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Modern Data + AI Integration:Strategies and Architectures

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Overcome Integration and Data Challenges of Open Banking

What is Open Banking/Open Finance

Open Banking has greatly augmented people’s ability to make strategic financial decisions. From checking account balances on your phone to accessing all kinds of financial products, personal financial data is more accessible than ever. This is done through Open Banking–the sharing of financial data via application programming interfaces (APIs). By opening up their APIs, financial institutions allow third parties to access consumer banking, transaction, and other financial data. Third-party FinTech developers can then build applications that bring value to consumers with services ranging from simplifying payments to streamlining the user experience and beyond.

The Open Banking initiative was originally driven by the EU’s PSD2 directive, followed by the UK’s Open Banking Standard that allowed banks to open their infrastructure to third parties. In the US, Open Banking is instead industry-driven, powered by major banks and payment providers.

Open Finance is a similar concept but has a wider scope regarding the types of data shared. Data covered include information about loans, pensions, investments, and other financial products and services. With both Open Banking and Open Finance, consumers can take control of their data, gain insights into their financial health, and make data-driven financial decisions.

API-Driven Innovations

APIs drive many innovations in product development across the financial services industry. Most banks have already been using internal APIs to help information flow among systems. Open Banking/Open Finance APIs facilitate experimentation that eventually produces products allowing consumers to trade stocks or manage credit risks with a few taps on their phones. At the same time, financial institutions are able to expand customer reach and increase revenue streams.

A good example is Citi’s API platform Developer Hub. Qantas Airways uses the Accounts APIs included in this hub to launch branded credit cards and mobile applications. Through connections to customer data shared by Citi, Qantas lets customers manage their reward points and credit cards and monitor their spending habits. Intuit uses Citi’s Authorization API to allow customers to securely link their bank accounts. Intuit then gathers customers’ information through the Accounts & Transaction API to provide personalized solutions in products such as TurboTax.

At the center of Open Banking/Open Finance is extending the data value chain beyond the previously closed doors of financial institutions’ systems. From integrating with APIs to delivering business value, participants in Open Banking/Open Finance must overcome the following challenges to improve user experience and facilitate innovation, while maintaining security and privacy of highly sensitive information.

Data Challenges of Open Banking/Open Finance

Connecting disparate data sources

  • For financial institutions: One of the biggest challenges is integrating digital solutions with legacy systems. Banks need a way to make legacy systems communicate with newer systems in order to provide access to all necessary data that power third-party applications. Data remaining stuck in legacy systems impedes integration with public and partner APIs. For example, to offer data access, a bank needs to ensure that APIs such as e-signature and credit checking can pull data quickly.
  • For third-party applications: FinTech applications such as Mint need to connect to various APIs in order to pull bank account, transaction, and billing information from most major banks’ APIs. These connections span a number of data sources. Depending on the product offerings, some products also need to integrate with various sources outside of banking, such as eCommerce and real estate systems. Managing API credentials and keeping track of all involved APIs demand much effort and resources.

Nexla’s bi-directional universal connector allows banks and third-party developers to form and manage connections to any data system. This includes niche and legacy systems unsupported by other integration tools in the market. Nexla supports any authentication type for REST and SOAP APIs— OAUTH1, OAUTH2, and refreshing token-based authentication. Just input credentials or API keys, and connectors can be auto-generated, moving from zero to production level in a few days compared to the average banking API integration time of six months.

Making Data Ready-to-use

Data pipelines & integration

After connecting to an API, retrieving, processing, and moving data into warehouses, applications, or other APIs are sometimes the most engineering-intensive steps in the integration process. Challenges such as refreshing authentication and pipeline maintenance make building and managing pipelines in-house extremely costly.

A stock-trading application such as Robinhood needs to extract and aggregate data from stock exchange markets, banks, crypto exchanges, etc. Processing billions of data records via APIs every day requires highly efficient integration approaches.

Instead of building pipelines from scratch, Nexla offers a unified, all-encompassing integration that allows slicing and moving data in any format between any systems, e.g., Capital One’s public API and Redshift. Organizations can easily scale the number of enterprise-grade pipelines that can process as much data volume as needed. Data engineers can manage all data pipelines/flows within a single platform using intelligent monitoring and alerting systems to minimize downtime.

Schema recognition and data transformation

Interacting with numerous APIs requires ingesting data in various formats and preparing data to fit destinations. When a data record of a recent transaction is sent through the bank’s API to a budget-management application, the record attributes might look like this: Customer_ID, Account_Number, Transaction_Date, Transaction_Amount, POS_Location, Billing_Address, Credit_Balance, Transaction_Status, etc. To transfer this information into the budget-management application, the shape of the data needs to be molded into the schema and format required by the destination database. For example, the Billing_Address might need to be stripped, POS_Location could need to be parsed and rearranged, etc.

