Open banking application programming interfaces (APIs) power everything from instant bank payments to real-time account data access in the UK, helping to enable faster checkouts and lending decisions. UK open banking APIs processed more than 2 billion API calls by over 15 million users in July 2025 alone.

In this guide, we’ll discuss how open banking APIs in the UK work, why they matter, and how companies can use them to manage payments, verify customers, and build smarter financial products.

What’s in this article?

• What are open banking APIs in the UK?
  
• How does open banking enable data access and payment initiation?
  
• How does the UK’s open banking framework operate?
  
• What technical standards and security requirements govern UK open banking APIs?
  
• What are the benefits of using open banking APIs for businesses?
  
• What challenges arise with open banking APIs?
  
• How can companies choose the right open banking API solutions?
  
• How Stripe Financial Connections can help
  

What are open banking APIs in the UK?

Open banking APIs are digital gateways that let people share specific financial information or initiate payments through known apps, with full control over what’s shared and for how long. APIs allow budgeting apps, lenders or payment service providers to pull data directly from a customer’s bank account or send a payment on their behalf safely. Instead of handing over login details, customers authenticate through their own bank, which issues a short-lived, secure token that grants the permissions the customer approved. No passwords ever change hands, and old password-sharing practices are replaced with a much safer, standardized approach.

How does open banking enable data access and payment initiation?

Open banking works through secure APIs that let authorized third parties either read account data or initiate payments, with the customer’s permission. These two functions are formalized as Account Information Services (AIS) and Payment Initiation Services (PIS), each governed by standardized API rules and consent flows.

Account Information Services (AIS)

AIS is the mechanism that lets authorized apps and platforms retrieve real-time financial data straight from a customer’s bank. When an app requests access, the customer is sent to their bank to authenticate. Once they approve, the bank issues a time-limited token that allows the app to fetch the exact data requested. This keeps the process accurate and fully traceable.

Payment Initiation Services (PIS)

PIS takes the same secure model and applies it to moving money. An authorized provider can request a one-time payment on a customer’s behalf, but only after the customer confirms the amount and recipient through their own banking app or online banking session. This lets people make direct bank-to-bank payments without card details or manual transfers.

Built-in safeguards

Both AIS and PIS run on strict rules. The Financial Conduct Authority (FCA) must authorize providers, banks must follow the UK’s Open Banking Standard, and every action requires explicit consent plus multi-factor authentication. Together, these guardrails allow customers to safely use third-party services to access financial data or send payments without sharing customers’ credentials or exposing sensitive information.

How does the UK’s open banking framework operate?

The UK’s open banking system works because regulation, technical standards, and industry oversight all reinforce one another.

Here’s how they all interact:

Regulatory foundations

Open banking grew out of two major actions. First, the UK Competition and Markets Authority (CMA) required the largest banks to open up their data. Second, the implementation of the revised Payment Services Directive (PSD2) set legal standards for data access and payment initiation. Together, these rules require banks to provide API access for licensed third parties acting on a customer’s behalf. The Payment Services Regulations 2017 carry these requirements forward in UK law.

Governance and oversight

Open Banking Limited (OBL), formerly the Implementation Entity, maintains the technical standards that banks and providers must follow. Those include API specifications and customer experience guidelines. The FCA authorizes and supervises every third-party provider to confirm they meet strict requirements before they can access any bank data. And the Open Banking Directory serves as the trust layer; only providers listed there can establish certificate-based connections with banks.

Standardized API infrastructure

The UK created the Open Banking Standard so developers don’t have to navigate different formats and protocols for each bank. This standard covers how account and transaction data are structured, how payments are initiated, and how errors are handled. As a result, a connection built for one major bank works the same way across the rest of the ecosystem.

Customer control and consent

This requires granular, time-limited consent for every data request or payment. Customers authenticate through their own bank using strong security measures, and banks log and enforce those permissions automatically. This keeps customers in control while ensuring that third-party payment processors can only access what has been authorized.

What technical standards and security requirements govern UK open banking APIs?

Open banking only works if every connection is safe, consistent, and verifiable.

Here are the safeguards:

• Financial-grade API security (FAPI): Open banking APIs use hardened versions of OAuth 2.0 and OpenID Connect to make sure that every request is signed, encrypted, and verified through digital certificates. This creates mutual authentication between banks and authorized providers.

• Strong customer authentication (SCA): Every sensitive action requires multi-factor authentication through the customer’s own bank. This sharply reduces payment fraud because no request can proceed without the customer completing a secure step they control.

• End-to-end encryption: All data moving between banks and providers travels through encrypted channels using modern transport layer security (TLS) standards. Even if intercepted, the information would be unreadable and tamper-proof.

• Granular, time-limited consent: Providers can only request specific data or payment permissions, and customers must approve each one with visibility into what’s being shared. Access automatically expires unless the customer re-authorizes it, which limits exposure and keeps control in the user’s hands.

