API is the acronym for Application Programming Interface (application programming interface, in Portuguese). Simply put, it is a technological fabric that allows different platforms to communicate with each other.
In the case of Open Banking, financial institutions will have open APIs, which will allow the systems of different companies to communicate through a shared area. Thus, when you authorize, a bank may have information about your financial history in another institution, for example.
Will companies be able to access my information freely? Like this?
Calm! Your information will be safe and only you can authorize this process. See below for details on how this technology works.
What is API?
APIs are a set of patterns that are part of an interface and allow the creation of platforms in a simpler and more practical way. In simpler terms, it’s as if APIs are bridges that connect two places, and thus data comes and goes.
Think of it like this: behind every platform – every website, application, etc. – there is an entire layer of code that makes up the system, right? You don’t see this system when you’re browsing, but it supports everything you see on your computer screen or cell phone.
The API is a piece of code that acts as a messenger between you and the system. When you place an order, it translates the message into the system and returns the response to you.
How do APIs work in practice?
An example of how APIs work: When you search for a plane ticket on an airline’s website, you need to fill in various pieces of information – the round-trip dates, origin and arrival destination, etc.
If, on the other hand, you do this same search in a flight aggregator (those sites that look for tickets in several companies), several systems will have to talk to each other to deliver your result.
This conversation takes place through the APIs of each of the sites involved. That is, from your order (search for flights), the aggregator pulls information from different platforms and delivers it back.
This communication between platforms takes place through a series of standards and protocols – as if it were a shared area.
Technology companies often have their APIs open. Google Maps, for example, has an open API and anyone can create a website or app integrated with it. Therefore, it is common to find Google maps on many websites and even navigation and traffic applications that use as a basis the information that can be obtained from its API.
That is, in an increasingly digital world, we often interact with systems that have open APIs.
API and Open Banking: what do they have to do?
As with other companies’ APIs, Open Banking’s proposal is that the entire financial market has open APIs. In other words, institutions will be able to talk to each other – in other words, read data from each other as long as there is permission from the person who owns this data.
In other words: you, who are a client of a financial institution, can request that your information be shared with other companies – such as banks, fintechs, brokers, insurance companies, etc.
Institutions cannot do this sharing on their own: it must come from your request and authorization.
Financial institutions will continue to have the freedom to develop products and solutions with the technologies of their choice. What changes with Open Banking is the creation of a standardized way for these companies to converse and share information securely .
As of this change, customers will have more access and control over their own data, which can be consulted and shared (or not) with another financial institution.
If you choose to share, the person can take with them the history built over years with an institution – such as paid bills, deposited salaries, loans, spending profile, among others. This helps companies to have more data when offering more advantageous products (and rates) for each profile.
Open Banking will also allow financial institutions to create new, more competitive products and services.
Is Open Banking safe?
Talking about data sharing can scare a lot of people, but if that’s your fear, calm down! Open Banking is, yes, safe.
This is because at this time of system development, the main objective is to guarantee the security of all involved parties: people and institutions.
The existence of Open Banking does not mean that people’s data will be visible to anyone who wants to see it. On the contrary.
Customers will have control over sharing their own data and will be able to choose where to take it. In other words: no institution will have access to data without authorization.