Open Banking and the APIs Driving the New Era of Instant Payments

Open Banking has revolutionised the payments sector in recent years and we’re in an exciting period for FinTech innovation. Set up to facilitate the vision of PSD2 in the UK, the Open Banking organisation encourages the use of APIs to access data from the UK’s main banks to provide innovative financial products and services for consumers and businesses. In this blog, we explore how these APIs are driving a new era of instant payments.

Open Banking and the APIs Driving the New Era of Instant Payments

How Open Banking transformed the payments space

The idea of Open Banking was conceived as a result of the announcement in 2015 about the EU’s New Payments Services Directive (P2D2), and the subsequent ruling in August 2016 by the United Kingdom Competition and Markets Authority (CMA) that required the nine-biggest UK banks – HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske Bank, Lloyds and Nationwide – to allow licensed startups direct access to their account data.

This ruling came into force in early 2018, with Open Banking facilitating the process and the Financial Conduct Authority (FCA) regulating the payment service providers (PSPs) to protect consumer data and ensure compliance with PSD2 rules

The initiative aimed to bring greater transparency around the use of bank data to provide new financial services to consumers. The goal was to embrace open APIs that enable third-party developers to build applications and new financial services that offer more options for users.

Due to the increased demand for instant payments and easier ways for people to manage their finances, Open Banking has ushered in a new era of FinTech innovation. The APIs resulting from Open Banking have helped hundreds of innovative financial apps and cloud-based banking services to transform the payments space.


The role of PSD2 in the evolution of seamless banking

PSD2 and Open Banking have forged the beginnings of a more harmonious and transparent payments environment. This means financial institutions working with TPPs to give them access to banking data that enables them to serve the needs of consumers with new financial products while holding new FinTechs to account in their data processing and customer authorisation activities.

PSD2 has helped to nurture the growth of FinTechs and support the evolution of seamless banking operations, frictionless payment processing and instant payments.

Although the original date for meeting PSD2 compliance requirements was 14th September 2019, the European Banking Authority allowed a time extension for the implementation of strong customer authentication (SCA) until 31 December 2020.

For more information on the fundamentals of PSD2 and the responsibilities for financial institutions and TPPs, get our handy PSD2 Compliance Checklist.


Download the PSD2 Compliance Checklist

Key benefits of financial APIs and where they are having an impact

Customer demand for instant payments and easy access to financial data and services is fuelling the continued growth and development of financial APIs. This is future-proofing financial technology, which benefits customers and modernises financial institutions.

Driven by the innovation of PSPs, the APIs are used to enhance product offerings and improve customer experiences. Banks and financial institutions can give their customers more choices and modern product offerings, allowing them to choose the apps and services that best meet their needs.

Here are just some of the areas in the Financial Services space that APIs are having a big impact in:

  • Quick pay methods and mobile wallets
  • Account management and payment processing
  • User authorisation, verification and consent
  • Regulation, KYC and AML
  • Payment validation
  • Transaction reports and invoicing
  • Subscription billing
  • Currency exchange
  • Market feeds
  • Trading automation and alerts
  • Trade management
  • Money lending and credit checks
  • App development and integrations
  • Scalable banking products and databases

FinTechs such as XeroTransferWise, Trulio and, of course, Apply Financial, are great examples of companies pushing the boundaries in the payments space through APIs, whilst the UK FinTech scene is really thriving, with the likes of Currencies Direct, Alpha FX, PayBase, Currencycloud, WorldFirst, Revolut, XE and TrueLayer leading the charge.

Techworld offers up its Top UK FinTechs to Watch, which is worth checking out.


How APIs are helping financial institutions and PSPs to enable instant payments

One of the key ways that APIs are helping customers is in improving payment accuracy and speed, paving the way for instant payments. Remittance services are now so much more efficient thanks to the use of APIs, with more seamless integration of PSPs, systems talking to each other in real-time and a smoother process of consent and authorisation. In ecommerce, payment processing APIs streamline the checkout and payment process for online shoppers.

Consumers no longer expect or tolerate friction in the payment process, and the demand for instant payments is high. So, one of the top priorities for banks and PSPs is to remove any friction and increase straight-through processing (STP). We recently wrote a piece on the main barriers to frictionless payments and how you can increase your STP rate. 

Learn more in our blog: How to Improve Straight-Through Processing by Cleansing Reference Data.


Validate: An API to enable real-time payment validation

If improving straight-through processing and enabling instant payments is one of your top priorities, our payment validation API solution is well worth exploring. Validate API integrates with payment systems to validate your beneficiary data in real-time and cleanse your database to reduce payment errors and increase your STP rate.

Validate API | payment validation and data cleansing solution

How does it work? Our cloud-based system pulls data from official sources, including the central banks, the banking association, clearing houses, major banks, and other sources, to validate reference data for domestic and cross-border payments. Validate API checks and enriches data across over 180 countries and 225 payment jurisdictions. Our database contains over 66 million data points, from IBAN codes and correspondent bank information to payment purpose and tax codes. We maintain our database in real-time with over 7,000 daily updates.

FinTech collaborations are helping to deliver exciting financial products for customers and seamless payment experiences. We’ve partnered with other innovative PSPs and financial institutions to boost their offerings. Learn about our collaboration with Currencycloud: A FinTech Collaboration Using Cloud-Based Payment Solutions.

If you’d like to find out more about our API solution, head to our Validate product page or get a free demo.

Get a free Validate demo


Apply Financial is a SaaS business, based in London, offering payment validation and data cleansing solutions to banks, corporates, financial institutions and payment services providers. Hundreds of organisations worldwide use Validate. Our API is easy to integrate and improves straight-through processing and prevent costly payment errors - this enables customers to enjoy instant payments. Get in touch if you'd like to discuss our range of solutions.

Topics: Validate API, API integration, payment validation API, Compliance, PSD2, open banking, APIs



We can validate BIC’s for over 220 countries In addition in over 170 countries we can validate domestic and International payment details and suggest changes to help you and your customers stay up to date and compliant with the evolving world of payment legislation and rules. Most of all we continue to add more countries to our Validate solution to present you with the de-facto standard in payment validation.

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