In a world where open banking is the future of fintech, banks and other financial institutions need to understand both WSO2 and PSD2. With regards to implementation, WSO2, an open-source technology with a platform for integrating application programming interfaces (APIs), applications, and web services, is often regarded as a better alternative than PSD2.
The Challenges of PSD2
PSD2 is the second version of the payment services directive, created to address the challenges of the payments industry. To improve user experience and move to an open banking market, PSD2 aims to:
- Secure customer financial data by implementing multifactor authentication for remote transactions
- Broaden access to banking information
- Eliminate the use of hidden fees
- Foster industry innovation
This is especially important to be aware of if your business operates in the European Union (EU), as this regulation has been enforced there since September 2019. You must enforce this policy if you are a bank, financial service provider, fintech app developer, or merchant, that operates there.
Open Banking and WSO2
WSO2 is an alternative to PSD2. It was developed to meet the PSD2 requirements and improve upon its weak points. This system uses componentized architecture to allow banks to choose the technology components they need for open banking. These components include:
- API management
- Identity and access management
Choosing WSO2 to implement your open APIs, over PSD2, provides your institution with a host of benefits, such as:
- Lower outcome risk
- Efficient implementation
- Quicker regulatory response
- Extensible technology
WSO2 does more than meet PSD2 compliance. It gives banks a digital transformation in web and mobile capabilities that provide extensive analytics. When comparing WSO2 vs. PSD2, it’s clear that WSO2 is the future of banking.
What You Need to Succeed at Open Banking
Open banking doesn’t have to be a challenge. With the right preparations, you’ll have a smooth transition with open banking WSO2. To succeed, you will need to:
- Understand the needs for implementation: Banks, whether they are in non-regulated regions or not, need to understand the specifications and regulations necessary to become an open bank. Knowing what’s ahead allows banks to find and use the right resources.
- Understand how it will fit with your legacy systems: Though banks depend on legacy systems to operate, they now have to work with the emerging fintech, like API management, integrations, and microservices. Banks should develop a solution that allows them to reuse some of their existing technology, and integrate the components needed for open banking.
- Understand and map your implementation: Banks should accept open banking to gain compliance for the future, in addition to staying adaptive in an ever-changing market. Digital transformation and open banking are the future, so banks need to decide how this will fit into — and help with — their goals.
- Understand the need for changing financial technology: One of the reasons that open banking exists, is to keep up with customer demand. For banks, transitioning to open banking is the chance to analyze their technology and update it to stay relevant in the market.
Contact Hydrogen for Your Fintech Solutions
Hydrogen will help you build financial applications quickly and cost-effectively. No matter the size of your firm, you can take advantage of our fintech solutions. We want to create better financial products and components with you. To learn more about our API and No-Code offerings, contact us or start building today.