In recent years, the global banking sector has faced a technological restructuring as financial institutions navigate the integration of application programming interfaces (APIs) into their core operations.
These digital connectors, which enable different software systems to communicate, are reshaping traditional banking models and creating new market dynamics across the industry.
Moshe Winegarten, Chief Revenue Officer at payment services provider Ecommpay, has witnessed this transformation across multiple sectors.
His 18-year career spans the development of the UK’s first instant-issue prepaid Mastercard, the European expansion of Visa Direct and the growth of payment processor Checkout.com into a major financial technology provider.
Banking Service Specialists Challenge Traditional Models
Today, market developments are forcing a reassessment of conventional banking structures. “We are seeing the birth of specialist ‘banking as a service’ banks and even embedded finance banks who have built their models from the ground up,” Moshe explains.
“They have the technology as well as the processes to do the due diligence for a digital user experience.”
This evolution marks a departure from assumptions about traditional banks’ digital transformation.
“High street banks will retain their position delivering credit and savings services, albeit the presence on the high street will continue to be eroded as the move to online/app based banking accelerates,” Moshe adds.
“The high street banks are just not equipped – both technically and with their processes – to deliver API services. It’s not their core business – and doesn’t need to be.”
Legacy Systems Present Integration Hurdles for Banks
The technical challenge of connecting modern APIs with decades-old core banking infrastructure remains substantial.
Most major banks operate systems built on COBOL programming language from the 1970s and 1980s, requiring careful consideration of integration methods.
“Without a dramatic overhaul of their architecture and significant replatforming investment, the most effective mechanism for integration with legacy banking architecture is through an API integration layer built (as Natwest have done in the UK) or through traditional integrations to 3rd party aggregators,” Moshe notes.
Implementation progress varies by market. “Banks in the UK have already made significant investment in API under the Open Banking and Open Finance Agenda but it will require more consolidated effort and standardisation to achieve the same scale across Europe,” Moshe continues.
European markets demonstrate varying levels of API sophistication, with some countries maintaining fragmented systems while others push toward standardisation.
Real-time Payment Security Demands New Approaches
The acceleration of instant payment systems has created specific security requirements. Payment processors must now conduct fraud checks within milliseconds rather than the hours or days previously standard in banking operations.
“Realtime sanction screening is already in place across the financial services space,” observes Moshe.
“However, with fraudsters always finding new ways to scam businesses and customers, AI could be a critical tool in ensuring that APIs are fit for purpose. Speed to react to new frauds is vital, especially in the world of instant settlement.”
The regulatory framework provides an essential structure for these operations.
“Open banking & open finance frameworks play a pivotal role in controlling fraud,” says Moshe.
“This is because access and permissions for money movement are based on validated permissions, both at the Third Party Provider level for integration access and through their service access for validation of end consumers.”
Artificial Intelligence Reshapes Financial Data Usage
In the last few years, financial institutions have been moving beyond basic data transmission through APIs.
Machine learning models now process transaction data to identify patterns, predict customer behaviour, and automate decision-making processes. These capabilities enable banks to offer personalised services at scale while maintaining security standards.
The integration of AI with banking APIs has particular significance for fraud prevention, credit assessment, and customer service automation.
Banks are developing systems that can analyse transaction patterns in real-time, identifying suspicious activities while reducing false positives that can interrupt legitimate customer transactions.
Decentralised Finance Creates New Revenue Opportunities
Elsewhere, the emergence of decentralised finance (DeFi) and central bank digital currencies (CBDCs) presents specific opportunities for traditional banks.
“Banks are already heavily invested in due diligence and KYC; if this could be accessed through APIs for DeFi and CBDCs then it could enhance the user experience,” Moshe suggests.
“KYC and due diligence could, therefore, be a profit centre for the banks rather than the cost centre it currently is.”
Privacy Considerations Shape Processing Architecture
The management of data privacy in open banking requires specific technical approaches. “Key considerations are in the rules and permissions rather than in the technology per se,” notes Moshe.
“In open banking today, payment initiation requests (PIS) require individual authority whereas account information (AIS) request permissions are refreshed at defined periods, and many requests are implemented by batch to streamline process and access control overheads.”
This segmented approach enables efficient data handling while maintaining security standards.
“For recurring payment of continuous authority, similar principles could be deployed to support the seamless experience but manage access permission and account holder verifications.”
Market Evolution Extends Beyond Traditional Banking
It’s clear the implementation of open banking infrastructure has created opportunities beyond traditional financial institutions.
Moshe says: “The banks have spent many years and significant investment plugging open banking into their legacy systems.
“The opportunity now is for open APIs to be available beyond the incumbents – for payment platforms like Ecommpay to enhance the payment experience for merchants and their customers.”
He concludes: “At the moment, open banking is being used to look at transaction history for financial institutions to build their own models.
“The opportunity, surely, is to extend the data that’s available through an API to transform the customer experience.”
To read the full article in the magazine, click HERE.
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