Guide to Open Banking Integration: All You Need to Know

In a way, open banking becomes an entry point for businesses seeking to integrate with technologies such as real-time payments. By opening companies to more innovative services, open banking quickly gains popularity on the market with a CAGR of over 24.2% during the 2023-2031 period.

In this article, I will build a preface for all other open banking articles in our blog, so you will find a general overview of the concept, trends, and case studies here. This selection of carefully collected information should serve as an introduction to open banking and explain everything you need to know as a business owner. Let’s dive in!

What is an Open Banking API?

Essentially, in its broadest sense, open banking was created to make the financial industry more open, innovative, and customer-centric.

So, what is open banking? Before we proceed to review the concept as a whole, let’s take a closer look at open banking meaning.

An Open Banking API is a set of programming instructions integrated to share customer data and financial information between banks and third-party services.

Therefore, open API banking acts as a bridge between a third-party service (e.g., a budgeting platform) and the user’s bank accounts, enabling them to store, utilize, and control information in one application for better convenience.

A more detailed overview of the open banking API platform can be found in this comprehensive guide.

The infographics above visualize how open banking compares to traditional banking. In traditional banking, the customer connects directly to banks, which requires integrating with each of their APIs separately. Open banking offers a unified API to integrate with them simultaneously.

Open banking is an approach in which customers can manage their bank information, accounts, cards, and other important data from one unified and seamless application.

For the customers, open banking APIs provide the following benefits:

1. Personalization. Open banking APIs enable users to track spending, budget, and investment performance in one place.
2. Quicker payments. With these APIs, a customer can make direct payments from their bank account to various vendors.
3. Enhanced decision-making. Higher control over financial information improves decision-making by providing enough data.

Bringing valuable deliverables to customers is, undoubtedly, important, yet this is not the only reason businesses turn to open banking. In the next section, let’s take a look at why businesses need open banking APIs.

Why Businesses Need Open Banking API?

From the business perspective, open API banking can not only bring profit-enhancing benefits but also improve business efficiency and streamline workflow. Its main benefit is that even without a banking license, businesses can still utilize customers’ bank data (with their full consent) and provide them with services and information.

Yet, there are more reasons why businesses opt for open API banking. So, let’s examine a list of reasons why businesses need open banking.

1. To enhance customer experience. Open API banking improves customer satisfaction rates by allowing third parties to make seamless payments from their accounts. The efficiency of such an approach draws companies to using open banking in personal payments. Thus, this is the biggest single category of open banking adoption in the UK.
2. To increase workflow efficiency. Higher levels of efficiency are achieved through the automation of mundane and repeated processes, such as payment processing or invoicing. This, in turn, reduces the number of mistakes made and might significantly cut operational costs.
3. To create new revenue streams. Open banking is being adopted in diversified market aspects, with the biggest share falling to app markets. This signifies the wider usage of open banking in mobile apps. For example, open banking could be used for insurance, lending, or real-time payments, which might open a gateway to additional revenue streams for businesses integrating with open banking APIs.
4. To achieve competitive advantage. The open banking software market fosters dynamic growth, with the European market share nearing 40% while keeping the competition relatively low. Therefore, integrating with open API banking can lead to a competitive advantage, as the competition in this market is still growing, and the adoption, although fast, still allows for innovation.
5. To upscale customer centricity. Personalization, speed, and convenience would create a better experience for your customers. Overall, open banking software also creates a more secure way for payment management with an impressive 97% authorization success rate.

In this article, you can learn more about the benefits and risks of open banking API integrations.

Now, let’s examine how open banking software is changing and what you should consider when deciding to integrate with open banking providers.

Open Banking API: Trends Overview

The global open banking market is expected to grow significantly in the coming years, transforming the financial services industry. According to Straits Research, the market size is estimated to reach USD 122,066.93 million by 2031. Grand View Research estimates the market will grow at even a higher CAGR of 27.4% from 2024 to 2030.

