After years of promise, open banking is finally here. Advances in technology and globally adopted standards now allow non-financial companies to offer products and services previously only offered by banks and registered financial companies. Now, with open banking, any business (within limits) can offer certain financial products with absolute legitimacy and security.

So, non-bank apps that let you send money from your phone, borrow money, or buy value added services: that’s all possible thanks to open banking.
 

What is open banking?

In a nutshell, open banking is a standardised method that allows non-financial companies to tap into the banking systems of registered financial providers. Open banking offers a safe way for them to interact with confidential client information without exposing sensitive information to the third-party company.

Think of the budgeting and accounting apps that automatically download your bank statements. Or the online store option to pay by logging in directly to your online banking service.

Open banking is all about taking traditional financial services and making them easily available on mobile or desktop apps. The promise for users is the ability to do day-to-day transactions quickly and easily. 

Before open banking emerged as a global standard, developers relied on more intrusive ways to gather sensitive information. A common example is the so-called screen scraping technique that let third-party companies gather account balance and transaction data by having the user input their online banking credentials.

This is anything but a secure way to get the information, even if the user has given consent to the third-party developer.

As the fintech revolution gained pace in developed markets in the early 2000s, so did the need for more secure ways to allow outside companies to have access to clients’ banking data. Application programming interfaces (APIs) are the ideal tool for this, because they allow the owner of the data to create secure pathways to information and functionality within their own systems. The path and available actions are therefore clearly defined and tightly controlled.
 

What is an API?

APIs essentially allow 2 different programmes to interface with each other in a way that they both understand. The maker of the API creates interfaces to functionality or information on its systems. The maker of the app will then call for information or functions via the API, with that information then integrated into the app maker’s solution.

Let’s say you have a customer base using your app and you want to offer value-added services like selling prepaid airtime tokens. You need to find a company that has an API for selling value-added services, and then use that interface to buy airtime from the chosen network, get the token ID and present that to your customer.

The API simplifies this process because your call is recognised as coming from a registered/ authenticated source and the instruction is in the required format. The transaction therefore doesn’t have to intrude on the airtime token seller’s systems or require any sensitive information from the user.
 

The Nedbank API Marketplace

APIs that allow this level of open banking functionality are available on the Nedbank API Marketplace and are being used by companies throughout the country, including many household-name brands. The APIs enable a variety of services, from payments and account balances, to lending, wallets and rewards. 

Implementing APIs is not overly complex, but it does require fairly sophisticated technical capabilities. Once you’ve signed up and been approved to use the API Marketplace, you can then use the APIs to call up the functionality that you need.