Open Banking is a technology-driven movement that is revolutionizing the financial services industry. It is based on the idea that banks should extend their customer experience abilities by integrating services and products offered by third-party providers.

As Open banking makes noise in the fintech industry by uplifting financial services, let’s discuss Open banking and its impact on the financial landscape.

What is Open Banking?

Open Banking refers to banks’ extended capability to securely share customers’ financial data with third-party providers via APIs. Open banking aims to elevate the customer experience by giving them more choices and governance over their finances.

It can be said that open banking is an open data model wherein customer data, with their consent, is shared with different stakeholders across the banking environment. Third-party providers have access to this data in the form of transactions, fund checks, commencement of credit transfers, and so on.

How is open banking reshaping the financial landscape?

Earlier, consumers had access only to the products and services offered by the banks. With open banking, consumers can tap into a diverse range of products and services provided by different banks and financial institutions.

Since open banking allows sharing customer data with third-party providers, these providers can proactively develop and launch new and customized products and services that cater to the specific needs of consumers. As a result, consumers get a more personalized experience tailored to their individual needs.

The benefits of open banking continue beyond the consumers. Financial institutions also leverage open banking to access the latest range of financial products and services that may grow their business and help them strive in the competitive market. Along with accessing third-party products and services, consumer data can be utilized to create new products and services.

What are Open Banking APIs?

Open banking APIs are the bridge that moves consumer data from a bank’s database to the service providers. This allows the bank to offer a comprehensive range of services, payment plans, and financial products tailored to each customer. Banks can develop their own unique APIs, linking them to external APIs to create a customer-centric financial ecosystem.

How are Open Banking APIs reshaping the banking experience for customers?

Knowing your customer is always important, but in some industries, verifying accounts and identities is essential to doing business. Open banking APIs let companies check the authenticity of customers’ information. This accelerates KYC processes and cuts down process complexity and cost.

Better understanding of customers’ needs:

A personalized customer experience is a great customer experience. Data APIs give more information about users’ finances and habits, allowing finance product companies to offer tailored services.

Lower fees:

Processing payments can be a pricey proposition, but open banking takes cost out of the equation for merchants. Payment APIs lack both the transaction fees and operational costs of other methods. Businesses can save up to 80% on fees compared to cards.

Faster settlement:

Waiting for funds to settle is an inconvenience many businesses hope to avoid. While cards and Direct Debit payments can take days for funds to settle, open banking APIs facilitate instant processing and settlement, ensuring that companies receive their money when needed.

Evidently, for open banking APIs to deliver acclaimed benefits to customers and financial institutions, effective API testing is required for end-to-end testing of open banking APIs.

Why is API testing critical for Open Banking apps?

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 API queries’ data response and behavior during API testing. Financial institutions will necessitate the design and testing of APIs that are aligned with essential business logic and procedures. Banks can automate most API testing, including functional testing, data validation, and regression testing. Here are some facts and figures highlighting how the BFSI sector, especially the banking sector, needs API testing service.

• According to Markets and Markets, “the global API testing market size is estimated to rise to USD 1,099.1 Million in 2022, at a Compound Annual Growth Rate (CAGR) of 69% during the forecast period.”

• Allied Market Research shows that the global open banking market is expected to reach $43.15 billion by 2026

• As of November 2021, the open banking ecosystem in the UK comprised more than 330 regulated firms

• The BFSI vertical is predicted to develop at the fastest rate in the API testing market by the end of 2022

6 Important Open banking testing techniques

API Testing:

Ensures that banking APIs are working as expected and efficiently handles failures by responding with the respective status codes

Security Testing:

Ensures that the banking APIs effectively perform authentication and authorization

Data Validation:

Ensures that input data such as account information, transaction details, real-time batch process details, etc. can be accessed through the interface

Integration Testing:

Ensures that all integration touchpoints of the banking API are validated to find and fix any issues

Performance Testing:

Ensures that the application is stable, scalable, and consistent under expected loads

Compliance Testing:

Ensures that the third-party providers adhere to the defined policy or regulation before they are permitted to integrate with the banking APIs

Future of API-powered Open banking: Banking-as-a-Service

Open banking APIs enable financial service providers and firms to enhance their service offerings, enhance and customize their customer engagement models, and generate new revenue channels. By embracing the capabilities of open banking through APIs, financial institutions can see themselves as banking-as-a-service providers.

Banks should look for services that can be realized with APIs. For open banking to be effective, financial services providers should strive to future-proof their innovation by leveraging effective API testing services that ensure agile, adaptable, and secure APIs, and revolutionizing the banking customer experience.

Conclusion

As more and more financial institutions look to optimize their customer experience regarding facilities and security, API testing has become a necessary aspect of open banking. API testing is critical for open banking because its products are evolving rapidly. Therefore, third-party providers may not consider API testing a one-time task. API testing for available banking apps and services calls for continuous testing to ensure that product or service APIs meet compliance and performance goals as API flows and integrations evolve with the financial revolution.

Why Choose TestingXperts for API testing services?

TestingXperts offers comprehensive API testing services to validate business apps. With extensive experience in offering state-of-the-art QA testing solutions for banking and financial institutions, we provide better products, services, and superior customer experience to ensure quality, transparency, and cost-effectiveness.

TestingXperts offers the following API testing services:

Unit testing – for checking the functionality of individual APIs

Functional testing – For testing end-to-end functionality of the API layer

Load testing – For validation of functionality and performance for the system under various levels of user/ transaction load

Runtime error detection – Execution of Automated / Manual tests to identify problems, such as exceptions and resource leaks

Security testing – Involves various security checks like penetration testing, authentication, encryption, and access control

Web UI testing – End-to-end testing of the entire system using the APIs

Contact our experts now to know more about API testing services.