details Streamline Payments Provide added services to customers by wearing hats of PISP and AISP Value Added Services
- 16. Fiorano PSD2 Interface List ofBanks List of Beneficiaries
- 17. System Architecture Banks needAPI Management for interaction with PISP and other banks PISP packages the transaction information from the user and sends it out to the banks PISP Bank 1 Bank 2 Bank 3 APIs APIs APIs
- 18. Key PSD2 Flow (Step1) Customer Beneficiary’s Bank The customer asks the PISP to transfer X amount to a beneficiary PISP Customer’s Bank AISP • Consumer consolidates all Bank accounts with PISP • Transfers can be from any Bank account to any Beneficiary in a single interface
- 19. Key PSD2 Flow (Step2) Customer Beneficiary’s Bank The customer asks the PISP to transfer X amount to a beneficiary PISP Customer’s Bank AISP • Secure, time-bound API tunnel created from PISP to Bank • CryptographicTrace, with ISO messages The PISP initiates the payment from customer bank to beneficiary bank <PIAN 1 message> ISO20022
- 20. Key PSD2 Flow (Step2…) Customer Beneficiary’s Bank The customer asks the PISP to transfer X amount to a beneficiary PISP Customer’s Bank AISP • Before transfer, customer reviews Exchange rates,Transfer fees,Time- guarantees, etc. • Transaction can be reversed if consumer is not satisfied with guarantees/rates The PISP initiates the payment from customer bank to beneficiary bank <PIAN 1 message> ISO20022 <PIAN 2 message> ISO20022 - Exchange Rate - Transfer Fee - Time required for payment
- 21. Key PSD2 Flow (Step3) Customer Beneficiary’s Bank The customer asks the PISP to transfer X amount to a beneficiary PISP Customer’s Bank AISP • For each transaction over a certain limit (35-45 Euro), the Bank performs a 2-factor authentication over a range of devices/methods (mobile phones, email, etc.) • Overall timebound for complete transaction maintained <PIAN 2 message> ISO20022 - Exchange Rate - Transfer Fee - Time required for payment 2 Factor Authentication
- 22. Key PSD2 Flow (Step4) Customer Beneficiary’s Bank The customer asks the PISP to transfer X amount to a beneficiary PISP Customer’s Bank AISP • After Bank executes transfer, confirmation sent to PISP via one-way messaging • PISP updates ‘front-office’ transaction record and maintains cryptographic trace <PIAN 2 message> ISO20022 - Exchange Rate - Transfer Fee - Time required for payment 2 Factor Authentication Post authentication the customer bank transfers the amount to the beneficiary’s bank
- 23. Key PSD2 Flow (Step5) Customer The customer asks the PISP to transfer X amount to a beneficiary PISP Customer’s Bank AISP • Additional aknowledgements from Benefiary banks also recorded by both PISP and AISP 2 Factor Authentication Post authentication the customer bank transfers the amount to the beneficiary’s bank <1 way asynchronous message> Bank updates AISP & PISP with payment acknowledgement <PIAN 2 message> ISO20022 - Exchange Rate - Transfer Fee - Time required for payment Beneficiary’s Bank
- 24. Fiorano PSD2 Solution: Features Secured API connectivity via256 bit encryption Security 2 factor authentication via email and mobile Complete view of financial accounts in a single view Transparency End-to-end visibility of transaction history Out of the box core banking integration Interoperability Fully customizable solution to promote innovation
- 25. PSD2 Requirements Single viewof entire financial account status of an individual Complete financial transactional history for increased transparency Strong authentication mechanism that allows 2 factor authentication Enhanced security as confidential data is exposed to 3rd parties Sandbox for banks to start exploring new business models under PSD2 compliance Complete control on APIs to provide restrictive and selective permission access to different 3rd parties
- 26. Pre-requisites Customer has alreadyauthorized PISP to initiate payment on his behalf and the required information (includingSecurity Tokens, etc.) is available with the customer’s bank for verification The Merchant has the requiredCustomer Credentials / Security Token(s) (provided by Customer and Customer Bank during the setup process) to initiate payment via PISP Execution Flows (with PISP) PSD2 Execution Flows (PISP)
- 27. Execution Flows (withPISP) PSD2 Execution Flows (PISP) Customer Customer Bank Merchant/ Amazon Step 1: Customer places order on merchant website Step 2: Merchant contacts PISP which has been authorized by customer Step 3: PISP initiates the payment at customer’s bank via a secure Oauth connection Step 4: Customer Bank verifies PISP’s request, debits customer account and wires money to Merchant TransferWise (PISP) AISP Step 5: The Bank NotifiesAISP, PISP, and Merchant via one-way messages Step 6: AISP (optionally) sends notification to Customer
- 28. Single Portal for accessing yourbanks Banks Balance Bank A $ 2500 Bank B $ 4500 Bank C $ 1000 Beneficiary Bank ABC Bank A XYZ Bank B PQR Bank C Step 1: Customer chooses one of his banks from PISP to transfer money to a Beneficiary $ 500 Transaction Details Amount Beneficiary Customer Accounts Beneficiaries Transaction History
- 29. 2 Factor Authentication PISP Step 2: PISPcontacts Bank A via API Bank A Customer Step 3: CustomerAuthorizes the transaction via 2 factor authentication Bank C Step 4: Bank A completes the transaction by transferring $500 to PQR’s account in Bank C
- 30. Transaction History & Updated Balance Banks Balance Bank A$ 2000 Bank B $ 4500 Bank C $ 1000 Beneficiary Bank ABC Bank A XYZ Bank B PQR Bank C Step 5: Customer sees the updated account status and transaction history Transaction Details Amount Beneficiary Bank A to Bank C $ 500 PQR Customer Accounts Beneficiaries Transaction History
- 31. The presentations arenow concluded. Please stand by for the Q&A session Atul Saini CEO & CTO Fiorano Software Inc. ©Copyright FioranoSoftware, Inc, and its affiliates. Fiorano ESB, Fiorano Middleware Platform SOA, FioranoMQ,Fiorano JMS server and Fioranologo are trademarks or registered trademarks of Fioranoand its affiliates. The data and information contained herein may not be reproduced, published or distributed to, or for, any third parties without the express prior written consent of Fiorano. Products and names, if mentioned in the presentation are the property of their respective owners and the mention of them does not constitute an endorsement by Fiorano. www.fiorano.com ThankYou To find out more about Fiorano solutions, please visit www.fiorano.com or Email us at [email protected].
- 32. NextSteps… Please type inyour questions using the Chat Q&A windowQ&ASession in Progress To find out more about Fiorano solutions, please visit www.fiorano.com or Email us at [email protected].
- 33. ThankYou for joining us today Tofind out more about Fiorano solutions, please visit www.fiorano.com or Email us at [email protected]. AMERICA’S Fiorano Software, Inc. 230 S. California Avenue Suite 103 Palo Alto, CA 94306 USA Tel: +1 650 326 1136 Fax: +1 646 607 5875 Toll-Free: +1 800 663 3621 Email: [email protected] EMEA Fiorano Software Ltd 3000 Hillswood Drive Hillswood Business Park Chertsey Surrey KT16 0RS UK Tel: +44 (0) 1932 895005 Fax: +44 (0) 1932 325413 Email: [email protected] APAC Fiorano Software Pte. Ltd. Level 42, Suntec Tower Three 8 Temasek Boulevard Singapore 038988 Tel: +65 68292234 Fax: +65 68292235 Email: [email protected] ThisWebinar has now concluded. We will appreciate if you can complete the feedback form displayed at the end of the webinar