API and Open Banking: Best Practices for Secure Financial Data Sharing

Introduction 

Financial data can move between banks, fintechs, lenders and financial platforms in seconds. But in lending, speed is only useful when the systems behind it work together securely. Many lending journeys still depend on disconnected data sources, manual checks and separate technology systems. That can slow applications, create repeated work and make it harder for lenders to see the information they need at the right time.

As more financial services become embedded into the platforms businesses already use, secure and reliable lending infrastructure is becoming increasingly important. APIs must do more than connect systems. They need to support the safe movement of data across the lending journey, from application, underwriting and decisioning. The task for banks, lenders and fintechs is to build lending connections that are faster and more integrated, while keeping security, control and customer confidence firmly in place. 

What Are API and Open Banking? 

An API is an interface that allows one software system to communicate with another and exchange data or instructions. An API itself is not automatically secure. The security of the connection depends on controls such as authentication, authorisation, encryption, monitoring and permission management. 

Open Banking refers to the regulated approach to sharing payment-account data. It uses APIs as the technical connection, while the surrounding rules govern who can access the data, what the customer has approved and how that access should be controlled. The FCA describes Open Banking as a secure and regulated way for consumers and businesses to share access to payment data with trusted apps and services. In practical terms, an API might allow an accounting platform to retrieve account information or enable a lending service to assess an application using consented financial data. The API enables the exchange. Open Banking provides the regulatory and consent framework around that specific type of financial data sharing. 

Why Secure Financial Data Sharing Matters in Open Banking 

Open Banking’s value depends heavily on trust. A customer is unlikely to connect their bank account to a third-party service if they’re unsure who will see their information or how long it will be used. The Open Banking Standards reflect this directly, requiring that customers have clarity and control over how their data is used, including any onward sharing. Good security needs to cover more than the API itself. It should extend across authentication, permissions, data handling, monitoring and every organisation connected to the system. 

Best Practices for API and Open Banking Security

1. Start with strong authentication

Every financial API should be able to answer one question: who is making this request? Authentication should match the sensitivity of the data being accessed, whether it’s a straightforward open banking API call or a higher-risk payment initiation. Knowing who’s asking doesn’t mean they should have access to everything. 

2. Give each connection the minimum access it needs

Access should be restricted to what a specific purpose requires. Fewer permissions mean less exposure, and less damage if a credential is ever compromised.

3. Make consent obvious to customers

Customers should know what they’re sharing, why it’s needed and who receives it. Clear language and simple permission controls build trust and make consent easier to understand.

4. Track API activity

Regular monitoring flags suspicious access, failed requests and unusual behaviour, while rate limits keep excessive traffic in check. This needs to run continuously, not just at launch.

5. Know who is on the other side of the wire

Every third-party connection is another point to manage. Know what data is shared, where it goes, and who’s responsible, especially with multiple open banking API providers in the mix, since implementation varies enough to add real complexity. 

6. Protect data throughout its lifecycle

Financial data should be protected both while it is being transmitted between systems and while it is stored. Encryption, secure key management and appropriate data-retention controls help reduce the risk of unauthorised access. 

Common Challenges and How Financial Institutions Can Overcome Them 

Legacy infrastructure: Older banking systems make modern integration expensive and hard to secure. Phased rollouts and secure integration layers help modernise without a full rebuild

Inconsistent approaches: Different data formats and authentication methods create gaps. Shared standards keep consent, data exchange and incident response consistent across partners.

Third-party exposure: Every bank, fintech or platform in the chain adds a dependency. Proper due diligence and contracts covering security, access and exit responsibilities keep this manageable.

Confusing customer journeys: Poorly explained permissions mean customers agree to access without understanding it. Plain language and an easy way to view or cancel access solve most of this.

Security versus convenience: Too many checks frustrate users; too few invite fraud. Controls should scale with the actual risk of the request, not apply uniformly.

Skills shortage: API security spans engineering, privacy, fraud and regulation at once. Clear ownership and independent reviews keep it from slipping through the cracks. 

The Future of API and Open Banking 

Open Banking is becoming part of the infrastructure behind modern finance. As lending, payments and financial services move into the platforms businesses already use, the APIs connecting them need to be fast, secure and reliable. This shift opens new possibilities too. AI can also accelerate underwriting by using connected financial data to support faster, more consistent decisions. Pulse’s Einstein aiDeal illustrates this approach, using connected financial data to automatically decide 95% of incoming deals in under 45 seconds. The real challenge is making these systems work together securely. Interoperability, consistent data exchange across platforms, will be central to where Open Banking goes next. Platforms that connect varied sources cleanly will scale; disconnected integrations will struggle. 

Conclusion 

This is exactly the problem worth solving for.  Good, secure infrastructure isn’t a compliance checkbox, it’s what makes faster lending decisions and better financial insight possible in the first place, without trading away security to get there. That’s the gap Pulse was built to close. It connects banks, lenders, brokers, and businesses through one API-first interface, turning financial data scattered across a dozen places into something usable, without cutting corners. 

Two products bring this to life day to day: ULI, which serves as an interoperable technology layer that simplifies lender connectivity and provides the infrastructure needed to support modern embedded lending models, and Business Insights, which turns connected financial data into a clearer picture of a business’s financial health. If you’re trying to move faster on lending decisions while keeping data security genuinely tight, it’s worth seeing what that looks like in practice. Contact us to know more about how ULI and Business Insights could fit into what you’re building.