Open banking, the umbrella term for sharing banking, identity and payments data among fintech innovation firms, is being connected to the Ethereum ecosystem via API3, a startup focused on porting data onto blockchains.
Announced Monday, API3 (a “data oracle” service, in crypto-network parlance) has entered into a 10-year development partnership with the Open Bank Project, to merge over 400 banking APIs with blockchain smart contracts, Web 3.0 applications and decentralized finance (DeFi).
The move could one day give bank customers easy access to the online smart contracts that provide bank-like services (with more risk but often better yield).
Stepping back, the fintech revolution has relied on frameworks like the Open Bank Project so that banks can comfortably share their precious data to third-party innovators (the Revoluts and LendInvests of this world) — a data trove that includes everything from account information, to payment transaction requests, to know-your-customer (KYC) onboarding.
API3’s “Airnode” infrastructure (roughly analogous to the job Chainlink performs in the DeFi space) adds blockchains and decentralized apps into fintech’s mix of Web 2.0 and mobile applications that use Open Bank, said Heikki Vänttinen, co-founder of API3.
“It’s not necessarily about bringing private banking customer data onto the public Ethereum blockchain,” said Vänttinen. “A variety of blockchains can be connected to these APIs using Airnode. So it can be a very permissioned environment, something like JPMorgan and ConsenSys’ Quorum. Or it can be mainnet Ethereum, if you want to interact with common DeFi, for example.”
API3 is focused on Ethereum-based blockchains for the most part, including scaling solutions like Polygon and enterprise versions of the public chain, but the startup also works with things like Polkadot, Vänttinen said.
Open Bank Project CEO Simon Redfern, who has worked closely with the likes of HSBC, Santander and BNP Paribas as well as various regulators, said banks can sometimes be slow and bureaucratic, but they do carry an important trust credential. The API3 partnership will create a bridge between those banks and the worlds of DeFi, self-sovereign identities and data marketplaces, he said.
“This is about more than just customer data,” said Redfern, a 32-year veteran of programming database-driven web applications. “Banks are these sources of truth. Of course, that might include account-specific things, but I think it’s very broad, and banks have a huge amount of data.”