11 min read 
An open banking API is a secure digital doorway that lets a licensed third-party provider read a customer’s bank data or start a payment from their account, but only after the customer agrees. That’s the whole idea in one sentence. The bank keeps the money and the data. The customer decides who gets access. The API is the controlled channel between them.
We work with this model every day at ConnectPay. As an EMI-licensed provider based in Vilnius, we hear the same questions from founders, developers and product leads. What exactly gets shared? Who is responsible if something goes wrong? And what can you actually build once you have access?
This guide answers those questions in plain terms. We cover what an open banking API is, how the consent and authentication flow works, and which providers you’re likely to meet. We also look at the business benefits, how payments differ from data access, whether open banking API access is legal in the EU, UK and US, and where the market is heading. If you need the full security architecture, we cover it in a separate, more technical piece. This one is the foundation.
What Is an Open Banking API?
Let’s start with the basics of what is API in open banking. An API (application programming interface) is a set of rules that lets two pieces of software talk to each other. In open banking, one side is the bank that holds the account. The other side is a third-party provider (TPP), such as a budgeting app, an accounting tool, a lender or a payment service. The open banking API defines what the TPP can ask for and how the bank responds.
There is no single global open banking API, though. Each bank builds its own, and different banks implement their APIs using different protocols, data formats and authentication steps. In the UK, most large banks follow the Open Banking Standard. In the EU, PSD2 sets the rules but not one technical format, so you’ll find the Berlin Group standard, France’s STET standard and plenty of bank-specific variations. A developer who wants to reach 50 banks could face 50 slightly different integrations.
That’s why standardized platforms and aggregators exist. They connect to banks on one side and give you one consistent API on the other. A good provider also handles the parts that aren’t code: authentication flows, the regulatory licence, consent records and reporting. The TPP doesn’t have to build a compliance team before shipping its first feature.
It also helps to separate open banking from a related model. Open banking gives you access to accounts held at other banks. Banking-as-a-Service lets you offer accounts and payments under your own brand, using a licensed partner’s infrastructure. We break down that difference in our comparison of open banking vs Banking-as-a-Service.
How Do Open Banking APIs Work?
The easiest way to understand how an open banking API works is to follow one connection from start to finish.
Say a small online shop starts using an accounting app that pulls in business account transactions automatically. The owner clicks “Connect bank” in the app. The app, acting as the third-party provider, sends a request through the open banking API that spells out what it wants: for example, balances and transactions for the last 90 days. The owner is then redirected to their own bank’s login page or mobile app. They never type their bank password into the accounting tool.
This is where OAuth 2.0 comes in. OAuth 2.0 is an authorization standard that lets the bank confirm who the user is and what they agreed to, then issue the app an access token. Think of the token as a hotel keycard. It opens only the doors the user approved, and only for a limited time. With that token, the app calls the open banking API to retrieve account balances and transaction histories. No password changes hands at any point.
Consent sits at the centre of the whole model. The user chooses what to share and with whom. They can also revoke that access at any time through their bank, and once they do, the token stops working. In the EU, account access also has to be re-confirmed periodically, so a permission granted once doesn’t last forever by default.
Behind all this sits a set of strict security standards that regulators require banks and providers to follow. We cover those in our dedicated security article. For most product decisions, the key points are simpler: the user authenticates with their bank, the app gets scoped access, and the user stays in control.
If you’re mapping out how an integration like this fits your own stack, our overview of ConnectPay APIs shows how we structure account and payment endpoints.
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Open Banking API Examples
You’ve probably used an open banking API without noticing. When a lending app asks you to verify your income by connecting your bank, or a money app shows balances from three banks on one screen, an aggregator is usually doing the work in the background. Here are three open banking API examples worth knowing.
Plaid is the name most US developers meet first.
It connects to more than 12,000 financial institutions, and its network has linked over 500 million consumer accounts across the US, Canada, the UK and Europe. Apps like Venmo and Robinhood use it so customers can link a bank account in a few taps. For a US-focused product, Plaid is often the starting point simply because of that coverage.
Tink plays a similar role in Europe.
Visa acquired it in 2022, and it gives businesses access to thousands of European banks through a single integration. Teams use it for account verification, payment initiation and transaction data across EU markets, where bank API formats vary from country to country.
ConnectPay sits in a different spot. We’re not primarily a data aggregator. We give businesses API-first access to accounts, IBANs and payments in Europe, so they can build financial features on open banking and SEPA rails with a licensed provider behind them. A typical case is a marketplace that needs to collect funds from buyers, hold them, and pay out sellers.
The right choice depends on your geography and on whether you need data, payments or accounts. Our guide to open banking solutions compares the main options in more detail.
Benefits of Open Banking APIs
The benefits of open banking API access show up in three places: cost, speed and product quality. Here’s how they play out for real businesses.
- Faster, cheaper and more secure transactions. A payment initiated through an open banking API moves directly between bank accounts. No card network sits in the middle taking a percentage, and with SEPA Instant the funds can arrive in seconds. Security improves as well, because the customer authenticates with their own bank instead of typing card numbers into a checkout form.
