Understanding Open Banking APIs and Their Role in Finance

Throughout most of banking history, your financial data was locked within your bank accounts. For the sake of security, it wasn’t a bad setup. However, if you wanted to allow a third-party app access to your account for certain functions or services, there was no easy way to make a connection.

Open banking changed this. When the EU's Revised Payment Services Directive (PSD2) went live in 2018, regulators started allowing banks to share customer data with authorized third parties through secure, standardized connections. The United States created a similar regulation under Dodd-Frank Section 1033 in late 2024, granting consumers the right to connect their financial data to other apps and services.

This is all made possible through something called an API. An open banking API is a standardized interface that third parties can use to access their customers’ financial data, without the need to exchange any passwords or bank statements. With these connections, investment apps, cash management tools, and credit assessments have become more accessible than ever.

This article covers what open banking APIs are, how they work, and walks through real use cases for both individuals and business owners. We’ll also discuss how APIs can enhance the way businesses work with banking platforms like Slash.¹ Slash uses an open banking API to connect with Plaid, allowing customers to speed up underwriting processes, keep balance data up to date, and make identity verification easier.

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Glossary

APIs can be a tough subject to understand if you don’t know a few key terms. Here are some words and concepts you should be familiar with before we get into the weeds:

API (Application Programming Interface): A set of rules that lets two software systems communicate. In banking, an API might let an external app request a list of recent transactions or a current account balance from a bank, with no need to share extra data like passwords.
Open banking: A regulatory model where banks are allowed to expose customer data to authorized third parties through standardized APIs. The EU’s PSD2, the UK’s Open Banking Standard, and the US’s Dodd-Frank Section 103 are all open banking rulesets.
Open Authorization (OAuth) 2.0: The technical standards that handle consent and authorization. When you connect an app to your bank, you're redirected to your bank's login so you can authenticate and grant the app specific permissions. There, the app receives a token it uses to call the API. Overall, OAuth 2.0 is the security protocol that allows this.
AIS (Account Information Services): Open banking services where a regulated third party retrieves financial data from a customer's account with permission. For example, a typical AIS use case is a personal finance app pulling someone’s transaction history to categorize their spending.
PIS (Payment Initiation Services): Services where a third party initiates a payment directly from a customer's bank account on their behalf. You’ll often use a PIS when paying for something via account-to-account transfer instead of a card.
API token: A unique string of characters used to authenticate and authorize a client application or user making requests to an API, sort of like a digital key card.
GET request: An HTTP method used to retrieve data from a web server without making any changes to the server's data. Each time you type a URL into a browser address bar or click a hyperlink, your browser automatically sends a GET request to download and display that webpage.

What Are Open Banking APIs?

An open banking API is an interface a financial institution unlocks so that authorized, regulated third parties can access customer-permissioned data. In this context, the word "open" doesn't mean public or unsecured. It means the interface is standardized and accessible to vetted parties rather than exclusive to one institution.

Before open banking APIs, lots of third-party apps got the information they needed through something called “screen scraping”. An app would ask for your bank login credentials, log in on your behalf, and pull information from your account page by automatically reading the onscreen text. While a good idea in theory, it was pretty buggy. Certain fonts were unreadable to the OCR (Optical Character Recognition) tool, and the trading of login credentials was a huge security risk. Open banking APIs replaced scraping with a better layer of access that the bank controls and the customer can revoke.

We should also note the difference between bank APIs and aggregated open banking APIs. A simple bank API is maintained by a single institution and returns data from that institution only. An aggregated API, often from providers like Plaid or Yodlee, gathers different bank APIs into one interface. Instead of a developer building separate integrations with thousands of banks, they can integrate once with the aggregator and get access to the full network. This is how most apps access banking data.

Once an API connects to your account, it can get to work. Typical open banking APIs are built to access current and available balances, transaction histories with merchant names and categories, account identifiers like routing and account numbers, and account owner details for identity verification. Some APIs can also expose credit limits, product information, or fee schedules.

How Open Banking APIs Work

Let’s walk through an average scenario that calls for an open banking API. Say you want to connect your bank account to an investment app like Robinhood. To begin, the app redirects you to your bank's login page. You authenticate (biometrically or with a passcode), review what data the app is requesting, and grant permission. Then, your bank issues a special access token to the app. From that point on, the app calls the bank's API using the token rather than your credentials.

OAuth 2.0 is the protocol in charge of this handoff. The token connects to the specific data types that you approved, and it’s typically set to expire after a defined period. If you revoke consent, the token stops working immediately. This process may also use OpenID Connect, which is another protocol built to confirm the user’s identity.

Under the token, a bank maintains an API gateway that handles external traffic. When requests hit the gateway, it checks whether the token is valid and whether it has permission to enter. If the token’s valid, the gateway routes the call to the bank's internal systems. Responses come back as structured data, typically JSON (Javascript Object Notation).

If you’re a developer building a cash flow dashboard, you may want to call an AIS (Account Information Services) transactions endpoint. To do this, you’ll send a GET request with the user's access token and a date range, then you’ll receive a list of transactions with amounts, merchants, and categories. This process usually includes a lot of security measures, including TLS encryption and Strong Customer Authentication in Europe.

