If you’re new to the world of open banking, you’re likely already trying to juggle a lot of unfamiliar terms. From PSD2 to RTS to ASPS, the field of open banking is rife with terms and acronyms (check out our glossary here to find the most common terms and their meanings).
But among these, one that you’ll probably be seeing a lot is API. That’s because APIs are the tools that facilitate open banking, which means they make it possible to share financial data between certified entities (i.e. a bank to a Third Party Provider).
You may be wondering who can use open banking APIs. Are they accessible to everyone?
The short answer is no – but that’s a good thing!
Below, we go into detail about how open banking APIs work, who can use them, and why.
An API stands for Application Programming Interface. Simply put, it is the technology – a set of codes and protocols – that connects two online systems together so they can share information.
Since open banking is the process of sharing a user’s financial data (with the user’s consent) between a bank and a financial service provider, like a lender, APIs are important to the whole process. They actually make that data sharing possible.
APIs work on a series of “calls” – basically, a user agrees to share their information with a Third Party Provider (for example, a lender). The provider will then connect with the user’s bank API. They will make an API call to the bank, requesting the user’s financial data, which can include bank balance, transaction history and more. Then, the bank will process that request and respond via API with the data in a standard format.
Sometimes, the third party provider will seek help from a financial service provider (like Kontomatik) to request, read and analyze the banking data. Fintechs like Kontomatik often have their own APIs, and in those cases, the fintech API and the bank’s API will communicate with each other in order to facilitate that act of data sharing.
Here’s the big question, and the answer is: only verified users. This means that banks can use (and often have their own) open banking APIs. Additionally, verified Third Party Providers, like lenders, insurers and others who may need to view user data can use open banking APIs. Finally, verified fintechs that help third parties understand data (like Kontomatik) are also able to use APIs.
The key word in all of these cases is verified. Different countries have different rules for verification, but essentially, an entity must meet strict data safety requirements in order to become a verified entity.
Here’s why that’s a good thing: if you’re a user interested in sharing your data in order to obtain, for example, a loan, you can be rest assured that the entities viewing your data have been proven to meet strict safety regulations.
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