Kanishka NaikOpen banking APIs are secure bridges between banks and approved third-party providers. A customer grants explicit consent; the API then provides time-limited, encrypted access to specific financial data only, never full account credentials.
Third-party providers fall into two regulated categories under PSD2: Account Information Service Providers (AISPs), which can read account data, and Payment Initiation Service Providers (PISPs), which can initiate payments directly from a customer's account.
Open banking replaces screen scraping, where users shared full login credentials with third-party apps, with encrypted token-based API access. This limits data exposure to only what the customer has explicitly authorized, improving both security and regulatory compliance.