Sensedia: securing the future of financial institutions

By Marcilio Oliveira, Co-Founder and COO, Sensedia.

Brazil OB overview  – When Brazil’s Central Bank shared its timeline for the roll-out of Open Banking (OB), financial services providers experienced contrasting emotions; optimism for the future and the business opportunities ahead was tempered by apprehension over new challenges and whether their IT and infrastructure would comply with regulatory guidelines.

Phase one of the timeline, in February 2021, centred upon open data and required communication channels, products and services to meet security benchmarks.

Phase two in August, focused on customer data and how participants’ platforms had to protect data, in line with national LGPD security requirements (similar to GDPR).  Phase three in October, covered services and payments and called for new solutions/environments for payments and credit proposals.

Phase four in December, concentrates on Open Finance (OF), introducing additional products and services into the ecosystem. 

Out of the 821 organisations registered and active in the Central Bank directory, 158 are compliant with phase one and two, and 663 remain in phase one or are preparing to start their OB journey. Alongside their digital challenges, financial services providers also have to educate end users about the benefits of OB and OF.

Composable building blocks

In order to compete and thrive in an OB environment, companies need to add new components to existing legacy systems and become Composable Enterprises. By building, assembling and reassembling core business elements, businesses can connect to new ecosystems and increase their exposure to new markets and revenue streams. 

Top priority is to review future business plans, embrace change and identify and leverage the ecosystem. It’s also important to ensure the architecture can adapt and repurpose assets and that composable software components, accessed via tools such as Application Programming Interfaces (APIs), are in place. 

Being able to connect to legacy systems is key to unlocking the power of data trapped in these older systems, and at the same time, we must ensure connectivity with more modern technologies. Microservices architecture, for example, connects separate or ‘decoupled’ elements and supports interlinked software applications, enabling them to communicate via the Cloud and be managed, modified, tested, deployed and scaled, without affecting the wider operation.

APIs 

The key enabler for connectivity and innovation is an API management platform. It offers security and agility, connects legacy systems, integrates digital channels and supports the growth of partner ecosystems. 

These modernisation tools unlock data securely across business systems, mobile applications, Cloud services etc, connecting businesses, partners and third-party providers. 

APIs standardise communications, and while it’s important to share services, it’s equally important to focus on how they are shared. Third-parties that encounter unresponsive interfaces or difficult coupling processes will have to overcome connection barriers. APIs allow a smooth transition with easy onboarding, reducing development cycles and ensuring faster delivery to partners and customers. And when a solid API strategy is in place, it dramatically improves the developer experience.

They also have security benefits; APIs manage and protect data, access control and authorisation/authentication issues. APIs are more than a technology facilitator – they’re a strategically vital tool to compete in a digital world (it’s also mandatory for all OB participants to have a regulatory-compliant API platform).

Sensedia

The announcement of Brazil’s OB regulatory phases prompted stakeholders to reassess their IT architecture and review what they had in place for a smooth transition to a new open world. Helping them on this journey is our business, connectivity and integration expert Sensedia.

Recognised as an important ‘building block’, at Sensedia we not only enhance clients’ infrastructure capabilities so they’re compliant with OB regulatory guidelines, teams are assisting Central Bank consultants and working parties in building test scenarios and cases, identifying what APIs and documents are needed to progress through each phase.

We test the whole end-to-end solution. The testing environment covers the receiver/transmitter process and we check and validate the information exchange and host platform. Every OB participant has to pass conformity tests to ensure their solutions are configured correctly. If they’re not, their APIs will need to be adjusted.

Clients using our OB solution have access to a consent engine which provides them with regulatory compliant APIs. When PIX, the Brazilian instant payment tool, was integrated into phase three (covering services and payments), Sensedia was tasked with developing the API that would give participating organisations the data sharing consent they needed.

In addition to the consent engine, Sensedia’s solutions are compliant with the Financial API RW protocol, which all OB technology platforms must follow. Those that don’t will need to build one or source a ready-made solution.

It’s fantastic to help companies manage their APIs and systems’ integration. By opening their APIs to third-parties we’re creating a new platform for partnerships and facilitating business growth. Working on the regulatory side is a big responsibility, and we, like our clients, understand this role and the pressure it brings, but we’re excited with all that we’ve been seeing and what lies ahead.  

Financial Data Exchange

Sensedia is also a member of the US-based Financial Data Exchange (FDX), an industry-wide organisation with over 200 members representing financial companies, data aggregators, fintechs, payment networks, consumer and industry groups, utilities and other stakeholders. 

Members define and promote the adoption of common, interoperable and royalty-free FDX API standards for financial data sharing (the foundation of global OB/OF) and its goal is to enhance consumer and business control of financial data, prioritising five core data sharing principles; control, access, transparency, traceability and security.   

FDX says 22 million consumer accounts are now using the FDX API.

Banco Original

Companies ‘ahead of the pack’ not only have the IT tools in place to connect with and extend their ecosystems, they’re evolving into Banking as a Service (BaaS) providers, as is the case of one of our clients, Banco Original (BO).

In 2016, the personal and corporate bank was one of the first to connect BOT to its Facebook Messenger, Instagram and Whatsapp accounts. BO launched its BaaS platform in 2019; the same year it introduced the first 100% digital account. 

Having digitalised its services, in order to share them across a wider ecosystem, BO partnered with Sensedia. 

We helped BO structure its BaaS model and open APIs for third-parties to connect to, focusing on governance, standardising exposed APIs, and migrating APIs and services associated with bill payment, card operations (including BOT-connected systems) and account management.  

After moving everything onto a single interface, Sensedia formatted, structured, organised and documented all BO’s APIs, enabling BO to maintain and build new APIs in the future.  

The Brazilian bank now has an API management platform that’s flexible and simple, and in addition to its service provision, which includes money withdrawal using QR codes, investment platforms, insurance, mobile phone top-ups and payment machine supply, BO supports PicPay – Brazil’s largest digital wallet provider (34 million users) – and runs an Original Hub Unit, managing 50+ partnership arrangements with fintechs.  

In January 2019, at the start of its digital journey, BO had 700,000 account holders; at the start of 2021 this had grown to 4 million, an increase of 571%. 

OB innovators

OB is changing the global financial services landscape and innovators at the start of their journey are giving customers access to a wider range of financial products and services via new partners on their ecosystems.  Sensedia is currently supporting 21 clients in their OB journey and I’m proud our work is helping to build and secure the future of financial institutions.