Regulation is a fact of life for firms in the financial services sector— the next set of requirements appearing right after they’ve adapted to the first. At the forefront of the most recent set of changes is Open Banking, which is navigating its own set of regulatory challenges: notably, PSD2.
Short for Payment Services Directive 2, this common legal framework was established by the European Commission to regulate electronic payments and the banking system across Europe. The directive aims to enhance consumer protection, promote competition and innovation, and ensure all legal aspects of payments within the EU are airtight. PSD2 came into effect in 2020, with plans to release a PSD3 on the horizon.
In our previous blog, ‘Open Banking: Beyond the Hype into Reality’, we discussed how Open Banking has disrupted traditional forms of banking by allowing third-party providers to access the financial data of customers. With more opportunities to innovate in this increasingly dynamic ecosystem, banks are competing to stand out by offering the best possible customer experience. However, amidst this wave of innovation, PSD2 and other regulatory frameworks remain a key focus for the industry.
Since its inception in 2018, Open Banking has grown significantly, with a wide range of providers and applications that streamline banking and payment systems. Critically, the use of standardised APIs ensures a uniform interface across the banking industry. However, this raises an important question: Why do we need the Banking Industry Architecture Network (BIAN) standard in addition to Open Banking APIs?
BIAN: Standardising the Business Services Layer
BIAN is an independent, member-owned organisation dedicated to establishing a standardised IT framework for the banking industry. This collaborative network, comprised of banks, technology providers, architects and consultants, aims to streamline banking operations, reduce IT complexity and promote interoperability between diverse systems and applications.
For businesses that don’t have mature enterprise architecture practice, BIAN offers a foundational capability and service framework. It also opens the gateway to service-based architectures (SBA) and is complementary to Domain Driven Design (DDD).
While Open Banking standardises the API presentation layer, allowing applications to interact seamlessly, BIAN focuses on standardising the Business Services Layer within this SBA. This ensures the consistent and compatible delivery of banking services across various systems, regardless of the specific technology used.
Domain Driven Design: Where Business Meets Software
Domain Driven Design (DDD), a concept popularised in 2003 by Eric Evans, provides a framework for software development centred around a domain model. Crucially, this approach enables the creation of service patterns using a common language. DDD assumes that business domain models are documented, known and utilised within the organisation. It’s particularly effective in event-driven, microservice-based architectures requiring service granularity.
BIAN and Domain-Driven Design: A Perfect Match
BIAN addresses APIs and services within the financial services domain, providing capability models, service models, and even Swagger specs for API. This framework accelerate understanding and development. It also aligns perfectly with DDD's concept of bounded contexts, which define focused areas of the system with clear boundaries.
This alignment between BIAN's Service Domains and DDD's bounded contexts simplifies design and implementation within the business domain layer. What’s more, the shared terminology and common language, established by open banking, can be applied across layers through BIAN and into DDD, creating a unified metadata repository. Ultimately, this standardisation helps drive efficiency, while reducing confusion in various stakeholder groups.
The Transformative Power of Open Banking and BIAN
The synergy between Open Banking and BIAN represents a powerful alliance, driving the financial sector towards a future characterised by efficiency, innovation, and collaboration. But how does this alliance benefit financial institutions?
- Operational Excellence:
- BIAN's standardised framework streamlines operations, reduces complexity, and promotes interoperability.
- Regulatory Compliance:
- BIAN helps ensure systems and processes adhere to regulations, for example in Open Banking.
- Adaptability:
- Standardised architectures allow institutions to adapt to evolving technologies and customer demands more easily.
The Future of Banking Architecture: Openness and Resilience
By embracing standardised frameworks and open data sharing, the industry can build resilience and foster growth. A combined approach - where BIAN provides the standardised foundation and Open Banking enables secure data exchange - empowers the financial sector to deliver superior customer experiences while being compliant and pushing the boundaries of innovation.
At NTT DATA, we have the experience and knowledge which has led us to implementing a wide variety of architectures under various standards such as Open Banking and BIAN, while supporting various regulatory frameworks.
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If you’re interested in reading more about the evolving landscape of Open Banking, be sure to check out other blogs in our series, ‘The Future of Money’: