What are Open Banking APIs, and Why do They Matter?
You may have heard of Open Banking APIs, but what are they, and why do they matter? Open Banking APIs are application programming interfaces that allow third-party developers to access financial data. This data includes transaction history, account balances, and other financial data typically locked away in banks’ proprietary systems.
Open Banking APIs allow third-party developers to build financial products and services that consumers and businesses can use. This has the potential to revolutionise the financial services industry by making it easier for consumers and businesses to access the products and services they need. This blog post will take a closer look at Open Banking APIs and why they matter.
What is an Open Banking API?
An open banking API is an application programming interface that allows third-party developers to access data and functionality from a financial institution. This data includes things like account balances, transaction history, and payment details. Banks use open APIs to partner with FinTech companies and third-party developers to create innovative new products and services.
Open banking APIs are based on the principle of open data, which is the idea that data should be freely available for anyone to use and reuse. By making their data available through an API, banks can tap into new markets and reach new customer segments.
Open Banking was born out of the European Union’s Second Payment Services Directive (PSD2), which was enacted in January 2018. PSD2 requires banks to provide third-party developers access to customer financial data via APIs. The goal of PSD2 is to create more competition in the financial services industry and to make it easier for consumers and businesses to access the products and services they need.
Some of the largest banks in the UK have committed to providing open access to customer data. These banks include Barclays, HSBC, Lloyds Bank, NatWest, Royal Bank of Scotland, Santander UK, Standard Chartered, Ulster Bank Ireland, and Virgin Money UK.
Some banks in the US voluntarily provide access to their APIs as part of their commitment to open banking. These banks include BB&T, Capital One, Chase, Citi, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo, and USAA.
Why do Open Banking APIs Matter?
Open Banking APIs have the potential to revolutionise the financial services industry by making it easier for consumers and businesses to access the products and services they need. In addition, Open Banking APIs could help reduce fraud by giving third-party developers access to transaction history and other account data that can be used to verify transactions.
For example, imagine you’re a small business owner who wants to apply for a loan. In the past, you would have had to go through a lengthy process of collecting all of your financial documents and taking them to a bank for review. With Open Banking APIs in place, you could simply provide your bank login information to a third-party lender who can use your transaction history and other account data to assess your creditworthiness. This would make it much easier for small businesses to get the financing they need in a timely manner.
Conclusion:
Open Banking APIs have the potential to revolutionise the financial services industry by making it easier for consumers and businesses alike to access the products and services they need. In addition, they could help reduce fraud by giving third-party developers access to transaction history and other account data that can be used to verify transactions.
Fennech provides a set of standardised APIs that allow you to pick up the data you need from F³. We do the complex task of sourcing data from your various providers and standardising it. We can also automatically send instructions (e.g., trade requests, payment instructions, etc.) back to your providers. This results in a quick, simple integration that gives you the data you need in real-time to support all your automation tasks. For more information on leveraging the power of an open banking API, contact us at www.fennech.com.