Recognizing schema and transforming data significantly slows the integration progress. Nexla makes detecting schemas, schema changes/overlaps, and supersets/subsets automatic and continuous throughout the integration process. One can configure, save, and edit transformation and validation rules with little to no coding. Target schemas can also be saved and shared by simply pasting an input sample. With Nexla, data transformation happens while data is flowing between systems, freeing up engineering resources that would otherwise be spent on parsing through the complex API documentation and coding rules.

Capturing data at various speeds

Another challenge for FinTech developers is capturing data at varying speeds. For example, a stock-trading application like Robinhood requires instant data updates about the stock market, while it only needs updates on accrued interest every month. Nexla provides a flexible and scalable solution for data processing at any speed, whether batch, streaming, or real-time. It is a one-stop shop for all data processing cases.

Deliver Insights

Turning data into usable assets

The essence of Open Banking/Open Finance is extracting the value of data stored in banking systems and other places and utilizing it to produce insights, simplify tasks, and facilitate data-driven decisions. Data as a Product is the most modernized, efficient way to kickstart value generation from data.

Nexla can seamlessly aggregate and transfer consumers’ financial data according to  third-party developers’ specifications. The custom data products output called Nexsets–these are logical entities encapsulating a complete understanding of data. A Nexset can contain a consumer’s transaction data within a certain spending category, the price history of an ETF, the bank balances of a group of consumers in the same income bracket, and infinitely more subsets of data that provide financial insights. These Nexsets can be auto-generated or created with a few clicks without running complex queries, and they are readily usable on any analytics platform.


Identity management

A key challenge in the Open Banking/Open Finance world is identity management. A secure, universal framework for identity management across financial institutions is currently lacking. Therefore, it is challenging for third-party developers to track user accounts across various bank records. Developers usually have to build their own identity management systems as a result.

Nexla’s continuous metadata intelligence-driven data solution has proven to be effective in tracing datasets’ relationships and increasing the searchability of existing data. This unique technology observes data at the record level and infers metadata to generate a deep understanding of data. Developers can leverage this understanding to easily observe and link related datasets, thus mitigating the challenges of identity management.


Powering data science and analytics 

Data analytics is widely used in the offerings as well as operations of Open Banking/Open Finance products. Enterprise applications such as QuickBooks provide company financial health reports via interactive dashboards; loan and credit-risk applications use machine learning to build models to forecast risks and performances.

Catering data to these features and projects usually requires much data engineering effort, especially when large amounts of data need to be sifted through various APIs and injected into analytics platforms or notebooks.

Nexla streamlines the data preparation process by automating the most time-consuming parts of data engineering and handing the task of data sourcing to domain experts. With Nexla’s no/low-code integrations and universal connectors, data analysts can configure automated workflows that feed data into dashboards and run SQL queries to generate reports. Data scientists can grab data, slice and clean it, and have datasets ready to use in their notebooks for testing ideas and training models. The time saved by not having to wait on engineering decreases the time between data discovery and obtaining business value.

Security and Data Quality

API outage and error management

APIs are not guaranteed to work reliably. When downtime occurs in an Open Banking API, the consequences might be failed transactions or stale account information. This is detrimental to customers’ trust in the promise of a seamless experience. Very often, error messages are not clearly stated, causing delays in responses to customers that further damage the user experience.

Nexla makes sure that whenever failed API calls happen, errors will be detected, and personalized alerts will be sent. One can easily trace back errors and fix them without disrupting operations. At the same time, data quality is constantly monitored via automatic and customized validations to check for values, patterns, types, etc. One can command in-flight fixing or pausing during API calls to ensure full control over situations when errors occur.

Security requirements 

Open Banking/Open Finance requires strict security standards regarding API access management and privacy data protection. Nexla makes it easy to mask sensitive personal information and stay compliant with privacy requirements such as GDPR. Nexla has been awarded the ISO27001:2013 Certificate and SOC 2 Type II certification by AICPA. One of the US’s Big Four banks along with a leading investment accounting SaaS provider trust Nexla for their data integrations. Capable of cloud, on-prem, and hybrid deployments, Nexla has been proven to provide enterprise-level security.

Nexla – the One-stop Shop for Open Banking API Integration

From connecting to various APIs to catering ready-to-use data for analytics projects, Nexla is a unified solution that offers automated, scalable, and customizable data integration solutions without compromising data quality or security.

Request a free demo to get more details on how Nexla can help you succeed in the Open Banking/Open Finance ecosystem.

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