Banking cooperative Swift has published a new API standard for the pre-authorisation of funds in its latest bid to bring more efficiency to open banking in Europe.
The open banking initiative, facilitated by the EU's Payment Services Directive II, is heavily reliant on the use of APIs to link banks' payment systems with third party providers.
However a lack of standards within the API market runs the risk of increasing operational costs for all participants. As Swift states: "If each bank offers a distinct API, merchants and fintechs have to adapt to different data structures, workflows and security considerations for each one - adding complexity, cost and time for implementation."
Nor is the improtance of standards lost on Swift's banking membership. "We can already see that each country is developing their own formats and that sometimes individual banks are developing their own formats," said Hiroshi Kawagoe, geenral manager, Transaction Business Planning Department, Sumitomo Mitsui Banking.
"This kind of fragmentation may not be ideal as the banking industry progressively opens up more advanced services through API. Therefore there is a need to discuss standards, just as we have acheived with the Legal Entity Identifier (LEI) and in many other areas."
The latest standard is focused on the pre-authrisation of funds, allowing a payer's bank to segregate funds in advance of purchase, thereby guaranteeing payment.It is the latest effort from Swift to position itself as the defacto standards body for APIs, following its publicaiton of the Pay Later API standard earlier this year.