Open banking APIs are standardized, permissioned interfaces that let third-party applications access bank account data and initiate payments—only after the account holder gives explicit consent. Instead of scraping screens or storing customer credentials, developers call secure REST endpoints protected by OAuth 2.0 and strong customer authentication. The result is a safer, faster way to build account aggregation, payment initiation, lending, and personal finance products on top of existing bank infrastructure.
What are open banking APIs?
Open banking is a regulatory and technical framework that requires (or encourages) banks to expose customer-permissioned data and payment capabilities through documented APIs. The account holder—not the bank and not the app—decides who gets access, to what, and for how long. This shifts data ownership toward the consumer while giving regulated third parties a clean, auditable way to connect.
Most open banking APIs fall into two functional categories:
- Account Information Services (AIS): read-only access to balances, transactions, account details, and standing orders. This powers budgeting apps, accounting integrations, and lending affordability checks.
- Payment Initiation Services (PIS): the ability to start a payment directly from the user's bank account, bypassing card networks. This underpins pay-by-bank checkout and account-to-account transfers.
A third emerging category, often called "open finance," extends the same consent model to mortgages, pensions, insurance, and investment data.
Why do open banking standards vary by region?
There is no single global open banking API. Standards emerged from different regulatory drivers, so the endpoints, data models, and security profiles differ by market:
- United Kingdom: The Open Banking Standard is the most mature and prescriptive, mandated for the largest banks and widely adopted by fintechs.
- European Union: PSD2 mandates access but leaves the technical implementation to the market, producing frameworks like the Berlin Group's NextGenPSD2. The successor regulation, PSD3/FIDA, aims to standardize further.
- United States: Historically market-driven through aggregators, now consolidating around the Financial Data Exchange (FDX) API and the CFPB's data-access rule.
- MENA: Regulators in markets such as Bahrain, Saudi Arabia, and the UAE have launched open banking mandates, often modeled on the UK approach.
For any product serving multiple regions, this fragmentation is the central engineering challenge. Many teams abstract regional differences behind a normalized internal data model or integrate an aggregator that unifies the underlying banks.
How does open banking security actually work?
Security is the defining characteristic of open banking, and it is stricter than a typical public API. The core building blocks are:
- OAuth 2.0 authorization: The user is redirected to their bank to authenticate and approve a specific scope of access. Your application never sees the user's banking password.
- FAPI (Financial-grade API): Open banking relies on the OpenID Foundation's FAPI security profile, which hardens OAuth with measures like sender-constrained tokens (mTLS or DPoP), signed request objects, and PKCE.
- Strong Customer Authentication (SCA): Under PSD2 and similar regimes, the user must authenticate with at least two independent factors, and consent typically expires and must be renewed (commonly every 90 days for AIS).
- Certificates and registration: Third-party providers are often required to register with a regulator or scheme directory and use eIDAS or scheme-issued certificates to identify themselves.
In practice, this means your integration must manage consent lifecycles, token refresh, certificate rotation, and consent re-authorization gracefully—these are the parts that most affect real-world reliability.
Building your first open banking integration
Whether you connect directly to banks or use an aggregator, the flow follows a predictable shape. A clean, well-structured approach to API development pays off here because open banking integrations are long-lived and consent-driven.
Direct-to-bank vs. aggregator
Connecting directly to each bank gives you maximum control and the lowest per-transaction cost, but you inherit the burden of regulatory registration, certificate management, and maintaining dozens of slightly different integrations. Aggregators (such as Plaid, Tink, TrueLayer, or Yapily) expose one API across many banks and handle much of the compliance surface, at the cost of a per-call fee and some abstraction.
A typical implementation checklist
- Register your application and obtain client credentials and, where required, transport/signing certificates.
- Implement the OAuth redirect and consent flow, storing the consent ID and its expiry.
- Exchange the authorization code for access and refresh tokens; store them encrypted.
- Call AIS or PIS endpoints, handling pagination, rate limits, and inconsistent data formats between banks.
- Build robust consent-renewal and error-recovery paths, since expired consent is the most common production failure.
- Log every access for audit and compliance, and never store raw credentials.
Common pitfalls to avoid
Teams new to open banking tend to underestimate operational realities. Watch for these:
- Treating consent as permanent: Consent expires. Design re-authorization into the UX from day one.
- Assuming uniform data: Two banks under the same standard may return different transaction categories, date formats, or optional fields. Normalize aggressively.
- Ignoring sandbox-vs-production drift: Bank sandboxes often behave differently from live endpoints. Test with real accounts early.
- Underinvesting in observability: Bank endpoints have variable uptime. Instrument latency, error rates, and per-bank availability.
Because open banking sits at the intersection of regulation, security, and reliability engineering, it rewards teams with genuine fintech development experience who have shipped and maintained these integrations before.
Frequently asked questions
Do I need a license to use open banking APIs?
It depends on your role and region. To act as a regulated Account Information or Payment Initiation provider in the UK or EU, you typically need authorization from a regulator. Many companies avoid direct licensing by working through a licensed aggregator that acts as the regulated party on their behalf.
Are open banking APIs free to use?
Bank-provided APIs mandated by regulation are usually free to access, but building and maintaining direct connections carries real engineering and compliance cost. Aggregators charge per API call or per connected account in exchange for coverage and reduced compliance overhead.
How is open banking different from screen scraping?
Screen scraping relied on storing and replaying customer login credentials—fragile and insecure. Open banking replaces this with permissioned, tokenized API access where the user authenticates directly with their bank and can revoke access at any time.
What is FAPI and do I have to implement it?
FAPI (Financial-grade API) is a hardened OAuth 2.0 security profile designed for high-value financial data. If you connect directly to banks under most modern open banking standards, FAPI compliance is effectively required. Aggregators handle FAPI internally, so their clients rarely implement it directly.
How Direlli can help
Direlli builds and maintains open banking and broader fintech integrations for clients across the US, Europe, and MENA. From choosing between direct bank connections and aggregators to implementing FAPI-grade security and resilient consent management, our engineers handle the regulatory and technical complexity so you can focus on your product. With a 5.0 rating on Clutch and dedicated teams available across time zones, we help teams ship dependable financial software. Contact us to discuss your open banking project.
