The Central Bank of Russia for the first time standardized open banking APIs

Monday, October 26, 2020, 17:54 GMT

The development of guidelines for open banking interfaces has been completed by the Central Bank of Russia. The adoption of open banking APIs will substantially reduce the expense of the production and pace of deployment of new financial products, but the process will be entirely voluntary for the time being.

Standardized Bank and Fintech Standards

On the site of the Organization for the Advancement of Financial Technology ‘Fintech’ (AFT), the Central Bank of Russia announced the readiness of specifications for open banking interfaces (API), developed jointly with the participants in the Russian financial market. It is believed that it would be optional to adopt the revised requirements.

Open banking principles will ensure the smooth sharing of customer data in compliance with the same interaction guidelines for all that will become the framework for a wide variety of services, from collecting customer bank account information to arranging online purchases for products and services via affiliate apps to developing universal customer financial management apps in many cities.

The banking APIs developed by the Central Bank are required to ensure the flow of data between the information systems of different entities in the financial industry, whilst the transparent architecture of the API would provide a substantial cost reduction and timing for the launch of new financial products, simplifying their production and scaling up. Written specifications also offer information management guidance for their use, in addition to defining how interfaces function.

Open APIs-based Unification

The theory of the operation of the open banking API (Application Programming Interfaces, a set of software application development procedures, protocols and tools) implies cooperation between banks and operators of fintech services through stable, centralized channels of data exchange.

Banking based on open APIs provides consumers with the ability to offer their data and initialize transfers to suppliers of different financial services, while banks undertake to provide data sharing capability to external partners.

Such APIs are currently common-for example, to connect various online ticket purchase systems, food or goods to payment services. However, this industry’s lack of standardization pushed market players to develop proprietary solutions for each new partner.

Open API standards will ensure compatibility and unification, increase the competitiveness of new services and financial products, and their availability, along with optimization of their launch costs.

The list of documents released by the Central Bank defining open banking interface standards includes general regulations, a standard for accessing third-party customer account information, a standard for facilitating a third-party transfer of customer funds in Russian currency, and a security standard for financial (banking) transactions defining the implementation of software int

As a foundational framework for the new specifications, the international standard ISO20022 was used, including in terms of adopting message semantics, improving the hierarchy of message schemes, using message element data types, and modifying the names and composition of API message scheme components.

According to the text, open banking interfaces are structured so that “they do not focus on a single payment scheme responsible for making a payment.” The data presentation format is not meant to refer exclusively to individual messages, whereas the OpenAPI interface definition language is used in the YAML format of the third edition at the physical level when creating messages.

In the open banking interface contact environment, such parties are known to be a “Consumer”-an person or legal entity, payer or receiver of funds, a “Third Party Provider”-a legal entity with open API access to a bank account, and a “Payment Service Provider” (PSP)-a credit agency or branch that services the account.

The task of a Third Party Information Service Provider (ISP) providing a service to access information about a bank account(s) might be for participants in an open banking interface contact environment, or a Third Party Payment Service Provider (SPP) providing a service to facilitate a money transfer.

The consumer can have long-term (exchange of data between a third-party provider and a PPU over a long period of time, without the user’s direct involvement) or short-term consent to the reception of data from a bank account (in order to validate a one-time transfer of funds from a bank account).

The Central Bank of Russia, along with AFT, manages the guidelines for open banking interfaces, while AFT has at its disposal a specialized infrastructure with everything required for the production, maintenance and publishing of these guidelines. The AFT framework has a research site for testing improvements to the specifications, as well as a dedicated forum for the preservation of open banking interface standards on the Internet.

Association for Improving Financial Infrastructure
At the end of 2016, on the initiative of the Central Bank of Russia and a number of participants in the domestic financial market, AFT (Association for the Development of Financial Technologies) Fintech was developed as a forum for the development of financial technology principles and approaches to their implementation, as well as for the establishment of an expert evaluation of emerging technologies integrating new technologies. AFT draws partners from Russian and foreign businesses, universities and organisations in order to enhance the level of skills.

As well as 22 banks, two payment system firms, three telecommunications companies, five insurance companies and one IT firm, including Sberbank, VTB, Yandex, Alfa-Bank, Gazprombank, Bank Otkritie, National Payment Card System, QIWI Bank, Ak Bars Bank, Tinkoff Bank, Raiffeisenbank, Rosselkhozbank, Moscow Exchange, SKB-Bank, Sovcombank, PSB, RNKOzbank, AFT includes the Central Bank of Russia Banks.