- More customized financial products. With permissioned access to real transaction data, a lender can see actual cash flow instead of relying only on a credit score. That matters for freelancers and young companies with thin credit files. A savings app can suggest a monthly target based on what the user really spends, not on a generic rule.
- Better customer experience. Integrated services remove manual steps. Instead of downloading three months of PDF statements to apply for a business loan, a founder connects their account and the lender reads the data directly.
- Real-time risk assessment. Before shipping goods or releasing a payout, a business can confirm that an account exists, belongs to the right person and holds enough funds. That cuts failed payments and some types of fraud.
- Operational efficiency. This is the benefit finance teams notice first. Transactions flow straight into accounting software, incoming payments match invoices automatically, and nobody spends Friday afternoon reconciling bank lines in a spreadsheet.
These gains add up when data and payments run on the same infrastructure. You can see how that works across our payments offering.
Open Banking API Payments
Most conversations about open banking focus on data. But open banking API payments are a separate use case, and for many businesses they’re the more valuable one.
Here’s the difference. With data access, an app reads information from an account. With payment initiation, a licensed provider uses the open banking API to set up a transfer from the customer’s account. The customer approves it in their banking app, and the money moves account-to-account (A2A). It doesn’t touch card networks like Visa or Mastercard at all. In the EU, the provider doing this is called a payment initiation service provider (PISP).
Picture a utility company collecting monthly bills. With cards, it pays processing fees on every payment and chases customers whose cards have expired. With A2A payments, the customer approves a transfer from their bank, and the company receives the full amount, often within seconds over SEPA Instant. There are no card chargebacks either. That cuts both ways: merchants get certainty, while buyer protection depends on how the provider and the bank handle disputes.
We expect A2A payments to keep growing as an alternative to card rails, especially at checkout and for bill payments, where amounts are predictable and every percentage point of fees counts. If you sell across borders, currency handling becomes part of the picture too. Our post on multi-currency payment gateways covers that side.
Is Open Banking API Access Legal?
Yes. Using an open banking API is legal in the EU and the UK, and it isn’t illegal in the US. The detail differs a lot by region, though.
In the EU, open banking rests on the revised Payment Services Directive (PSD2), which has applied since January 2018. PSD2 requires banks to give licensed third parties access to payment accounts when the customer consents. Those third parties need authorization as an account information service provider (AISP), a payment initiation service provider (PISP), or both, and they must follow strong customer authentication rules.
The UK also launched in January 2018, through a framework the Competition and Markets Authority (CMA) mandated for the nine largest banks.
The US is less settled. Open banking activity is legal, and millions of people use it every day. But the CFPB’s Section 1033 rule, finalized in 2024 to give consumers a formal right to share their financial data, has been enjoined by a federal court and is under active reconsideration. For now, US open banking runs more on industry practice and aggregator agreements, with providers like Plaid, than on a binding federal mandate.
For any business, the practical point is that compliance is part of the product, not an afterthought. Our embedded compliance approach covers that layer, and our dedicated open banking API security piece goes deeper into the regulatory detail.
The Future of Open Banking APIs
The open banking API is moving from a specialist integration to standard financial infrastructure. Four trends show where it’s going.
- Scope. Open banking covers payment accounts. Open finance applies the same consent-based model to savings, investments, pensions and insurance. Industry forecasts expect that wider scope to become common by 2035, which means a single connection could eventually show a customer’s whole financial position, not just their current account.
- Market size. Industry estimates put the global open banking market at roughly $240 billion by 2035, although projections vary widely between research firms, so treat any single number as directional.
- Partnerships. Surveys of banks report that a large majority plan to partner with fintechs around open banking rather than build every service in-house. For fintechs, that means more banks treating them as distribution partners instead of competitors.
- Automated A2A payments. The same rails that power one-off bank transfers can support recurring ones, such as subscriptions, savings sweeps and regular bill payments that pull from a bank account with the customer’s standing permission. This connects directly to the payments use case above. For the operational side of collecting regular payments, see our guide to recurring payment software.
Turn Open Banking API Access Into Real Financial Products
An open banking API on its own doesn’t do much. It’s the connective layer, not the end product. The value comes from what you build on top of that access.
In practice, that might be onboarding where a new customer’s account is verified in seconds instead of days. It could be a checkout that takes bank payments without card fees, a credit decision based on real cash flow, or a finance workflow that reconciles itself overnight. Each of these starts with the same permissioned connection and ends somewhere much more useful.
Getting there takes two things. You need reliable API access, and you need the compliance layer behind it: licensing, KYC and AML checks, safeguarding of client funds and strong customer authentication. Many teams underestimate the second part until a bank partner or regulator asks about it.
For businesses building on open banking rails in Europe, this is where we come in. ConnectPay is an EMI licensed in Lithuania that gives you accounts, IBANs and payments through one API, with compliance built in. If you’re planning a product on open banking, talk to us about what you want to build.
