What is an open banking API?

When it comes to innovation, particularly in Financial Services, open banking APIs are essential. They allow third-party companies and financial institutions to safely share and receive customers’ financial data.

 

Simply put, APIs (Application Programming Interfaces) are secure digital communication channels. These channels enable businesses and their customers to access data. With open banking, these channels connect customers to their banks for the purpose of sharing financial data (with their consent) or initiating a payment.

A great example of a popular API is LinkedIn Search.

LinkedIn Search

When users click on the search bar, they are using an API. It sends a message to LinkedIn’s database to retrieve a list of profiles matching the name searched.

 

Open banking explained

The term ‘open banking’ refers to both the technology and the global community of developers and innovators, who build the connectivity ecosystem.

Open banking APIs expose a range of data to third-party financial service solution providers. These solutions include payment initiation and account aggregation to name a few. The banks’ APIs support open banking regulations and are PSD2 compliant.

 

How do companies access open banking APIs?

Thanks to the Open Banking Implementation Entity (OBIE), there are a set of agreed protocols and approaches, which TPPs need to follow to access open banking APIs.

  • To access these API points, customers must give consent to a TPP via the bank to access their data.
  • Customers are then required to log in to their bank accounts online via the bank’s secure login process.  

It’s important to remember both individuals and businesses can only access their data through secure online gateways. Data and payment requests are made over real-time APIs.

 

Are all bank APIs the same?

Whilst banks in the UK adhere to the OBIE’s standard, other banks outside the UK and EU may have a slightly different approach. However, more and more banks in the ecosystem are working toward a similar standard. As a result, it takes time, resources, and ongoing investment to set up the backend infrastructure to establish and maintain connectivity.

 

Are all bank API response times the same?

No, different banks have different API response times. Challenger banks like Revolut have some of the fastest response times. Whilst banks are continuously improving their response time, this response time can vary depending on different factors like infrastructure and technology stacks.

 

Why should a business use an open banking platform?

By using a single interface or platform, businesses can:

  • Reduce the time spent struggling to keep up with bank changes and costly downtime.
  • Minimise technical debt with a dedicated team.
  • Focus on innovation, delivering competitive, hyper-personalised products and services.

 

What happens after connecting?

Once customers give consent, businesses can receive customers’ financial data including account information, such as current account balance and transaction history. Customers can also initiate payments from the bank in real-time.

Using a bank API, service providers can receive real-time raw data aggregated from numerous banks. This data can be normalised, so it is clean and ready to be used in an app or dashboard. This data will then be used to offer more personalised products and services to consumers.

 

What bank APIs are available?

Depending on the partner you select, a wide range of bank APIs are accessible. Most open banking partners in the UK will cover more than 90% of the UK bank network. The CMA 9 banks will always be available as they are open banking entities– HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske, Lloyds and Nationwide.

These banks release their data in a secure, standardised form. This allows data to be shared between authorised organisations online via a secure API. Additionally, innovative challenger banks like Revolut, Monzo, Starling and Tide bank APIs are also available.

 

Summary

In conclusion, open banking allows businesses and customers to gain greater visibility of financial data, spending habits and needs. This allows companies to offer better products and services, drive growth and offer an improved user experience.

If this has raised a few questions or you would like to explore open banking, then please do get in touch. We have the knowledge, product, team, and experience to get open banking data and payments working for you