Innovation spotlight – Open Bank Project

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Germany-based Open Bank Project (OBP) is looking to tap into the wave of innovation on the market with its open source ‘app store’ API for banks. It has built up a community of developers and partners, and also has its first two customers.

One of the ongoing challenges for banks is to find new ways of innovating without undertaking large structural changes to their front and back office IT. Open Bank Project (OBP), the brainchild of Berlin-based consultancy firm, Tesobe, is hoping to solve this with its version of an app store for banks. OBP has developed an open source API which integrates with the core banking system to give access to a range of third party applications for banks’ customers, created by its community of developers.

Ismail Chaib, project manager at OBP, explains the thinking behind the project. ‘The vision we have for the future of banking is that the banks will all have app stores, and customers will have the ability to cherry pick the apps that they need,’ he says. ‘Rather than the bank building these apps, it will be third party developers building the functionality, and then the bank making sure they are secure before pushing them out to their customers.’

Innovation spotlight: Open Bank Project
Innovation spotlight: Open Bank Project

The financial services industry has been slow to embrace APIs, Chaib feels, but there is now a growing awareness of the potential in using technology such as this to add more value for customers. ‘When we started a few years ago there wasn’t so much interest in this kind of thing, and people didn’t really understand what apps or APIs were. Now there is really a shift in perception, more and more banks, particularly the tier ones, are adopting.’ This is evidenced, he adds, by the fact that many of the main tier one banks have introduced accelerator programmes and now have dedicated teams looking at how best to tap into APIs.

Using a combination of third party developers and in-house builds, OBP has around 20 apps available for use via its website. Most of these are in the personal finance management space, but there are also apps for business analytics and online accounting functions. There are also gimmicky apps. One of the first designed by OBP is called ‘the singing bank’ which plays the customer a tune with a high pitch representing money coming into an account, and a low pitch for money going out.

One app, called Momentum, is a take on PFM aimed at SMEs, which allows businesses to do cash and revenue forecasting. Another is Money Journey, which provides a 3D graphical view of a customer or business’ accounts around the world, showing the flow of funds and transactions with associated data. There are also compliance apps, such as Regulatory Detective which allows for KYC, AML and fraud detection controls via a mobile interface.

OBP has designed its platform so that it has a light footprint, with a fast time to market. ‘The API has an abstraction layer which a bank could put on top of their core banking system. So without the use of re-engineering or changing the core banking system, you have an API service on the architecture. So it is a very agile type of approach,’ says Chaib. The typical deployment process consists of several steps. Firstly, connectors are modified to access the core banking system; then a login page is branded for the bank and connected to bank’s authentication system. Open Bank Project servers are then installed behind the bank’s firewall or secure cloud, then the bank chooses apps from OBP or third parties and launches a bank-branded store to customers. OBP also offers a risk-free proof of concept to determine scope and timescale for live deployment as part of the initial consultation process. Prospects receive a fully-fledged API at the end of this using test data.

OBP has proved it can integrate with core banking systems such as Temenos’ T24, where the integration process took six weeks, says Chaib. ‘If a bank has a lot of web services, it is relatively straightforward to integrate. If they have a mainframe, it is slightly more complicated of course,’ he adds. The OBP API is an open source project, but for banks looking to tap into the service it offers a licencing option with an annual maintenance fee. It has already gained two customers via this route, both in Nigeria, and is working on proof-of-concepts with two other banks. One is a tier one institution in the UK. OBP’s other revenue streams include consultancy for banks on APIs, as well as arranging hackathons (see below for a review of OBP’s latest hackathon in London) to showcase potential new apps for banks and investors.

Chaib suggests that one of the main advantages of OBP is ‘there are very few projects that can deliver such value in such a short amount of time’. He also adds that for a bank, it provides freedom and flexibility. ‘The bank owns the code and there is no vendor lock-in. They can see the code and if there is a problem and they are not happy working with us for instance they can bring someone in to change the code and fix things.’

Hack/Make the Bank

IBS was in attendance at the Hack/Make the Bank hackathon event hosted by Open Bank Project in London last month. The event was staged at the incubator for financial innovation in the UK, Level 39 in Canary Warf, which has become a focal point for start-ups hopeful of gaining investment. A broad range of developers were in attendance, with a background in a number of different programming languages, as well as a panel of investors from a range of banks and venture capitalists to provide feedback.The aim of the event was to provide coders and programmers the opportunity to access several APIs and ‘hack’ them to create new innovative products.

The APIs were provided by a range of participating partners, and teams were given two days to draw up ideas and create a pitch for the panellists to be presented at the end, either as a working product, or a prototype for further development.The APIs on offer included IBM’s Watson analytics tool, which processes information by understanding natural language and then generating hypotheses based on evidence, as well as the API for the T24 core banking system, provided by Temenos, Standard and Poor’s Capital IQ offered access to S&P data, and there were other offerings from the Currency Cloud and Open Corporates.

After two days of brainstorming and hacking, there was a broad range of different applications on the table ranging from useable tools, to one developer who managed to successfully hack into a bank’s app and carry out a range of tasks. One team adopted the popular crowdfunding model to create Syndik8, a platform to allow customers to invest in a proportion of properties, and either live in them paying rent to other funders or vice versa. There was also a tool for charitable organisations to show how money was distributed, and how payments were routed through the company, using a range of the APIs available.

A couple of teams used the Currency Cloud API. Smart Travel, for instance, used the tool to create an app which allowed users to forecast the value of currency before travelling, depending on variables such as the departure point, time of travel and destination. And owner of Mortgage27, a mortgage comparison service, Peter Harris, used his API to trawl through the mortgage market, and integrated it with the Currency Cloud API to feed back the costs in local currency for foreign buyers.

At the end of the hackathon, developers presented their ideas to the panellists, with the feedback generally positive. OBP is hosting another hackathon in Paris this week, and another event in Ireland is in the pipeline for early next year. Is this the new medium by which the next great ideas in the fintech space will be formed?

 

By Jan Metcalf.