UK government: 'detailed framework' for standardised bank APIs due by end of the year

The majority of respondents to a government call for evidence said that it would "not be unreasonable" to expect a standardised application programming interface (API) to be available for use in the UK banking industry within the next couple of years, according to the report. Developing an open API standard would both help encourage more competition in the banking sector in line with the government's stated objectives, and "ensure that the UK remains a global hub and a world-leader for financial technology and innovation", the report said

Financial technology expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said that the creation of a standardised banking API would have benefits for both banks and consumers.

"For consumers, this is a positive step forward - they will now have more secure access to innovative financial services tools such as account aggregation applications which give users a single view of their financial lives online in the one place," he said. "It will also increase trust in these services as users will no longer be required to hand over their log-in details and passwords, potentially compromising their online banking guarantees."

"For banks, the challenges will be in ensuring that they themselves can innovate fast enough to respond to the wealth of information they could access about their clients through open APIs, or have the right relationships in place so that they can collaborate effectively with technology start-ups and SMEs that are already providing these services," he said.

APIs allow different pieces of software to interact with each other. In a banking context, they would allow consumers to grant access to their data to different applications; for example, portals allowing them to manage accounts with different providers in one place, or tools enabling them to compare products from difference providers. Although some financial technology companies use 'screen-scraping' techniques to access data provided by consumers, standardised APIs are widely accepted to simplify the process while presenting fewer risks to privacy and security.

The "vast majority" of respondents to the Treasury's consultation identified numerous benefits of an open API standard, including more competition and a better consumer experience. Although respondents from the financial and technology industries said that they were aware of the data privacy issues at stake, they said that these risks could be addressed through existing data protection laws and "meticulous scoping" of any potential API design.

"The government is therefore committing to deliver an open API standard in UK banking, and will set out a detailed framework for the design of the open API standard by the end of 2015," it said in its report. "The government will work closely with banks and financial technology firms to take the design work forward and, as part of those discussions, will also take forward ideas to introduce more open data in banking for the benefit of customers."