Fintech bnpl

3 minute 20 May, 2022

What & How Open API Banking Works

Fintech companies are always looking for new ways to innovate, and financial institutions like banks and credit unions want to offer consumers convenient banking experiences they can’t get anywhere else. Open application programming interface (API) banking allows these two parties to work together through information sharing, opening up opportunities for them and their customers.

In order to stress the benefits of open API banking, we have to go over the basics:

  • What is Open API Banking?
  • How does it work?
  • What are the benefits?


What is Open API Banking?

Open API banking refers to a bank or other financial institution opening its API to fintech firms. They do this to allow those fintechs to create applications for things like budgeting, debt management, bill tracking, or anything else that would require the consumer to link to the app to their bank.

The API is a pathway through which apps can communicate with a banking database, allowing them to give consumers convenient software tools that could only be achieved through this kind of partnership. The only other alternative would be for the banks to make their open software tools, taking on significant time and financial investments.

How Does Open API Banking Work?

So, to avoid the extra expense of creating brand new proprietary software solutions themselves, banks open their API to select fintech partners to develop apps for them. Fintechs can then use this new information to create an app that they think will serve consumers well and generate revenue through the usage of the app. Consequently, customers who bank with an institution with an open API gain access to unique tools at no cost to the bank.

This works as a win-win-win for the bank, the fintech firm, and the consumers because each of them realizes some value from the relationship. Fintechs get access to new consumers and information, banks become more valuable through the new apps they can offer their consumers, and the consumers benefit through the use of said apps. It allows each party to do what they do best, and everybody gets a piece of the pie.

What are the Primary Benefits of Open API Banking?

So, why would banks do this? Why not develop their own applications, or seek out a third party to make it for them under their own name? Well, there are a few major benefits of going the open API banking route:

  • Cost reduction
  • Time savings
  • Fintech creativity

Let’s dive into what these mean and how they benefit the financial institution that opens up their APIs.

Cost Reduction

Some of the costs that banks save by working this way are:

  • The cost of the IP for whatever tool they are creating.
  • The cost of hiring staff to develop and maintain the software.
  • The cost of marketing the new tool.

By opening their API, fintechs that are looking to get access to some of their customers will cover all of these costs themselves, while the bank gets satisfaction from having a unique solution for consumers. 

Time Savings

In addition to the cost of developing new applications, there is also a massive amount of time saved. This is because fintech firms are experts at developing software, and that is what their staff are paid to do first and foremost. Banks can take advantage of this by simply allowing fintechs access to their API and letting them do the rest of the work.

Fintech Creativity

On the subject of what fintech firms are good at, coming up with new ways to innovate in the finance space is what they are known for. Not only do banks get let off the hook in regard to money and time invested in these new products, but they also don’t have to think of any of the ideas themselves, instead allowing fintechs to do what they do best.

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Skeps offers a comprehensive, end-to-end consumer financing program that helps businesses modernize their entire payment process. We go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:

  • BNPL
  • Consumer loans and leases
  • Branded credit cards

If you’re looking to increase revenues and conversion, there is no better way than to partner with an all-in-one flexible payment platform like ours.

Do you have more questions about open API banking?  Request a demo or contact us at

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Fintech companies are always looking for new ways to innovate, and financial institutions like ...


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