Open Banking API for Banks and Fintechs: Integration, Providers, and Rollout

What shipping open banking actually means

Someone handed you an open banking API and a deadline, and the word "API" makes it sound like one HTTP call away from done. It isn't. A launch puts product and engineering in the same room as security and compliance, and all four are working on the same feature at the same time.

Strip away the jargon and open banking is one idea. With the account holder's permission, a third party gets access to bank data and the ability to move money on that person's behalf. Those are the two things it lets you do. You can read account information such as balances and transaction history, and you can initiate payments straight from a bank account.

Those two capabilities carry different weight, and most of the confusion in a scoping meeting comes from treating them as one thing. Reading data and moving money have separate consent and risk, and each carries its own regulatory exposure. So before anyone writes a line of code, the team has to agree on which of the two you're actually building, and what each demands. The rest of this piece works through those demands in the order you'll meet them.

Consent is the product, not a checkbox

The consent flow is the single screen that decides whether your feature works, because no data moves and no payment fires until the user agrees on their bank's turf. Teams treat it as legal boilerplate to bolt on at the end. That's backwards. Consent is where conversion is won or lost, and it's a product decision long before it's a compliance one.

Explicit consent has to tell the user what data or action they're approving and how long that access lasts, with the practical effect stated in plain language. The scopes you request and the wording on the screen are choices your product and design owners make, as is the path for revoking access later. They're not handed down by a regulator as fixed text.

The evidence that UX moves the numbers is hard to argue with. In the UK, one firm that implemented the app-to-app authentication standard reported an approximate 60% increase in customer conversions from a bank's customers, and it told the Open Banking Implementation Entity the results were "absolutely astounding." The reason is mundane. Early redirect flows pushed people through as many as twelve screens of repeated warnings, so app-to-app authentication, where the user confirms inside their own banking app, cut that friction down.

The gains keep coming from small fixes. Tink worked with Deutsche Bank to split the branch and account number into two fields to match the bank's own login, and saw a 10% increase in end-to-end conversion along with a 17-second drop in flow duration. Design within the constraints, though. The bank controls the authentication step, and your compliance owner controls what the consent text must disclose. Your job is the journey around those fixed points.

Security and compliance you cannot skip

This is the groundwork the security lead and compliance owner are signing up for, and it splits into requirements that teams handle separately. Some of these are legal obligations you cannot negotiate. Others are engineering best practice that the ecosystem has standardized into a bar you must clear. The two H3s below cover the parts that trip up teams who know general application security but haven't met the financial-grade specifics.

The FAPI security profile

The Financial-grade API (FAPI) profile is a security specification from the OpenID Foundation that hardens OAuth 2.0 for the higher risk of bank data and payments. Most open banking ecosystems standardized on it, with the UK regime and Australia's Consumer Data Right among them; Brazil's open banking framework did the same. In North America, the Financial Data Exchange (FDX) standard provides the equivalent technical foundation, with OAuth 2.0 and OpenID Connect security and over 200 member organizations.

At a practical level, FAPI demands more than a typical OAuth setup. The advanced profile requires you to authenticate the client using mutual TLS or a signed JWT, with RSA keys of at least 2048 bits. It pulls in extensions like Pushed Authorization Requests (PAR) and JWT-secured authorization, and it forbids public clients for write access. Conformance to this profile is the bar for handling sensitive financial data.

Building this in-house is expensive because getting the implementation right is the hard part. The OpenID Foundation notes that configuring a system to be FAPI-compliant is the hardest part of certification and depends entirely on your internal expertise or your vendor, as explained in its usually the hardest part certification overview. The conformance test suite itself is free and open source, and self-certification costs a small fee, so the cost lives in the engineering work. An engineer can judge the effort by that split: cheap to test, expensive to get right.

Strong customer authentication

Strong customer authentication (SCA) is the requirement that the user prove who they are using at least two independent factors. The categories pair knowledge, such as a PIN, with possession, such as a phone; biometrics such as a fingerprint form the third category. Under PSD2 in the European Economic Area, SCA has been a legal requirement for electronic payments since September 2019, and it applies both to reading account data and to initiating a payment.

In practice, SCA shows up as the app-to-app or decoupled flow your users already know. The provider detects that SCA is required and issues a second challenge, such as a one-time passcode or a biometric check. The user clears it inside their bank's channel, and only then does the action proceed.

Here's the division of responsibility that matters for scoping. The bank, as the account provider, enforces SCA and runs the verification. The authentication belongs to the bank. Your product must support the journey: a clean handoff to the bank and a return path that preserves state after the redirect or device switch. So your obligation is to accommodate SCA within the product journey.

