How Can Your Fintech App Use The Open Banking API?

These days, everyone is talking about open banking. Experts in banking say that open banking has a bright future, while technology experts say it is one of the most disruptive technologies in mobile banking. But there are still a lot of questions about how to make certain fintech apps.

 

The most common questions I obtain from customers are:

• How can I build a fintech app with the open banking API?
• Is the data of people who use open banking safe?
• Where can I find the APIs?

We’ve made solutions for fintech apps that use open banking APIs for 7 Uptech clients. This article will discuss what’s important about open banking, why it’s safe for user data, and how you can use open API to make a new product.

 

What Does Open Banking Mean?

Open banking API is a type of technology that describes how big banks share data with other businesses and startups. With this information, these new companies can quickly and easily make new products. The idea of an open banking API is not new.

Uber was also created when Google’s maps and location API were used together. In the same way, Mark Zuckerberg built Facebook from information like names, ages, and schools. In the same method, an open banking API can be the start of hundreds of fintech startups that will change the world.

For example, you might want to start a business that does financial analytics and gives useful tips on running a business. The good news is that you don’t have to build a bank for such an app. You can look at and use the information about the bank’s transactions.

Or, what if you want to make a product that combines accounts from different banks into one app, making it easier to manage money? The open banking API is also a great way to make this process easier in this case.

 

Open Banking is coming to the EU.

In the EU financial sector, APIs are becoming more and more important. In 2007 and 2013, the EU passed the Payment Services Directive (PSD) and PSD 2. The directives let banks open their infrastructure to third parties via API, as long as they have the right data production and security measures.

Once the plan was implemented, the results did not take long to show. Surprisingly, the UK, which has the most conservative banking system, was the first to start implementing the open banking initiative. Because of this, API calls went up from 66.8 million in 2018 to nearly 6 billion in 2020.

Because of this, the UK’s financial industry has moved past the point of no return. The initiative made banking more competitive and efficient and made way for new fintech projects. About 2.5 million people and businesses in the UK use open banking API-based products to manage their money.

 

What is an Open API?

The first thing to know is that this is an abbreviation for an application programming interface. This set of codes and protocols shows how different program parts should work together. API makes it possible for apps to talk to each other.

 

Data Provided by API

For years, banks have kept track of what their customers buy and how much they spend. This information isn’t very useful to banks; it’s just a bunch of data.

 

This information could be about:

• Locations of bank branches,
• information about certain banking products,
• details about transactions,
• mortgage payments,
• electric bills,
• travel costs.

At the same time, this information can be useful for many new businesses. With the user’s permission, API-sharing allows startups to use this data safely to make new products and improve people’s lives.

 

Open Banking API Participants

Most of the time, there are three people involved in the open banking API process:

• As a third party, a startup can be a bank, an API provider (like Open Banking Limited), or both.
• The bank gives the API provides the information it needs once the user has given permission. The API provider then makes the protocols that automatically send the information to the third party, a company that will use the shared information to make a product.

 

Open Banking API’s Benefits And Risks

The open banking API is one of the best for the fintech industry. Open banking makes it possible for many fintech projects that help users and businesses.

 

Open Banking API Benefits

• Startups can make new products, like mobile apps where bank customers can plan their finances, manage their credit, invest their money, and get financial advice in chat. Most traditional banks don’t offer these kinds of services in real-time, so startups will be able to fill this need.
• Big data from financial analytics and customer behavior can be used to make more personalized services. The Open Banking API makes it easier to work with financial instruments and gives better interfaces and analytical data for better financial management. People won’t have to check their finances by opening dozens of apps. All the functions will be in one app.
• All services should be done faster. Payments for utilities and other things can be made through a single app and only need one authorization.
• Because there is more competition in the market, prices for financial services are going down.

 

Open Banking API Risks

The user data is used closely by the open banking API. Unfortunately, not every service dealing with user data is completely safe from leaks or fraud. But that doesn’t mean these kinds of apps shouldn’t be made. It means that security measures for these apps will need to be stronger than for other apps.

What Is the Future of Open Banking?

At this point, countries behind in open banking API risk falling behind in global markets. So, in the years to come, an open banking API is likely to grow quickly. PISP growth is another thing that is likely to happen. This will give stores a lot more freedom in how they handle payments. It could replace card payments and give you more freedom without charging a fee.

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Conclusion

With an open banking API, there are many new ways to make fintech goods and services. But making API-based apps takes a lot of work and thoroughness. You will also have to talk to the bank and the API provider. Uptech has worked with a US corporation on a project that involved integrating an open API, so we know what steps to take.