Why Fintech Startups Should Standardise Their APIs

As of February 2021, there were 26,045 fintechs in the world, up from 20,925 in December 2020. At this rate of growth and amidst growing regulatory implications, fintech startups have to design their solutions in a way that stands out from their competition, are innovative and customer-centric and have control over critical regulatory components.

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Open Banking Standards dictate how financial institutions and fintech companies design their APIs to interact with each other, and the standards are based on industry best practices that allow organisations to share data quickly and securely.

The Challenges of Open Banking

Open Banking and fintechs have changed the financial landscape and brought about challenges, such as:

  • Ensuring consumer safety as sensitive financial data changes hands.
  • Maintaining fair commercial interactions between banks and new, unpredictable fintech players.
  • Drive innovation amidst competition.

As fintechs and traditional institutions interact via Application Programming Interfaces (APIs), a new territory has emerged from a technical perspective because legacy institutions are slowed by their core infrastructure and have been slow to adapt to APIs.

Added to this, larger banks and smaller fintechs have no history of collaborating, and there are still concerns about whether this kind of data sharing can be exploited by cyber criminals to access customers’ financial data.

So far, without any globally standardised rules for creating APIs, fintech startups have had the freedom to experiment and innovate without constraints. But given the above challenges, the issue that fintechs are facing is how to design customer-centric, cyber secure APIs that can maintain growing regulatory demands and drive innovation.

The Benefits of Standardising Fintech APIs

At present, there is no global Open Banking Standard, although many countries and financial institutions have adopted existing standards as a template.

Open Banking Standards or API specifications outline how financial institutions and fintech companies design their APIs to interact with each other so as to follow best practices and allow organisations to share data quickly and securely.
API standardisation can ensure:


  • Faster implementation
  • Improved clarity
  • Easier to develop
  • Standardised API products
  • Consistent security models
  • Clearer communication

On the other hand, the lack of a common API standard is delaying Open Banking adoption and hindering the interoperability of the banking and FinTech sectors. As yet, regulators have left it to the market to decide individual standards, but the Open Bank Project suggest that standardising APIs can:


  • Lead to greater structure and clarity during the initial phases of Open Banking implementation, when the biggest challenge is API design. With a better-defined framework, API development can progress faster and with fewer unknowns, whereas the lack of clear guidelines may hinder the adoption of Open Banking.

  • Improve developer experience and accelerate innovation with consistent APIs across all institutions. Fintech startups are the main creative force in the Open Banking ecosystem. Standardised APIs minimise the learning curve and make APIs more intuitive and easy to use, accelerating the creation of FinTech applications and services.

  • Standardised APIs can themselves become products to a wider consumer base, where fintechs will find it easier to consume and distribute standardised APIs. So, fintechs that have long-term growth in mind and want to monetise their API products will need to standardise them first.

  • Non-standardised APIs can lead to inconsistent security models, API documentation and even functionality across banks, and make them more vulnerable to cyber attacks and data breaches.

Hence, fintech startups should design their APIs to be standardised if they wish to collaborate with different financial institutions and ensure effective interoperability and widespread adoption of their solutions.

Sign up for the Oxford Fintech Programme to learn about the disruption in the financial sector caused by Open Banking and the latest developments in fintechs.

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