An open banking Application programming interface (API) is a digital connection that gives a Business permissioned access to a Customer’s bank account, either to read data from it or to move money out of it, once the Customer authorizes it through their own bank. Authorisation runs through a Token instead of a Stored password. This separates open banking from older data access methods that relied on screen scraping and shared credentials. Businesses across payments, lending, and financial software build on this layer to verify accounts, assess risk, and move money directly between banks.

Open banking use is expanding, with open banking API calls estimated to reach 580 billion in 2027. Below, we’ll explain how to use open banking APIs, including how to initiate payments directly from a Customer’s account, verify account ownership during Onboarding, feed Transaction data into lending decisions, power personal finance apps, and confirm Payout accounts on platforms and marketplaces.

Key takeaways

• Open banking APIs replace Stored banking credentials with tokenized, revocable access that’s controlled by the Customer.

• Businesses use the same underlying connection flow for Payment initiation, account verification, Underwriting, and Payout confirmation; they simply adjust the data requested for each case.

• Connecting bank data directly to a Business’s existing payments and Billing infrastructure cuts down on the manual reconciliation required when that data is Stored in a separate system.

What is an open banking API?

An open banking API is a Developer interface that lets a Business Request permissioned access to a Customer’s bank account, either to pull data or to move money out of it, with the Customer’s explicit Authorisation. The Customer logs in to their own bank through a secure flow, picks what to share, and the bank issues a Token that defines exactly what the Business can see and for how long.

How do open banking APIs power Payment initiation?

Payment initiation lets a Business prompt a Bank transfer straight from a Customer’s account. The Customer picks their bank at Checkout, authenticates through their bank’s own app or login page, and confirms the amount before the Transfer goes through.

This enables the following:

• Lower per-Transaction cost: Card payments carry interchange and network fees on each purchase, and account-to-account Transfers skip that cost structure, which matters most on higher-ticket purchases where Card fees add up fast.

• No Stored Card credentials: When a Customer chooses to pay by bank, there’s no Card number to store or update. For Subscription Billing, that means fewer failed renewals caused by a Card that got reissued or expired.

• A different fraud profile: Bank-authenticated Transfers depend on the Customer’s logging into their own bank account rather than typing in Card details that a fraudulent actor might’ve obtained elsewhere.

• Real-time Settlement signals: Some open banking Payment networks confirm that Funds are available before the Transfer completes. This gives a Business more certainty than a Card Authorisation that can still fail to settle.

• A fast Checkout flow: The Customer selects their bank, authenticates, and confirms. In markets where open banking is well established, the whole sequence can often finish in under a minute, which is on par with a Digital wallet Payment.

How do open banking APIs improve account verification and Customer Onboarding?

Before open banking, microdeposits were used to verify that a Customer actually owned the bank account they’d provided. These small test transfers—where the Customer confirms the exact amount—could take one to two working days to process.

Open banking APIs perform the following real-time checks the moment the Customer connects their account:

• Account ownership: The API confirms that the account exists and that the person who’s authenticating the connection is the actual Account holder.

• Identity verification: Bank-verified account details feed into a Business’s broader Know Your Customer (KYC) checks, which adds a data point that’s harder to fake than a self-reported name and address.

• Balance checks: A Business can see whether an account can support a Transaction before committing to it so it doesn’t find out only after a Payment fails.

• Faster fraud Screening: Verifying ownership at sign-up catches a mismatched or stolen account before money moves rather than after a Chargeback or failed Payout shows the problem.

How do open banking APIs support lending, Underwriting, and risk assessment?

The traditional Underwriting Process relies on credit bureau data that updates with a delay. Open banking data gives lenders a Transaction-level view of cash flow, including Deposit patterns, recurring bills, overdraft frequency, and balances over time rather than a single number.

Here’s why that matters:

• Expanded access for thin-file applicants: Someone with a low or nonexistent credit score, such as a gig worker or a recent transplant to a new country, might still show a checking account with steady Income and manageable expenses; open banking data allows a lender to factor that in.

• Warning sign detection: Frequent overdrafts, sudden balance drops, or irregular Deposit patterns appear in Transaction data well before they’d affect a credit score.

• Alternative Income verification: A lender with permissioned access to a few months of bank statements doesn’t need to rely on pay stubs or self-reported figures to verify Income; it can use Deposit history for direct confirmation.

• A supplement, not a replacement: Open banking data typically adds to a traditional credit pull for regulated lending products instead of replacing it outright; it verifies stated Income or builds an alternative risk model that runs alongside the standard check.

How do open banking APIs support personal finance management and aggregation?

Personal finance apps and account aggregators depend on a Customer’s connecting every account they hold (e.g., checking, savings, credit Cards, investments) across multiple banks to a single Dashboard. Open banking APIs make that connection possible without having the app ever store a banking password.

Here's how it works:

• Transaction categorization: Individual purchases get sorted into categories such as groceries, dining, and utilities, usually through a mix of Merchant code matching and pattern recognition. A Customer sees spending by category without needing to tag anything by hand.

• Balance monitoring: The app checks account balances at set intervals and can alert a Customer before a balance drops low enough to risk an overdraft.

• Savings insight: By comparing Income patterns against spending, some apps reveal how much a Customer could realistically move to savings in a given period.

• Revocable access: The Customer grants permission through their bank’s own authentication flow, then the Token defines what data can be pulled and for how long. The Customer can cut off access at any time, usually from a settings screen inside their bank’s app.

Since none of this requires the aggregator to hold banking credentials at any point, access depends entirely on the Token the bank issues. The Customer, not the app, stays in control of what gets shared and for how long.

How do open banking APIs support platform and marketplace Payouts?

Instead of verifying who’s paying, platforms and marketplaces need to verify who’s getting paid. A Marketplace that onboards thousands of Sellers, or a platform that pays out to contractors, must confirm that each Payout account is real and belongs to the person who’s claiming it before any money moves.

Here's what that looks like:

• Payout account verification: Confirming ownership at sign-up catches a mistyped account number or an account someone doesn’t have signing authority over, before a Payout fails or lands somewhere it shouldn’t.

• Fewer failed Payouts: Verifying accounts up front cuts down on transfers that bounce back, get delayed, or need manual correction after the fact.

• Fraud pattern detection: Connected account data can flag signals associated with fraudulent Seller sign-ups, such as a brand-new account that immediately requests a large Payout.

• Supplier Onboarding: A Business that verifies a new vendor’s bank details before it sets up Recurring payments benefits from the same instant-verification mechanics used in Customer Onboarding.

• Treasury visibility: Platforms that manage Payouts across many Connected accounts can use aggregated balance data to get a better read on cash positioning across the whole network.

How Stripe Financial Connections can help

Stripe Financial Connections is a set of APIs that allows you to securely connect to your customers' bank accounts and retrieve their financial data, enabling you to build innovative financial products and services.

Financial Connections can help you:

• Simplify onboarding: Offer a seamless, instant bank account verification process that does not require manual identity and account verification.

• Access rich financial data: Retrieve comprehensive information about your customers' bank accounts, including balances, transactions and account details.

• Automate recurring payments: Enable your customers to securely link their bank accounts for recurring payments, improving payment success rates.

• Enhance risk management: Analyse customers' financial data to make more informed decisions about credit, lending and other financial products.

• Comply with regulations: Financial Connections helps you meet KYC and Anti-Money Laundering (AML) requirements.

• Innovate with confidence: Build new financial products and services on top of the secure, reliable Financial Connections infrastructure.

Learn more about Financial Connections or get started today.