Open banking: buy vs build

5 min read
Open banking - buy versus build

Open banking has opened the door to many opportunities for various businesses. Enhanced security, improved user experience and lower payment acceptance fees are among the main open banking benefits. More and more companies are eager to get on board.

The first steps towards implementing open banking-powered payment systems are essential. They can determine how much effort and resources maintaining the solution will require and, essentially, define the success of a business.

The most important question that many financial institutions such as lenders, Payment Service Providers (PSPs), marketplaces and fintech companies need to answer is whether to buy an open banking solution or build it in-house.

Each option has its own advantages and disadvantages. Buying an open banking solution means partnering with a company that has established open banking connectors and created a product that can be implemented into another company’s systems. Building an in-house solution means working from scratch to get a licence, having sufficient human resources and implementing open banking APIs into the business infrastructure.

Buying a ready-to-use solution

Companies that want to offer a convenient payment solution as their service can partner with a company that provides an established, ready-to-use open banking solution.

This option requires finding a partner with an offer that suits specific business needs. Different options may depend on whether a business is licensed under the Second Payment Services Directive (PSD2) in the European Union or The Financial Conduct Authority (FCA) in the United Kingdom.

Some companies, such as kevin., can offer a partnership for businesses that don’t have a payment institution licence. These companies that aren’t licensed as Payment Initiation Service (PIS) and/or Account Information Service (AIS) providers can partner with kevin. and save time and resources by not having to apply for their own licence. They will then receive the same benefits as licence-holding partners and will be able to offer kevin.’s innovative and widely-tested account-to-account (A2A) payment solution to their clients.

Benefits of a partnership

Here are the main benefits of buying vs building an in-house solution:

Resources

Time and financial resources are often the defining factors for choosing a partnership over building an in-house solution. When partnering, companies can get up and running with a working solution in months or weeks, rather than the years it would take to acquire a licence, find and hire developers and build a working solution.

One factor that companies often forget to consider when building an in-house solution is the time and resources required for testing the systems. This is especially relevant for payment solutions that cover multiple markets. Establishing API connectors with different banks is often talked about, but it’s just one side of the coin. Testing how different payment scenarios work for each bank in different countries requires a vast network of international specialists with access to various bank accounts.

kevin. provides a solution that has been tested in a number of markets across Europe and covers all the main banks in those countries. Choosing such a partnership means saving heaps of time, money and other resources.

Maintenance and scaling

Maintaining an in-house solution is a never-ending process. Implementing new features, making sure that everything works as planned and updating the solution to match consumer needs are regular system maintenance tasks. They require knowledge, time and human resources.

Even if resources for maintenance are not a problem, they may become an issue when a company is scaling. Moving into new markets, growing the consumer base and expanding services can require more resources than anticipated. This may even require rebuilding the systems from the ground up, which can greatly affect business operations.

However, if you have a partner, they’ll take care of your business needs, and you won’t have to worry about any of the above-mentioned maintenance tasks. In most cases, you won’t even know that the system was updated, because it won’t affect your business.

When it comes to scaling, it’s essential to find a partner that is capable of accommodating specific business needs. For example, kevin. can offer services in 27 EU and EEA countries. When partnering with kevin., scaling across Europe will never be a problem.

Customisation

kevin. offers a white-label solution that allows companies to customise the look of the checkout. This option is especially beneficial for clients with an established brand presence that wish to keep their branding throughout the entire customer journey.

Customisation allows kevin. partners to offer their clients full control over their checkout look and feel. From the end-user perspective, the white-label solution creates a frictionless payment experience with complete visual integrity.

Flexibility

When companies decide to partner, they have the freedom and flexibility to choose the partner that matches their needs and values. Finding the right partner may take a while, but it brings other benefits that building an in-house solution cannot offer, such as saved resources.

Companies have the freedom to choose multiple partners to cover different services or change partners if their visions for the future no longer match. This benefit gives companies reassurance and flexibility.

Building an in-house solution

Building an in-house solution requires multiple elements. Firstly, as already mentioned, a company needs to hold a payment institution licence. Acquiring these can take anywhere from one year up to a few years. To become a licence holder, a company needs to meet certain requirements related to Know Your Customer (KYC) compliance, anti-money laundering, security risk management, etc.

Secondly, a company needs to build API connections with different banks. The main challenge here is that even though banks are mandated to open their data, there are no strict regulations for API standards.

There are over 5,000 banks in the EU, and most banks have different API requirements and specifications. This means that each bank, even in the same country, may have different payment flows, statuses, fields and IDs. All this data will have to be standardised before it can be integrated with an existing payment solution.

Even when the APIs are integrated, they must be tested to ensure they all work properly in different scenarios. Testing the APIs requires end user access to specific banks and various other resources. If a bug is found, it needs fixing, which results in more time spent testing the systems.

Moreover, bank APIs require constant maintenance. Each bank has scheduled and unscheduled downtime for various reasons. Companies need to monitor the systems and communicate these outages to their consumers.

Partnering vs building in-house

It’s fair to say that building an in-house open banking solution is a long-term investment that requires a lot of resources not just to get off the ground, but also to maintain. Partnering with a company like kevin. allows businesses to focus on other goals and increase revenue. An open banking solution may create an extra revenue stream for companies, so finding the right partner is the best path to success.

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