Unlocking Innovation with FinConecta’s Open Finance Sandbox
By Bilal Karaduman, Sr. Solutions Architect – AWS
By Alejandra Perez, Marketing Content Manager – FinConecta
Open banking emerged in the financial industry as a new collaboration scheme between traditional financial institutions and third-party providers (TPPs) or financial technology companies (fintechs).
As this new type of interaction evolved within the industry, banks and fintechs have been working together motivated by the increasing need to attend to customer demands, stay ahead of the competition, and tackle big tech companies’ expansion.
In recent years, this fintech-bank relationship has been joined by non-financial institutions. The banking-as-a-service and embedded finance trend, as an extension of open banking, allows non-financial companies to cross industry boundaries and expand their offering to financial services in partnership with traditional regulated banks.
This synergy between banks and non-financial companies is enhancing the financial sector by bringing appealing business opportunities. However, the transition towards open innovation, cross-industry collaboration, and data-sharing ecosystems is not easy.
FinConecta is an AWS Partner which knows that in this new financial landscape, connectivity and interoperability of systems raise great challenges for those who want to remain relevant. Therefore, its API cloud-based platform, Open Finance Sandbox, is designed to streamline the adoption of new technologies for different players across industries.
As technology enablers, FinConecta provides a robust infrastructure to connect both financial and non-financial institutions with a curated set of technology providers to build new digital business opportunities and growth.
In this post, we will review the Open Finance Sandbox platform’s main characteristics and explain how this powerful testing solution can accelerate digital transformation in the financial industry.
Co-creation through partnerships is modernizing the financial ecosystem, but new partners always entail search, validation, and compliance costs. The innovation journey can be full of bumps, and if you don’t anticipate them properly you can run into inefficient, time-consuming, and costly processes. Unnecessary delays, security vulnerabilities, and defects in roll-out are some of the problems that need to be avoided.
By simulating production parameters, testers can obtain valuable information that allows them to move forward throughout the technology project. At an early stage, the ability to measure, verify, and compare the capabilities of new technologies ensures the transparency and clarity needed to identify potential partners.
Gathering information on solution performance ensures alignment between TPPs’ value proposition and the organization’s needs. Once the solution provider has been selected, it’s essential to conduct a proof of concept (PoC) to test the feasibility of the project. Early identification of gaps allows adjustments and remediation without further development costs.
To support this iterative process, a successful open innovation strategy should enable frequent and efficient testing. The evidence and analytics provided during testing reduce uncertainty and nurture the innovation cycle.
Before fully committing to a solution, the institution needs performance data to make better decisions. Testing reports, statistics, key performance indicators (KPIs), and trends monitoring pinpoints risks and obstacles, making innovation easier and more profitable.
Product Overview and Benefits
FinConecta’s Open Finance Sandbox is a comprehensive testing tool built to mitigate risks and reduce friction along the innovation process. This isolated controlled environment enables the evaluation, monitoring, and testing of solutions before going into production.
The Open Finance Sandbox, like an innovation lab, is designed to:
- Empower collaboration
- Identify potential roadblocks
- Minimize costs
- Shorten implementation projects
The platform provides the infrastructure to enable easy testing, launch of open innovation programs, and monitoring.
Figure 1 – Open Finance Sandbox integration landscape.
FinConecta’s customers can leverage the Open Finance Sandbox platform to easily engage with TPPs and start testing. To solve a pain point, platform users get access to FinConecta’s Digital Store, an online catalog featuring 200+ curated global solutions. The information displayed facilitates the scouting-matching phase.
At the end of this selection process, the appointed TPP integrates into FinConecta’s pre-developed standardized PSD2-compliant Rest APIs. Once the solution is integrated, the financial institution can effortlessly start sandboxing, even without its core banking integration, through a dummy bank called BankBot.
The testing process uses synthetic data to ensure data protection, avoid manipulation, and mitigate bias in testing results.
Open Innovation Programs
The Needs feature available in the console allows organizations to communicate a specific need within FinConecta’s ecosystem. Following a few steps, users can share information related to a pain point with TPPs registered on the platform.
By including a brief description of the need, conditions for solution submission, APIs involved, and other relevant data, the search for solutions becomes easier and the list of proposals narrower. TPPs respond to the challenge by submitting applications. Throughout the selection process, only suitable candidates will be approved for sandboxing.
Analytics and performance trackers are crucial to drawing out decision making. Open Finance Sandbox users count on a comprehensive KPIs menu to evaluate results, measure product success, monitor responsiveness, identify trends, and more.
The platform allows the analysis of API usage including the following data: number of API calls, average API calls per day, most called APIs, average response time, and number of Fintech products and services created.
Figure 2 – Integration workflow.
How it Works
The BankBot feature is a core banking simulator that can only be accessed from FinConecta’s network. To allow fintechs to test and demo their applications, BankBot simulates the most relevant operations and services of financial institutions, such as account balance inquiries, transfers, bill payments, and credit card management.
To protect real customer data and avoid data manipulation, BankBot uses synthetic data for accounts, clients’ information, and transactions. High-quality and realistic data is generated in FinConecta’s data factory.
Modular and Reliable Platform at Scale
FinConecta uses AWS Elastic Beanstalk, which is a scalable platform as a service that provides high levels of reliability and availability for web applications. Deployed to a segregated AWS Elastic Beanstalk environment, BankBot utilizes auto scaling, Amazon Elastic Compute Cloud (Amazon EC2), and Elastic Load Balancing to ensure high availability and automatic recovery, and high redundancy.
Figure 3 – Infrastructure platform.
