Digital DisruptorsTechnology Futures

‘Open Banking 3.0’ – The Fusion of Blockchain, Self-Sovereign Identity and Digital Banking

Open Banking 3.0 – Scotland’s Opportunity

A key method for a small country like Scotland to achieve a level of global leadership in a huge, worldwide trend like Open Banking is to specialize in a small but hugely influential component part of it’s future growth.

Small in that it’s at it’s earliest, cutting edge stage of adoption but giant in terms of where it could lead, thereby positioning to ride that wave as it takes off.

Furthermore an especially potent strategy is to specialize in the intersection of a number of accelerating trends, in this case the Blockchain, Self-Sovereign Identity and Open Banking.

From OAuth to SSI

At the heart of this scenario is the ongoing evolution of Digital Identity notably Self-Sovereign Identity, such that it forms an “Identity Metasystem“, will power an equivalent step change leap forward for all industries using these technologies, banking being one of them.

Perfectial provides an introduction to the SSI concept and Zaid Mahomedy of Chainstack explores the specific potential of it’s application to Open Banking here.

He provides an excellent introduction to the Open Banking sector, and describes the primary concerns holding up adoption, notably data privacy concerns, and from this explores the role a permissioned Blockchain and Self Sovereign Identity system could play in addressing them, through enabling a more granular control for users of how their personal data is shared

To dive to a detail level we can consider our Starling Bank case study, where it identifies how they are using the OAuth 2.0 protocol to achieve the integration with their catalogue of banking app plugins. (see from 43m:10s in this video).

As Timothy Ruff CEO of Evernym describes in this blog, Self-Sovereign Identity represents a further evolution again, a third generation of Identity-centric data integration where OAuth represents a second.

SSI could evolve this component part of inter-connectivity, enhancing Open Banking with more sophisticated capabilities in line with this generational step change improvement, what we could think of as ‘Open Banking 3.0’.

Central to SSI are ‘DIDs’ (Decentralized Identifiers), which as explained here can be stored on the public Blockchain to enable the verification of credentials, prior to and enabling the establishment of relationships such as digital banking.

Blockchain Open Banking

Although the focus of Blockchain has been headlined by its role in enabling cryptocurrencies, the technology will also act as a core technology for facilitating the goal of Open Banking, better integration across the ecosystem.

For example Sam Mire identifies 14 possible use cases for Blockchain in Banking, including interbank transactions, cross-border transactions and remittance, and clearing and settlement. The sweet spot will be where the technology facilitates both digital currencies and also integrated features for their exchange.

For example payments firm Wirex is launching 26 stablecoins on the Stellar blockchain network, that can be spent using its own multi-currency Visa card. Wirex’s card allows users to convert and spend cryptocurrencies wherever Visa is accepted.

Plucky startup Ramp is enabling a ‘virtual bureau de change’, leveraging Open Banking capabilities to facilitate “atomic swaps”, where one cryptocurrency can be swapped directly for another– but with fiat to crypto.

It’s not just startups pioneering the field. JP Morgan is utilizing the Blockchain to expand the capbilities of its IIN – Interbank Information Network, adding 200 banks to the network.

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