So, here are the trends I believe are currently disrupting the industry:

1. Innovative expanded functionality. I believe it will move past payments to lending, insurance, and wealth management. This is already happening, especially with the latter, as over 85% of respondents in the MasterCard survey are more willing to pursue a loan with a digital application. Open banking here might become a game-changer with its reduced processing time and streamlined onboarding process.
2. Data analysis and data-driven decision-making. Data is an inherent part of fintech, and improved decision-making would only benefit the field. Open banking can drastically enhance this process as it centralizes the data and allows one to view different patterns from different accounts in one place. Therefore it might be beneficial for applications that give financial or budgeting advice, enabling users to make better decisions.
3. Rise of AI integrations. AI-powered insights can greatly combine with the previous point, and automation achieved by AI integrations can bring forward the speed that open banking is revered for. I believe AI might be the future for open banking just as much as it influences other aspects of technology.
4. Cross-border data sharing adoption. Globalization is a trend not only in technology but pretty much in every aspect of our lives. Therefore, I believe open banking might greatly benefit from a common regulatory framework and general harmonization of standards. While now it seems like rather a fantasy, it might be closer than we think once all major players adopt open banking.

Yet, despite my ideas, open banking might require a completely new nexus of development that I didn’t assess in this blog post. So, we have to keep our eyes peeled for what drives the industry and be ready to move with the flow.

Open Banking Key Market Drivers

The key market drivers stir the industry’s development, prompting open banking development along the path most beneficial to those adopting and changing it. Let’s take a closer look.

#1 Increased adoption rate

In the UK alone, over 18% of small businesses and 12% of active digital users used open banking services in 2023. It’s estimated that over 64% of adults will use open banking services worldwide. This rapid scale of adoption is a trend in market growth and a telltale sign of quickened adoption.

#2 Open banking payments

Payments are driving forth the adoption of open banking, surpassing open banking data. Open banking data focuses on sharing financial information, compared to open banking payments, which focus on initiating transactions.

As the graph above shows, open banking payments now steal the focus of the market.

#3 Variable recurring payments (VRP)

VRP is a type of open banking payment that allows businesses to collect payments from customers at regular intervals. Unlike traditional subscriptions, VRPs allow users to adjust the amount of each payment. This creates a consistent and predictable revenue stream for businesses while allowing users to modify their spending at the same time.

#4 PSD3 regulations

New regulations enter the European market and will take effect in 2026. PSD3 is an updated version of the previously introduced payment directive; it’s aimed at improving competition and innovation in the financial industry.

Compared to PSD2, the new PSD3 sets out more extensive, Strong Customer Authorisation regulations and stricter access to account information. In the EU states, a new directive will also impose improved consumer protection.

An article written by DashDevs legal expert explains the changes in PSD3 compared to PSD2 in more detail.

Now that I’ve briefly mentioned EU regulations, it would only be fair to discuss geographically imposed changes in regulations for different countries regarding integration with open banking API providers.

Open Banking API Drivers in the EU

Currently, open banking in the EU is driven by PSD2 and other open banking regulations. Implemented in 2018, PSD2 mandates that banks grant licensed third-party providers secure access to customer account information with their explicit consent.

Currently, the directive enables customers to decide what information is shared and with whom. Yet PSD2 has inconsistencies that have become apparent during the past few years as businesses in European countries adopted open banking. PSD3 seeks to address these inconsistencies.

In anticipation of growing transparency, banks have started researching PSD3 to prepare for the incoming transition and integration with open banking API providers.

Open Banking API Drivers in the US

While the US doesn’t have a single, mandatory open banking regulation like PSD2 in the EU, the data-sharing process is still strictly regulated within fintech.

The Dodd-Frank Act, specifically Section 1033, can be seen as the legal basis for open banking in the region. It regulates users’ right to access their financial data and security when sharing it with third parties. The Consumer Financial Protection Bureau oversees this exchange and is responsible for regulating open banking development.

