What is api in open banking?

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API (Application Programming Interface) in open banking refers to the set of rules and protocols that allow different software applications to communicate and interact with each other. In the context of open banking, APIs play a crucial role in enabling secure and standardized access to financial data and services. This article will delve deeper into the concept of API in open banking, exploring its significance, benefits, and implications.

Understanding API in Open Banking

What is Open Banking?: Open banking is a regulatory framework that requires banks and other financial institutions to provide third-party providers (TPPs) with access to customer data, with the customer’s consent. This data can include account information, transaction history, and other financial details. Open banking aims to foster competition, innovation, and customer empowerment in the financial services industry.

The Role of APIs: APIs act as intermediaries, facilitating the secure exchange of data between banks and TPPs. They define the methods and protocols for requesting and sharing information, ensuring that data is transmitted in a standardized and secure manner. APIs in open banking enable TPPs to access customer data from multiple banks through a single interface, simplifying the development of innovative financial products and services.

Types of APIs in Open Banking: There are primarily two types of APIs in open banking: account information services (AIS) APIs and payment initiation services (PIS) APIs. AIS APIs allow TPPs to retrieve account information, such as balances and transaction history, from a customer’s bank account. PIS APIs, on the other hand, enable TPPs to initiate payments directly from a customer’s bank account, with the customer’s consent.

Benefits of API in Open Banking: API-driven open banking offers numerous benefits for various stakeholders:

1. Enhanced Customer Experience: APIs enable TPPs to develop innovative financial products and services that can provide customers with personalized and tailored experiences. This can range from budgeting and financial management apps to loan comparison platforms.

2. Increased Competition: Open banking and APIs promote competition by allowing new players to enter the financial services market. This leads to a wider range of options for customers and encourages established institutions to improve their offerings.

3. Improved Financial Inclusion: APIs can help bridge the gap between traditional banking and underserved populations by enabling the development of user-friendly and accessible financial services. This can include mobile banking apps, micro-lending platforms, and more.

4. Efficient Payment Processes: PIS APIs streamline payment processes by allowing TPPs to initiate payments directly from a customer’s bank account. This eliminates the need for traditional payment methods, such as cards or checks, and reduces transaction costs.


APIs play a crucial role in open banking, enabling secure and standardized access to financial data and services. They facilitate the exchange of information between banks and third-party providers, fostering competition, innovation, and customer empowerment. By leveraging APIs, TPPs can develop innovative financial products and services, enhancing the overall customer experience. Open banking and APIs also promote financial inclusion and streamline payment processes. As the open banking ecosystem continues to evolve, APIs will remain a fundamental component in driving its growth and potential.


1. openbanking.org.uk
2. europeanpaymentscouncil.eu
3. financialdataexchange.org