Advantages of Implementing Open Banking APIs

To understand the benefits of open banking APIs, it’s helpful to take a look at how different types of customers can take advantage of them:

Individual customers get consolidated visibility. Normally, people have to log into a bunch of bank accounts and combine their numbers manually. An app with open banking access, on the other hand, can bring them all into one place. A small business owner can see their operating balance, outstanding invoices, and card spend without manually exporting data from different systems.
Businesses using financial services get improved automation and underwriting quality. Lenders can use real-time bank account data instead of financial statements for credit assessments, often making approvals faster and more accurate. Embedded payment flows built on PIS can also help bypass card rails, which can reduce per-transaction costs for high-volume businesses.
Platforms building on top of APIs get the ability to create new products. Plaid, for instance, connects over 7,000 apps to more than 12,000 financial institutions by sitting between fintech applications and banks as an API aggregator. If a lending app needs to verify a borrower's income and bank balance, all it needs to do is integrate one time with Plaid rather than constructing a new connection with an unfamiliar bank.

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Key Use Cases: From Banking Apps to Embedded Finance

Now that we’ve gone over the mechanics of open banking APIs and the audience that uses them, it’s time to review the functions they most commonly perform. Here’s where you’ll often see these APIs used today:

Personal financial management and account aggregation

Apps like Rocket Money and Cleo are built to track their customers’ spending as it happens. To do this, they pull transaction history from multiple institutions, categorize purchases automatically, and identify patterns the user might not notice as they check separate banking sites. The combination of open banking access and budgeting algorithms has made this a competitive market in recent years.

Payment initiation

A business collecting payments via account-to-account transfer instead of card rails typically pays a fraction of the per-transaction cost. This is a little different from a peer-to-peer app like Venmo, which is funded from a linked account. PIS-based solutions like Trustly and Plaid Transfer let customers initiate payments directly from their bank. On the business’s end, PIS can remove card network fees entirely. There’s a bit of a disadvantage for the customer, though, since card payments carry consumer protections and chargeback privileges that account-to-account transfers might not.

Alternative credit underwriting

Traditional credit models rely heavily on debt repayment history, which can actually undervalue healthy companies that pay vendors promptly and don't carry revolving debt. Live bank account data can give lenders a more complete picture of a company’s repayment capacity. Balances, revenue, payroll obligations, and seasonal swings can be analyzed up to the current day rather than read off of an old bank statement.

Automated reconciliation

If you run a business that manages multiple accounts, currencies, or entities, open banking connections can save you a lot of time on reconciliation. All of your transaction data can travel automatically into an accounting system rather than being manually exported from each bank's portal. This is exactly how a business banking platform like Slash connects with accounting solutions like QuickBooks Online, Sage Intacct, NetSuite, and Xero.

Embedded finance

Some open banking APIs appear in products that aren’t inherently financial, such as an e-commerce website that offers instant seller payouts or a marketplace that checks vendor bank balances before approving an application. These platforms may take advantage of APIs without supporting money-based accounts or anything else that falls under the banking umbrella.

Where Slash Fits in the Open Banking API Ecosystem

Some solutions use open banking APIs to become simple data aggregators, gathering their customers’ banking information together so it’s easier to look at. Slash uses APIs to go much further. It's a neobank that takes banking, corporate cards, treasury, payments, and spend management and uses APIs to allow deeper levels of automation and connection.⁶

Our platform supports API-based financial workflows for approved customers that need programmatic control. Depending on eligibility and product availability, teams can use Slash to automate card issuance and controls, payment operations across supported rails, and treasury movements. For tech-savvy teams building internal tools or finance features, this API layer can make those workflows much quicker.

Slash’s customers can take advantage of open banking APIs to connect to third-party data providers like Plaid and Yodlee, as well as a slew of popular accounting platforms. Transaction information can automatically travel from place to place without manual intervention or human error.

Plenty of other features come with the Slash platform that don’t involve APIs or technical know-how. Some of these include:

The Slash Visa® Platinum Card: The Slash Card allows you to set customizable spending controls and issue unlimited virtual cards for handling team expenses, vendor payments, subscriptions, and more. Users can also earn up to 2% cash back on business purchases.
Working capital financing: Access short-term financing with flexible 30-, 60-, or 90-day repayment terms to help bridge cash flow gaps.⁵
High-yield treasury: Earn up to 3.80% annualized yield on idle funds with money market investments from BlackRock and Morgan Stanley, managed directly within your Slash account.
Stablecoin on/off ramps: Send and receive USD-pegged stablecoins USDC and USDT across eight supported blockchains for faster, lower-cost global payments.⁴
Diverse payment methods: Slash supports a wide range of payments, including card spend, global ACH, international wire transfers to over 180 countries via SWIFT, and real-time domestic payments through RTP and FedNow.

Whether you’re an API expert or you’re a technological newbie, Slash can help business owners manage and automate their financial processes.

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Frequently Asked Questions

Is it safe to connect my bank account to a third-party app via open banking?

Regulated open banking connections are quite safe, especially compared to the screen scraping tools they replaced. Instead of working with your bank credentials, apps can only access a specialized token that users can revoke at any time, with secure controls that help reduce fraud and protect sensitive data. Fraud detection algorithms can also analyze transaction data from APIs without sharing credentials.

How does open banking benefit businesses specifically?

For businesses, the clearest gains are in automation and data quality. Open banking can replace manual statement uploads with live account data, feed real-time cash positions into treasury and reconciliation tools, and enable payment collection that skips card rails.

Do I need technical knowledge to use open banking as a business?

Not necessarily. Most businesses access open banking functionality through platforms like Slash that have already built the integrations. Oftentimes, all you have to do is connect a bank account through a short authorization flow, review what data you're sharing, and click approve.