Regulations focused on consumer data privacy and security, such as the Gramm-Leach-Bliley Act (GLBA), influence how Open Banking practices evolve in the US.

These regulations ensure secure data sharing, which is crucial for enabling fintech companies to develop specialized financial services while addressing security concerns associated with third-party access to sensitive financial data.

Open Banking API Drivers in MENA

Open Banking has the potential to expand access to financial services for the unbanked and underbanked in the MENA region. It’s regulated by different regulators depending on the country, yet powerful support is driving its further adoption.

Thus, initiatives like the Saudi Arabian Central Bank’s Open Banking APIs and Vision 2030 are supporting open banking adoption in MENA. Both aim to promote the adoption of new financial technologies, innovate the market, drive fintech development, and promote cashless transactions.

*If you wish to learn more about open banking adoption in MENA, read this article that is specifically dedicated to it. *

Open Banking API Drivers in Canada

Open banking in Canada is still in its early stages. While the government has taken steps to introduce a framework, it is not yet available. There is a big possibility that the technology will be introduced to the market, yet the anticipated adoption is delayed.

Previously expected open banking adoption will most likely happen later than 2025, as there are still regulatory hurdles and regulations in development.

Overall, open banking, while being streamlined and convenient, requires extensive research to implement and adopt by businesses before integration with open banking API providers. Yet, it frequently happens, and businesses continue working with it. So, let’s take a look at successful cases that utilized open banking.

Examples of Open Banking API Integrations

DashDevs, a software development agency with experience in fintech and open banking integration, has quite a few cases of its own. In this blog post, I decided to share the stories I see as one of the most successful in the niche. Without further ado, let’s take a look at examples of open banking.

Tarabut: The first regulated Open Banking platform in the MENA region

The software was created to allow users to access and manage bank accounts from a single application 24/7. It leverages open banking to provide users with a unified platform that manages finances across different bank accounts.

It was achieved via open banking API integrations and enabled users to:

1. Monitor their finances.
2. Make payments.
3. Manage the cards and bank accounts.
4. Perform investment management and financial planning.
5. Seamlessly transfer money peer-to-peer.

With over 200,000 downloads, it has captured approximately 4% of the region’s population. This impactful platform has a total value of £25 million.

NDA All-in-One Financial Management App

This project empowers users to budget, track expenses, and achieve financial goals. It is essentially made for individuals and freelancers.

The platform was developed to address the complexities of modern financial management, including manual budgeting, inaccurate calculations, and limited insights. These complexities made budgeting more convoluted and inefficient for the customers.

Therefore, the project enabled users to enhance their budgeting with:

1. Account management.
2. Payment processing.
3. Personal and commercial budgeting.
4. Investment tracking.
5. Tax estimation.
6. Retirement planning.

Open banking integration ensured that the software was centralized to enhance data overview and analysis. It also enabled automated budgeting and real-time income and expense monitoring.

Overall, open banking application successes also depend on momentum; open banking is relatively new and can occupy a niche that’s waiting for a new player. For example, Canada’s market is still waiting for open banking to be introduced.

Yet, the niche is rapidly changing as open banking is adopted by new companies and scales to new regions as a technology. With more innovations and wider usage introduced, this technology has a chance to become a new step in seamless real-time payments and banking unification.

Wrapping Up

Drawing conclusions, I would like to note that open banking might be beneficial for businesses that are looking to achieve customer centricity and improve their customer satisfaction levels. But, essentially, it is a great opportunity for businesses to build a strategy that revolves not only around the customer but also around automation and profit enhancement, as these aspects are also being improved by open banking.

If you are interested in implementing this technology and integrating your software with open banking APIs, you should consider looking at the DashDevs portfolio. With over 15 years of experience in fintech and 500+ completed projects, this team created the biggest open banking platform in MENA and can certainly help you achieve your goals.

Let’s talk about your project!