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Best Practices

Open Banking vs “Premium” Bank APIs – What’s the Difference?

Branson Low | November 30, 2022


Open Banking generically refers to the objective of banks opening up their data for wider consumption – be this authorised Third Party Providers (TPPs) or simply a Technology Service Provider (TSP) such as FinLync.


The European Payment Services Directive (PSD2), has the objective of transitioning from a bilateral relationship between a bank and its customers to an ecosystem where bank data is shared between bank, customer and an authorised third party via API.


However, Banks are increasingly providing direct access to their corporate customers of  Premium/Private APIs  allowing corporates to directly access bank data into their underlying systems – whether these are front-office commercial systems or back-office ERP, finance or treasury systems.


These 2 different types of API, one regulated (PSD2) and the other not (Premium) has led to  significant market confusion.


This blog attempts to shed some light on the key differences between regulated “open banking” APIs and premium/private APIs.  In Europe, PSD2 defines open banking; and, in the UK, it is the Competition and Markets Authority (“CMA”) which mandated the 9 largest UK banks under the Open Banking Standard.  The blog will also review the API market in the US.

A brief history

Regulators across certain economies have been trying to increase competition and innovation by opening up banking data to third parties.  In other economies, whilst not driven by regulation, market forces are having a similar impact.

The aim is to develop a level playing field for new market entrants and banks.

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Key terminology

PSD2 outlines two different types of Third-Party Providers (“TPPs”):

  • Payment Initiation Service Providers (PISPs), and
  • Account Information Service Providers (AISPs)

Note that PSD2 also defines a Technology Service Provider (TSP)

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Premium APIs for Corporates

Corporates have traditionally relied upon individual bank portals, Host to Host (“H2H”) and/or SWIFT connectivity between themselves and their banks for the purposes of transmitting payments, balances and transactions or other financial messages.  Corporates have built up, over a number of years, a usually reliable connectivity infrastructure with their banks – however, this infrastructure relies upon file transmissions, middleware and third-party intermediaries such as SWIFT service bureaus to transmit messages.  Messages need to encrypted and decrypted multiple times.  Corporate treasuries, that are by nature risk averse environments, have been maybe slow to adopt newer digital technologies.

Whilst maybe slow, Corporate Treasuries have not been immune to digitalisation and real time processes/data.  The trend can be attributed to multiple factors, not least the digital transformation occurring in the retail sector.

Within this context, open banking APIs might offer treasurers access to real time data.  However, open banking APIs are ill suited for the corporate market.  The main shortfalls are:


Further developments

PSD3 is unlikely to take effect under national regulation until 2026 at the earliest.  EU launched a consultation period which comprised 3 elements:

  • a public consultation
  • a targeted consultation on the technical aspects of PSD2, and
  • a targeted consultation on open finance.

The public consultation came to an end in August 2022. The targeted consultations have also concluded.  Some of the items being considered include:

  • Are current open banking requirements adequate?
  • Are there alternatives to current SCA methods?
  • Should the SCA period be extended from 90 to 180 days to reduce friction?
  • Should contactless payment limits change?

In the unregulated premium/private API market, corporates are looking to accelerate their digitalisation strategy.  In response, banks are accelerating the rollout of their APIs and these are covering an ever-increasing range of use cases.  SWIFT has launched a project seeking to standardise a number of core APIs but this is seen as a drag on innovation allowing a number of API aggregators such as FinLync to develop software solutions allowing simplified multi-bank API solutions.



PSD2 and Open banking have thus far had a retail focus, which is ill suited to the multi-banked multinationals processing potentially thousands of transactions on a daily basis.  The number of regulated open banking APIs remains limited – banks minimising the number of services that they are required to provide free of charge to TPPs.  Whereas the digitalisation of the finance function within corporates, whilst maybe slow to get off the mark, is now accelerating rapidly – and premium APIs are providing the bank connectivity solution to provide corporates with real time data that they seek from their banks.  Corporates are identifying an ever-increasing number of use cases allowing banks to innovate and gain competitive advantage by releasing new APIs and seek to monetise the value add provided to their corporate clients.

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Giles Newell

Giles Newell

Business Solutions Director - EMEA

Giles blends the best of both the advisory and practitioner worlds with extensive transaction banking, corporate treasury, and finance practitioner experience at the likes of Bank of America, SABMiller and Dixons to guide clients to effective, meaningful outcomes that will transform their business. With expertise in the areas of treasury, corporate finance, financial accounting and management, cash management, FX & Interest risk management, processes and controls, Giles has managed, advised and influenced from the team level through to the Board level in both traditional and emerging markets.  He is a Qualified Chartered Accountant (CA), a Fellow of the Association of Corporate Treasurers (FCT) and is fully bilingual in English and French.