• Regulated participants only: Banks will only interact with third parties that the FCA has authorized and that appear in the Open Banking Directory with valid digital certificates. This creates a closed, supervised network.

• Conformance testing and performance monitoring: Banks and providers must pass technical tests to prove they meet open banking security and interoperability requirements, and OBL tracks uptime and response-time metrics across the ecosystem. This performance standard keeps API quality high and surfaces issues quickly.

• Clear, consistent user flows: Standards also cover how consent screens and redirects should work so customers understand exactly what they’re approving. This reduces confusion and helps people recognize anything suspicious.

What are the benefits of using open banking APIs for businesses?

Businesses use open banking APIs to speed up money movement, understand customers better, and build cleaner, more intuitive digital experiences.

Key benefits include:

• Faster, lower-cost payments: Open banking payments move money directly between bank accounts, often in real time over the UK’s Faster Payments infrastructure.

• Less fraud and fewer chargebacks: Because each payment is confirmed through a bank’s own security process, the risk of unauthorized transactions is greatly reduced.

• Better checkout experiences: Open banking lets customers pay without entering card numbers or bank details, which reduces drop-off. Stripe’s Pay by Bank option is one example. A customer selects their bank, approves the payment in their banking app, and returns to checkout already done.

• Real-time financial visibility for lending and underwriting: AIS connections let lenders review income patterns, spending behavior, and cash flow directly from a customer’s bank account with their permission.

• Better identity and account verification: Businesses can confirm account ownership, match names to bank accounts, and reduce fraud during onboarding or payouts.

• Cleaner, consolidated financial management: Accounting platforms and financial tools can automatically pull transactions from multiple bank accounts to give businesses and consumers a unified view of their finances. This reduces manual work and keeps financial data current.

• More personalized products and services: With richer transaction data, businesses can build tailored insights, budgeting tools, or financial recommendations that reflect a customer’s actual behavior.

What challenges arise with open banking APIs?

Open banking still faces some logistical, commercial, and adoption hurdles, including:

• Uneven API quality and legacy systems: Some banks still run older core systems that make it hard to deliver consistently fast, reliable APIs.

• Divergent incentives for banks: Banks carry the cost of building and maintaining these APIs, while many of the benefits show up in fintech products or customer-facing apps outside the bank. Without a clear commercial upside, some institutions can treat open banking as compliance work rather than an area for meaningful investment.

• Fragmented governance and oversight: Responsibility for open banking regulation and overseeing compliance is distributed across regulators and industry bodies, which can slow decision-making and leave gaps in long-term planning.

• Limited consumer awareness and confidence: Many people use open banking-powered apps without knowing they’re doing it, and concerns about data privacy, consent, and financial safety shape adoption.

• Fraud and social engineering risks: Scammers often target the user instead of the system and manipulate people into authorizing fraudulent transactions.

• Inconsistent standards beyond the major banks: The nine largest banks and building societies in Great Britain and Northern Ireland, also known as CMA9, follow a shared technical standard, but smaller institutions sometimes use slightly different implementations that add complexity for developers. This fragmentation can make full-market coverage harder for third-party providers.

• Ecosystem maturity and monetization pressures: Some businesses struggle to build sustainable revenue models on top of basic data access. That creates a need for more advanced services such as analytics, affordability insights, or integrated payments.

How can companies choose the right open banking API solutions?

The goal is to pick a provider that handles the regulatory and technical sides while giving your customers an easy, reliable experience.

Here’s what to look for:

• Security and regulatory status: Work only with FCA-authorized providers listed in the Open Banking Directory, since banks won’t accept connections from anyone else. This ensures you’re operating inside the regulated ecosystem with the protections and oversight that come with it.

• Coverage and capabilities: Check whether the provider supports AIS, PIS, or both, and whether they cover all the banks and account types your customers use. Check for value-adds such as transaction categorization, income verification tools, or support for emerging features such as variable recurring payments.

• Integration experience: Strong documentation, clean APIs, and sandbox environments make development faster and reduce maintenance problems. Providers that invest in good tooling generally offer an easier path to production and fewer surprises at scale.

• User flow and conversion: Evaluate the consent and authentication path from the customer’s point of view, since clarity and simplicity directly affect completion rates. Providers that offer polished, mobile-friendly flows tend to achieve higher connection and payment success rates.

• Performance and reliability: Uptime, response times, and error-handling practices matter, especially if your product depends on real-time data or payments. Look for transparent performance reporting or references from businesses with similar volume and needs.

• Scalability and pricing: Make sure the provider can handle growth in users and data calls and that their cost structure lines up with your business model. Predictable, usage-based pricing can make long-term planning easier.

• Fit with existing systems: If you already use platforms that support open banking, those integrations can simplify your tech stack.

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