AWS Elastic Beanstalk automatically detects and recovers from failures, providing resiliency in the case of hardware or software failures. In addition, the platform’s modular design makes it easy to scale applications up or down as needed, without affecting other parts of the system.
All customer applications are deployed to multi-region, multiple AWS Availability Zone (AZ) configuration with auto-scaling AWS Elastic Beanstalk environments based on customer size and needs.
Critical production environments components are hosted in two (or more) segregated load-balanced AWS global regions which are completely independent of each other. Within each region, the platform utilizes multi-AZs which are independently powered and cooled.
FinConecta leverages AWS tools like AWS CloudTrail, AWS Config, Amazon CloudWatch, AWS Key Management Service (AWS KMS), and AWS Identity and Access Management (IAM) to make sure cloud best practices for compliance and security are in place.
Application workloads are deployed via AWS Elastic Beanstalk, which utilizes auto scaling and Elastic Load Balancing to ensure the high availability and redundancy coupled with Amazon Route 53 domain name system (DNS) failover and health checks, as well as regular point-in-time snapshots for backup and fast recovery.
All internal components communications are limited to AWS account local IP communications and dual redundant virtual private network (VPN) connection with two-way SSL with the client core system. This ensures internal data streams cannot be accessed by the public or any external network.
AWS CloudFormation is used as a primary service to provision infrastructure resources by treating infrastructure as code.
Organizations that provide financial services are subject to a variety of regulations designed to protect consumers and ensure the stability of the financial system. AWS hosting facilities help organizations providing financial services successfully achieve their compliance goals and protect their customer data and production applications.
Working together, AWS and FinConecta have implemented a series of industry-leading physical, environmental, and logical security controls to secure customer data at rest and in transit. This enables financial services organizations to run workloads that must meet stringent compliance requirements, such as the ISO27001, PCI DSS, and GDPR.
In addition, AWS provides customers with a flexible way to deploy applications that can scale up or down to meet changing business needs while still maintaining compliance.
Multi-Tenant SaaS Deployment Model
Leveraging the power of the AWS services, FinConecta deployed Open Banking Sandbox on AWS Marketplace, which accelerates time-to-market and enables companies to innovate faster.
With FinConecta, businesses can quickly and easily provision the platform using the software-as-a-service (SaaS) deployment model and start collaborating with stakeholders.
FinConecta’s multi-tenant architecture provides a high degree of scalability and reliability, and the application is designed to be easy to use and manage with a self-service interface simplifying the provisioning and configuration of FinConecta’s services.
Figure 4 – Open Finance Sandbox high-level architecture.
The Open Finance Sandbox provides the technology to innovate, collaborate, build, and validate TPP solutions. The platform enables customers to address industry-specific and cross-sector business opportunities as well as establish strategic alliances.
FinConecta’s unique approach accelerates the implementation projects faster than traditional models. Some of the use cases are:
- Compliance with open banking regulatory requirements. New open banking regulatory initiatives are posing big challenges to traditional banks. Banks are being required to open their infrastructure and customer data assets to third parties while maintaining security and data compliance. To meet these standards, banks need an API testing sandbox to manage risk.
- Digital solution development. Through FinConecta’s platform, customers can browse the Digital Store, identify potential solutions to solve a need, compare functionalities and business models, and finally select and test suitable candidates without the backend integration. The curated set of solutions, previously registered on the platform, is ready to be integrated into FinConecta’s BankBot and then validated, via synthetic data, within a secure environment. The testing process ensures the quality of the product early on in the development life cycle.
- Build proofs of concepts. After defining a use case and success criteria, customers can quickly conduct a technical PoC in the preconfigured testing environment of Open Finance Sandbox. With the technical support of the FinConecta team, both the institution and selected TPPs will engage and start collaborating. Based on the results, some of the questions the institution might be able to answer are: Will this technology meet our needs? Will this product perform as expected? Will the deployment be feasible?
- Open innovation programs. FinConecta’s customers can easily host hackathons or other innovation challenges through the Open Finance Sandbox. Providing a virtual and secure environment to build and evaluate new propositions rapidly, it encourages collaboration to achieve a specific goal. Working together, TPPs and the host institution can fix inefficiencies, solve interesting business problems, and unlock real-world industry challenges. With out-of-the-box ideas, the host institution expedites creative problem-solving and drives change.
- Regulatory sandbox. Regulators around the world are interested in assessing the impact of a policy change, analyzing emerging technologies, and validating new business models. The Open Finance Sandbox provides a neutral and secure environment designed for experimenting. Supervised by the regulator, financial institutions, TPPs, and other players within the ecosystem engage and collaborate. All of the data obtained from the testing exercise allows policymakers to develop a flexible innovative-oriented regulatory framework.
Test, learn, and adapt. As the open banking trend expands, new challenges in the financial industry arise. Open architectures define the future in banking, fostering collaboration and co-creation. Experimentation is key in this digital transformation process, and having reliable tools to facilitate testing can make a difference.
FinConecta’s Open Finance Sandbox is a robust, flexible, and efficient testing solution. It supports innovation and the adoption of new technologies, providing an isolated environment where platform users can easily validate TPPs capabilities, run PoCs, and monitor results.
By enabling frequent and iterative testing, FinConecta mitigates implementation risks and reduces costs associated with open innovation. The sandbox infrastructure includes a core banking simulator, API gateway with a predeveloped set of APIs, and a digital solutions store. It’s designed to support different use cases and new business models.
FinConecta – AWS Partner Spotlight
FinConecta is an AWS Partner focused on accelerating the digital transformation of the financial industry.