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What is API in the context of Open Banking?

Written byKoyo Loans
First published30th September 2022
  • Introduction
  • What is API in the context of Open Banking?
  • What is the difference between Open Banking and PSD2?
  • What does Open Banking mean for customers?
  • Is Open Banking free?
  • Conclusion

In 30 seconds…

There’s no doubt that, since 2018, Open Banking has changed the way you can access financial services in the UK. It has also put you – the customer – in total control of how your financial data is managed. Powered by APIs and made possible by PSD2 legislation, Open Banking is 100% free for all UK customers and promises to make the financial services industry more competitive and innovative. It also enables clients to access a broader spectrum of financial services, offering better deals and cost-saving opportunities as a result.


Since its introduction in 2018, Open Banking has transformed the financial services industry. It is designed to make life easier for customers and financial institutions and promises to create healthy competition in the sector more broadly. Below, we look at some of the key aspects of Open Banking in the UK to help you understand how you can benefit from it.

What is API in the context of Open Banking?

API stands for application programming interface, which is essentially software that supports communication between certain applications. It is integral for Open Banking as it enables specific IT systems to provide relevant financial data to businesses and customers.

Open Banking APIs act as connecting links between databases and trusted third-party applications. A good analogy is to consider an Open Banking API as a bridge over which key data travels between two sources. All APIs in the UK must conform to strict Open Banking standards and undergo a rigorous assessment before approval.

In the context of Open Banking, APIs are beneficial because they facilitate the flow of information in a controlled and secure format. Without APIs, it would be difficult for third parties to access the required information that makes Open Banking so innovative. Therefore, Open Banking APIs facilitate a much more competitive financial market and are beneficial to both customers and businesses.

What is the difference between Open Banking and PSD2?

Open Banking and PSD2 are certainly similar, but there are important differences between the two financial terms that you need to understand.

PSD2 is legislation that was passed through the EU and its member states in 2018, which maintains a safe and secure single market for e-money payments. Its goal is to prevent fraud and enhance security while attempting to pave the way for a single digital market in Europe. Crucially, PSD2 enables projects like the UK’s Open Banking to happen.

Therefore, it’s accurate to say that Open Banking is in part facilitated by the presence of PSD2. In the UK, Open Banking enables customers to view all of their accounts, bills and payments from one place thanks to application programming interfaces, as explained above. Essentially, Open Banking provides people in the UK with more control over their financial management and is enabled in part by the EU PSD2 legislation.

What does Open Banking mean for customers?

Open Banking is all about providing customers with more control over their financial data and providing a broader range of financial products and services. If you want to stay opt-in to Open Banking, you enable trusted financial companies to securely access your data, which can help you in numerous ways.

For instance, Open Banking presents customers with an increased number of tailored products that match their current financial needs. These might be in the form of offers that you wouldn’t ordinarily be aware of. Open Banking can also lead to faster access to credit and financing, which helps you access the money you need without having to wait an eternity for your application to be approved.

But perhaps the key benefit to customers is that Open Banking affords you full control over how your financial data is used and accessed. Trusted third parties can only access your financial data with your approval, and you can opt out at any time. Given that mistrust of financial institutions is at an all-time high, Open Banking provides you with an additional level of security, at least in terms of how your financial data is managed.

Is Open Banking free?

Open Banking in the UK is 100% free. The purpose of Open Banking is to enable financial institutions to securely share your data with trusted third parties to help you access better offers and a broader range of services.

What’s more, it’s hoped that Open Banking will nurture a more competitive and innovative financial services industry, which is likely to lead to improvements in the way that you manage your money. Charging for this service doesn’t make any sense and is not currently being discussed.

That being said, it’s important to realise that some of the regulated apps and websites that use Open Banking may charge you to use their products and services. So, you need to bear this in mind when you use open banking to identify potential offers that you can benefit from, as they won’t all be completely free.


Opting in to Open Banking has the potential to transform the way you access and manage your finances. However, it’s entirely up to you whether you use it. We hope these key questions have improved your understanding of how Open Banking works and helped you decide whether or not to opt in.

Koyo Loans is the trading name of BETR Technology Ltd. Company No. 11483187. Registered Office: Huckletree Soho, Ingestre Court, Ingestre Place, London, W1f 0JL

Key Takeaways

So, Open Banking – should you stay opt in? It’s entirely up to you, and this is why it’s so valuable. You are in complete control of how your data is managed and who accesses it. By securely sharing your data with trusted third parties, you have the opportunity to access a wide range of financial services that can help you save money. You can do this safe in the knowledge that your data is secure, thanks to the role that APIs play.

Crucially, Open Banking is a key aspect of making the UK financial services industry more competitive and innovative. It will continue to foster competition and provide you with access to financial products and services that can improve the way that you manage your money. So, if you stay opt in to Open Banking with your bank or building society, you will be able to access a broad range of products and services that can help to improve your financial management in a safe and secure way.

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