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Is Open Banking Built To Last?

Every few years, a new "revolutionary" technology comes along promising to change everything. We've seen it with blockchain, the metaverse, and now, open banking. The question for us, the builders, is always the same: is the open banking future a fundamental architectural shift we need to learn, or just another trend to wait out?

This blog post will cover what you need to know about open banking, including APIs, infrastructure, real-world adoption, and on-the-ground challenges, particularly in Africa. We'll cover the promise vs. the reality, the risks involved, and how you can start building for the open banking future today.

What Is Open Banking?

Open banking is a simple and powerful idea that mandates banks to expose customer data via secure, standardized APIs, but only with explicit customer consent. Before open banking was introduced, customer banking information was closed source and proprietary to the banks managing customers' finances. Think of open banking like your smartphone's operating system: it allows different apps to access your contacts, but only after you give them explicit permission. Open banking acts as that secure permission layer for your financial data.

Open banking

Here’s how the process typically works in a secure, three-step flow:

  1. Initiation & Redirection: A user on a third-party app (like a budgeting tool) decides to connect their bank account. The app securely redirects them to their own bank's official login portal.
  2. Authentication & Consent: The user logs in directly with their bank as they normally would. The bank then presents a clear consent screen that explicitly states what data the app is requesting (e.g., "View account balance and transaction history") and for how long. The user must approve this request.
  3. Secure Data Sharing: Once consent is granted, the bank issues a secure token to the third-party app. This token acts as a limited-access key, allowing the app to retrieve only the specific data the user agreed to share. The user remains in control and can revoke this access at any time.

The open banking model operates on the core principle that customers own their financial data and have the right to share it with third-party providers (TPPs) they trust. The user is in control, granting or revoking access much like managing permissions for an OAuth token.

How Is Open Banking Supposed to Change Everything?

The promise of open banking is that it's supposed to change the power dynamic in finance. For decades, banks have operated as the sole gatekeepers of customer financial data, a structure reinforced by traditional regulations. Open banking was designed to dismantle this system and create a new one where you own your financial data and have the right to share it with TPPs you trust.

By making APIs the primary way for third parties to interact with banks, open banking triggers a wave of innovation, with specific benefits for the entire financial ecosystem, including:

For Consumers
The primary benefit of open banking for customers is greater control over their financial lives. This could translate into:

  • Personalized Services: Access to budgeting apps that see all your accounts in one place, automated savings tools, and platforms that analyze your spending to recommend better-fit loans or credit cards.
  • Increased Competition: By making it easier to share data, it becomes simpler to switch between financial providers, bringing about competition that can lead to lower fees and better service.
  • Greater Control: Users get to decide who can access their financial data and for what purpose, giving them more power over their own information.

For Developers
Open banking unlocks a lot of possibilities for developers. For example:

  • All-in-One Financial Dashboards: Build apps that let users see their accounts from five different banks in one place.
  • Smarter Lending: Instantly analyze transaction history (with permission!) to make fairer, faster credit decisions, bypassing traditional credit bureaus.
  • Seamless Payments: Initiate direct Account-to-Account (A2A) payments, which are often faster and more cost-effective.
  • Automated Accounting: Pull transaction data directly into accounting software, saving businesses countless hours.

Hype vs. Reality of Open Banking

The buzz about the open banking future in Africa cannot be ignored. It's a recurring theme at tech conferences and investor pitches, driven by substantial venture capital seeking the next great fintech disruption. Staggering market forecasts are suggesting the global market, valued between $28 billion and $118 billion in 2024, could surge past $2.5 trillion by 2033. But what is the current reality in Africa?

In Africa, progress in open banking is primarily visible at the infrastructure level. For example, the Central Bank of Nigeria (CBN) released its official Operational Guidelines for Open Banking in 2023, creating a formal, regulator-backed framework. The nationwide “go live” for full implementation of open banking is set for August 2025. Still, millions of API calls for services like account verification and direct payments are already being made monthly, proving that businesses and consumers are already adopting services built on open banking principles.

Customers might not be aware of this yet, but the open banking revolution is already happening behind the scenes. Once full approval by CBN is given, financial institutions will be mandated to open up their systems to open banking, leading to massive growth in the space.

Why Open Banking Might Fail

Despite the optimistic projections in the open banking space, there are still a number of things that can stall the progress of open banking or make it a niche technology that isn't considered “revolutionary.” These challenges are at the center of what makes the financial system work. Let’s take a look at some of them.

1. The Issue of Fragmentation
One of the biggest challenges, especially in a diverse market like Africa, is the lack of standardization. Bank A's API behaves differently from Bank B's. One has great documentation, the other has... a PDF from 2019. One has 99.9% uptime, the other seems to go down for maintenance too often. For a developer, this means every API integration is a new project, requiring custom code for every single bank you want to connect to.

2. The Burden of Compliance
Handling sensitive financial data introduces significant regulatory obligations. As a developer in this space, you are directly responsible for adhering to a complex web of standards and regulations. Key among them are:

  • Data Protection Regulations: Across Africa, countries are implementing data protection laws. Nigeria's Data Protection Act (NDPA), for example, mandates strict rules for data handling, requiring explicit user consent and a robust data governance framework.
  • PSD2: For services operating in Europe, the Payment Services Directive sets rigorous security and operational standards for accessing customer payment accounts.
  • PCI DSS: If your application processes card payments, you must adhere to the Payment Card Industry Data Security Standard, a global benchmark for protecting cardholder data.

Failure to comply can result in financial penalties and a loss of user trust. For any development team, particularly smaller ones, navigating these requirements requires significant resources and specialized expertise.

3. The Challenge of User Adoption
Beyond the technical and regulatory hurdles lies the challenge of gaining users' trust. For open banking to succeed, users must consent to sharing their financial data. However, many consumers are justifiably cautious about granting third-party applications access to their bank accounts. Overcoming this hesitation is a barrier to widespread adoption, making user education and transparent communication as important as the technology itself.

How Flutterwave Helps With Open Banking

At Flutterwave, we support open banking by helping you build a more connected payment ecosystem. Our infrastructure is engineered to provide developers with the tools to overcome the core challenges of fragmentation and compliance.

Here’s how we can make the API integration practical for you:

  • A Unified API for a Fragmented Market: We provide a single, unified API to facilitate collections and payouts across numerous financial institutions. This eliminates the need for developers to build and maintain separate integrations for each partner.
  • Integrated Compliance: Our platform is built with compliance at its core. We are PCI-DSS Level 1 certified and NDPR compliant. By using our infrastructure, your application benefits from our established security and compliance frameworks, reducing your product's risk and allowing you to focus on your core business logic.
  • Practical Application in Core Features: We apply open API principles to deliver essential services. When you use Flutterwave for account number verification or to enable our "Pay with Bank Transfer" feature, you are using secure, permission-based connections that exemplify the practical benefits of open banking.

Wrapping Up

So what if open banking is just a passing trend? Given the challenges of fragmentation, compliance, and user trust, it’s possible the "open banking" trend might fade. But the underlying architectural shift, which is secure, permission-based access to financial data via APIs, is here to stay.

We’ve seen how the idea of open banking can be revolutionary and some of the issues that can cause slow or no adoption of this new technology. This isn’t a signal for you to stay away from the open banking space, but an opportunity to start exploring platforms that provide a unified API to access the power of entire bank networks, securely and reliably.

Ready to see what a practical API integration looks like? Check out the Flutterwave documentation and start building today.

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