• Benjamin Elliott

What is an Open Banking API? Open Banking APIs Explained

Updated: Oct 17

What Is An Open Banking API?

Open Banking API technology has completely changed the financial services sector. Thanks to Open Banking, there are endless new opportunities for FinTech startups and finance management apps.

Open Banking APIs are something we should be embracing, due to the many powerful opportunities that they present. With technology moving at such a fast pace and Open Banking rapidly developing around the world, it’s important to understand how it all works.

In this guide, we’ll cover what exactly an Open Banking API is, how APIs work, and why they are so important for the development of the financial services sector.

Understanding Open Banking

To understand what an Open Banking API is, you will first need to understand the process of Open Banking.

Open Banking is a system that allows third-party applications access to consumers’ banking information. This is done to open up greater possibilities for financial products while levelling out the competitive financial services market.

With Open Banking, tech startups can use customers’ banking data to create products that can be used with the customer's bank account. This makes it possible for a wider variety of financial products and services to exist - which can completely change the face of the financial services market.

In order for Open Banking to take place, the bank will need to be able to share information with third-party applications. This is where an Open Banking API comes into play.

What is an Open Banking API?

An Open Banking API, or an Application Program Interface, is what enables and facilitates the process of Open Banking. Open Banking APIs allow financial institutions to share financial information with each other. This is generally done through a third-party application, and it allows for a whole new range of financial abilities and opportunities.

For example, a financial app could exist that connects to your bank account and helps facilitate payments and process your banking information - even though the app is not from your bank. This is an Open Banking API.

Open Banking API providers are FinTech companies and collaborators that aim to improve the traditional banking system. With an Open Banking API, these companies can offer a wider range of unique products and directly compete with the larger banks. This helps to create a web of banking tools that work seamlessly with each other.

Open Banking APIs improve the opportunities of the traditional banking system and make it more convenient for everyone.

How Do API Open Banking Platforms Work?

In the most simple sense, an Open Banking API facilitates communication between two different application providers. This is generally done through sharing information between a financial institution’s application and a FinTech provider’s product.

One of the most common use cases of an Open Banking API is through a Personal Finance Management (PFM) app. These apps will typically use a customer's transactional data from their bank account to help them perform certain functions. Banks store many years' worth of customer data in their systems, which can be shared with the third-party app through Open Banking.

With the customer's permission, the Fintech startup uses the banking information to run their product and refine the Open Banking API over time. The FinTech company is able to access useful data to create a new product, the financial institution is able to expand its customer's financial capabilities, and the customer has a wider option of financial tools available to them.

Sweep is an example of this, where users can connect the expense management app with their banking data. The app uses an Open Banking API to access banking information and streamline the expense management process.

Open Banking API platforms are also often used for security applications. FinTech solutions can perform processes like authenticating transactions and accounts. This helps to protect customers' financial data.

With permission, Open Banking apps can also initiate payments. Automated Open Banking payments provide a safe and convenient solution to many traditional payment methods, making users' financial lives a lot more efficient.

An example of this is the Sweep Pay platform.

Why Should Banks Use Open Banking API Technology?

Open Banking is all about innovation. Banks that are using Open banking APIs are getting ahead of the competition, providing new customer opportunities, and widely improving the customer experience.

Here are some of the main reasons why Open Banking APIs are so important for financial institutions.

1. Greater Innovation

Open Banking APIs facilitate innovation. By making data available for third-party developers, financial institutions are letting FinTech companies develop new technologies and solutions. Ultimately, these solutions benefit the bank's customers, and so they help the bank to provide a wider range of financial opportunities to its customers.

2. More Opportunities

Open Banking regulation was developed in the UK to allow emerging FinTech companies to enter a highly competitive environment. Where the financial services sector was dominated by a small handful of large banks, there is now an opportunity for smaller startups to enter the market. Ultimately, this makes a lot more financial opportunities available to consumers.

3. More Personalised Offers

Open Banking APIs allow FinTech providers to create more personalised banking experiences. With all of the banking data available, customers can be offered more personalised products and recommendations. This can vastly improve customers' financial possibilities.

4. Open Banking Benefits Everyone

Open Banking benefits everyone involved with it - including banks, FinTech startups, and consumers. By embracing Open Banking, we are able to access a more advanced and developed industry as a whole.


An Open Banking API is what allows the entire Open Banking ecosystem to exist.

In the most simple sense, Open Banking APIs allow banks to communicate and share customer data with third-party developers. This means that these developers can create new solutions and products using this data - opening up a wide range of possibilities for the financial services sector.

It’s important to understand Open Banking API, how they work, and what kind of opportunities they present. By utilising Open Banking, you can access a whole new world of financial prospects.

137 views0 comments