API Testing for Open Banking Operations

API Testing for Open Banking Operations

The United Kingdom is recognized as a leader in Open Banking Operations. It’s been three years after the introduction of the second payments services directive (PSD2) in the United Kingdom (UK), which issued a statement to a few big banks to access their customer data with authorized third-party providers and startups. Furthermore, it also allowed third parties to directly transact with banks with no interventions.  

Why and What actually is Open Banking?

The term “Open Banking” refers to the concept of shattering the dominance of a few large banks by exchanging financial data with authorized third companies, but only with consumers’ agreement. Clients of banks will get more control over their financial information in this way. Transactions, credit transfer commencement, balance data, and fund checks are among the information that third-party providers (TPPs) have access to. Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs) are the two types of third parties (PISPs). 

It is true to say that Open Banking moved from a closed data model to an open model with the cooperation of customers. An open data model where information can be passed across different stakeholders in the banking environment.  

Role of Open APIs 

Open Banking was one of the key elements included in PSD2. It is built on the utilization of API access to data pools, regulation-compliant infrastructure, and other financial services resources. Open Banking brings opportunities for modern age banks to offer customers new and differentiated products, services, and experiences.  

It may have taken days, if not months, to develop new products and services and integrate them into the banking system. However, thanks to open APIs, banks can rapidly take advantage of detailed data analytics and build new revenue channels. 

Open banking platforms have technologically altered the fintech business in the United States, the United Kingdom, and Asia-Pacific. To standardize financial data exchange methods, traditional banking institutions work with new-age fintech platforms. 

Even when the Covid-19 pandemic had an adverse impact on the global businesses, open banking-based products managed multiplied.   

How are Open APIs transforming Banking Experience?

To start with, the use of APIs is central to the Open Banking and PSD2 concepts. The demand for services and products that can deliver multichannel customers and provide relationships to these customers causes a significant growth in the Open API sector. 

Open APIs are publicly available application programming interfaces that act as an interface between applications owned by multiple users. There is a secure means of information sharing or access to specific aspects of an application to offer multiple financial services by embracing open APIs. India’s UPI-based applications are in fact based upon Open APIs to an extent. 

Individuals and large corporations alike are benefiting from Open APIs, which are radically changing the banking experience. The use of open APIs is quickly increasing, and banks must offer comprehensive, safe, real-time information sharing using Open APIs. 

By adopting open APIs, financial institutions start delivering a variety of banking services such as allowing businesses to pay directly via ERP (Enterprise Resource Planning), reducing dependence, quicker cross border settlements and PSD2 enables third parties to begin payment requests or payments based on pre-authorization, and it also applies to other banking services.  

Need for Open API Testing

When it comes to open API testing, banks must guarantee that integrations are completed and tested as thoroughly as possible. Banks will primarily need to validate the data response and behavior of API queries during API testing. They will necessitate the design and testing of APIs that are aligned with important business logic and procedures.  

Banks must accept input data in the form of structured requests and deliver responses when using APIs. Banks can automate the majority of API testing, including functional testing, dynamic data generation, thorough regression testing, test scenarios encompassing the entire ecosystem, performance, ad hoc scenarios, and robust security testing. 

Here are some facts and figures highlighting how the BFSI sector, especially the banking sector is in great need for API testing service.  

  • According to Markets and Markets, “the global API testing market size is estimated to rise from USD 447.4 Million in 2017 to USD 1,099.1 Million by 2022, at a Compound Annual Growth Rate (CAGR) of 19.69% during the forecast period.”  
  • The BFSI vertical is predicted to develop at the fastest rate in the API testing market by the end of 2022.  
  • The open API strategy, which exposes a wide range of financial APIs to other businesses, is driving the API testing market. Hence, its relevance is growing, as is the need to invest in automated API testing. 

Going by this idea, to remain at the forefront of FinTech innovation, banks must actively adopt open APIs. For accomplishing this, financial bodies must be supported by solid back-end systems that work in tandem with open APIs, in addition to collaboration and partnerships. In short, the need for an automated testing and QA strategy is a must!


Suggested Read

Why is it Important to Test Banking Applications?


The Future of Open Banking

After successful implementation and gaining popularity in the United Kingdom (UK), Open Banking start gaining attraction in the United States (US). 

The United States is also going toward open banking, although in a different path than Europe. Rather than being driven by government regulation, these advances are being driven by creative businesses. This means that banks and fintech in the United States can explore collaborations on their own terms. 

As per sources, there will be a standardized integration with the banks, which indicates that third-party service providers will be able to operate at a lower cost. The presence of Open Banking will therefore permit many Fintech companies to make use of use APIs to connect their services to financial data. It will also encourage other small institutes and startups to enter and start providing their services. The TPPs will get a brilliant opportunity to expand and grow from their current set of services. 

For further consultation and knowledge regarding Open API Testing and other testing requirements concerning banking applications, reach out to us at ImpactQA!  


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