The Open Finance Opportunity for LATAM Banks: Is Your API Gateway Ready for the Shift?

The Latin American banking sector is rapidly evolving, with open finance advancing at different speeds across the region. Brazil is leading with strong regulatory frameworks, while the regulators from Colombia and Chile are catching up very quickly and others are considering a market driven approach.

Many banks that haven’t yet implemented open finance may already have an API gateway in place. But does that mean they can simply repurpose their existing infrastructure to reap the benefits of open finance? The answer is no. 

A traditional API gateway alone may not be enough. While it serves as a crucial entry point for managing and routing client requests to backend services, true participation in open finance requires more than just exposing data and services.

To fully integrate into the open finance ecosystem, banks must adhere to specific standards, provide a seamless user experience, and ensure operational excellence. In this article, we’ll explore the essential features a bank’s API gateway needs to effectively participate in open finance.

Why your current API Gateway isn’t enough

An API gateway is designed to manage and connect APIs, but it may not have the features needed for open finance ecosystems, such as:

Compliance with Standards

Open finance ecosystems demand adherence to strict regulatory and technical standards, such as the Brazil open banking standard, the Open Banking Standard in the UK and the CBUAE Open Finance Framework in the UAE.

These standards all include API specifications, data formats, and security protocols such as FAPI, which forms the foundation of most modern open banking standards. A generic API gateway developed under each bank’s own tech guidelines will not meet these requirements.

APIs must also align with the ecosystem’s technical specifications, including data schemas, authentication methods, and performance benchmarks. Using API design frameworks that prioritize standardization is crucial.

There’s a lot of complexity to delivering APIs in line with these standards, and as they continue to evolve, so does the ongoing maintenance, and banks will find themselves having to keep their solutions up to date. 

Consent Management

Open finance relies on customer consent. Your gateway must include consent capture, storage, and management capabilities that comply with regulatory guidelines. These tools must also provide a clear audit trail for compliance. There is also the ability for banks to embed the end to end consent experience within their digital channels.

Interoperability

Successful participation requires seamless integration with third-party providers (TPPs) and other financial institutions. This level of interoperability demands APIs that follow ecosystem-specific standards and support real-time data sharing.

Banks will need to be able to onboard, authenticate, and monitor third-party providers efficiently, as well as manage TPP registrations, handle certificates, and enforce access policies.

Enhanced Security

While most API gateways offer basic security features, open finance ecosystems require advanced measures, including strong customer authentication (SCA), secure data sharing, and Finance Grade API (FAPI) protection.

FAPI adds an additional layer of complexity for banks, but while it is essential for ensuring high levels of security and compliance, implementing it correctly requires deep expertise. Banks will need to invest in security features such as OAuth 2.0, mutual TLS, encryption, and real-time monitoring to safeguard data and ensure compliance with ecosystem security standards.

Performance and Scalability 

Participating in an open finance ecosystem often means handling increased API traffic and real-time interactions. Your gateway must be robust enough to handle these demands without compromising performance.

Banks will need to deploy tools to monitor API performance, ensure uptime, and scale as needed to handle growing demands. Meeting required performance benchmarks is essential for maintaining ecosystem participation.

Developer-Friendly Features

Provide detailed API documentation, testing environments (sandboxes), and support channels to make it easy for developers to integrate with your APIs. A developer portal can also enhance the onboarding experience.

Building for Long-Term Success

Joining an open finance ecosystem is more than a technical integration; it’s a strategic investment in your bank’s future. Regulatory requirement is probably inevitable in every market now, but beyond that it is becoming an increasingly strategic imperative. By upgrading your API infrastructure to meet open finance requirements, you position your institution to:

• Meet current and future regulations 
• Enable a faster and significantly more efficient route to enable partnerships with third parties
• Provide more flexibility for customers, allowing them to manage their finances in more flexible ways
• Provide the foundation to embed products, solutions and services into third party digital experiences to be where your customers need you (and create new channels to market)
• Unlock new revenue streams through innovative, value adding and premium APIs

While your existing API gateway is a strong foundation, it’s not a plug-and-play solution for open finance participation. Smart participation requires investing in the right technologies to ensure compliance, security, and interoperability. By enhancing your API infrastructure with the features outlined above, you can confidently step into the open finance ecosystem and establish your bank as a leader in this transformative era of financial services.

The Ozone API platform helps banks rapidly build on their existing API gateways to deliver high-performing, standards-compliant open APIs. Get in touch, and we’ll help you navigate all the necessary changes too.