Build direct or buy an open banking API

Here's the decision the whole piece leads to: a genuine trade-off. You can connect to banks yourself, or you can buy an open banking API that abstracts the connections for you. The right answer depends on your stage and engineering headcount, with provider count shaping the trade-off too. The well-documented pattern is that direct integrations start as an advantage and turn into maintenance anchors as the provider count climbs.

Connecting to banks directly

Building direct means you own the provider-specific foundations: authentication and data mapping into your own schema, plus the error-handling and sync logic that keeps data current for each bank or scheme. To do this for payments or data access in regulated markets, you also become a licensed third party, which carries its own regulatory burden.

The upside is real. You get full control over the flows and the freedom to handle provider-specific edge cases the way you want, backed by a deep understanding of each provider's quirks. There's no vendor between you and the bank, and no dependency on someone else's coverage.

The cost is equally real, and it scales the wrong way. Effort grows close to linearly with each provider you add, because every bank has its own integration process and maintenance requirements. Your on-call burden grows with it as OAuth refresh failures and webhook timeouts multiply across connections. As Intersog's guidance puts it bluntly, only large fintechs or banks take this road, and it makes sense when open banking is the core of your business or you need only one or two local banks.

Using a unified financial data API

A unified financial data API, or open banking API aggregator, hides many bank endpoints behind one integration you build once. The scale on offer is the selling point. Plaid, for example, connects to over 12,000 financial institutions globally, so a single integration reaches coverage you'd never build alone.

The benefits are speed to market and far less maintenance, with the chance to offload FAPI conformance to a provider that already cleared it. The trade-offs are control and dependency. You inherit the vendor's coverage gaps and connection quality, and you have to weigh how each bank is actually connected. An open banking api built on OAuth redirects, where the user logs in at their bank, is more secure and more reliable than one built on screen scraping, where the user hands over credentials. The difference is measurable: moving from credential-based methods to API connectivity pushed connection success rates as high as 99.9% in beta programs, while screen scraping breaks whenever a bank changes its website.

That reliability gap feeds data accuracy too. Screen scraping reports transactions on the posted date, while a true API sources them on the incurred date in real time. When you evaluate an open banking API ask how each connection is made before you count the logos on the coverage page.

How to decide for your stage

You need a frame you can apply this quarter.

Weigh your situation against the signals below:

• Buy early when you have few engineers and need broad bank coverage fast under shipping pressure. The aggregator absorbs the integration count and the FAPI work.

• Go direct or hybrid when you serve a narrow set of high-value providers, or when you need control over specific edge cases that a one-size-fits-all financial data api handles poorly.

Many teams run a hybrid model and don't treat it as a contradiction. They lean on an aggregator for breadth while keeping direct connections to the handful of banks where volume and fidelity justify owning the pipe as much as cost does. Dwolla's framing of the choice as a decision matrix across budget and control, with compliance and coverage folded into the same review, is a useful checklist to run with your stakeholders before you commit budget.

Where payment initiation fits

This is the question that derails scoping calls, so separate it cleanly. Account information services let you view balances and transactions. Payment initiation lets you trigger an account-to-account transfer on the user's behalf. Reading data tells you what's in the account, while transfers move what's in it, and the gap between those two is where teams overscope or underscope.

The regulatory and risk weight differs accordingly. Reading data needs consent and SCA once to establish access. Payment initiation needs per-payment consent and SCA, because the approval covers a specific transfer of a specific amount; feed access uses a different consent model. It also puts you in a different competitive arena. Where an open banking API aggregates information, payment initiation competes directly with card networks, and that's why it's growing: global account-to-account payments are projected to climb from 60 billion in 2024 to 186 billion by 2029, a 209% jump.

So decide honestly whether your feature needs payment initiation now. Plenty of products ship valuable read-only experiences on an open banking API and never touch payments. If you do need to move money, scope it as its own workstream with its own consent design and its own SCA handling. The cost of adding payments later includes code and a new consent model, with risk review and, in regulated markets, a different license added to the work. Even the US Section 1033 rule treats account and routing numbers used for payment initiation as highly sensitive data, which tells you how the regulator weighs the difference.

Scope it before you commit

Open banking can unlock powerful opportunities for banks, fintechs, and financial service providers, but successful implementation requires much more than connecting to an API. From consent design and security requirements to compliance obligations, provider selection, and payment initiation, every decision affects scalability, customer experience, and long-term operational costs.

Whether you're evaluating direct bank integrations, comparing open banking API providers, or planning a broader financial infrastructure strategy, the right approach depends on your business model, growth stage, and regulatory environment.

At Doocat, we help financial institutions and fintechs navigate these complexities with secure, scalable, and compliant infrastructure solutions. Our team combines deep expertise in open banking, payments, and financial data connectivity to help organizations launch faster, reduce technical overhead, and build products that customers trust.

If you're exploring open banking integration or looking to modernize your financial infrastructure, get in touch with Doocat to discuss your requirements and discover the most efficient path to market.