Open Finance vs. Open Banking: How the Scope Is Expanding
Open banking lets you share bank account data with apps. Open finance expands that to include investments, loans, and crypto. Here’s how the scope is growing-and what it means for your money.
When you use an app like Chime to check your balance, or a budgeting tool that pulls data from your bank account, you're using API finance, a system that lets software applications talk to financial institutions securely and automatically. Also known as Financial API, it’s the invisible bridge between your bank and the apps you rely on every day. This isn’t science fiction—it’s how millions of people now manage money without logging into their bank’s website.
API finance enables Open Banking, a regulatory framework that forces banks to share customer data with approved third parties, with permission. In Europe, this is powered by standards like NextGenPSD2 and a technical upgrade to the original PSD2 law that makes data sharing faster and more secure. In the U.S., it’s driven by similar principles, even without a federal law—banks like Chase and Wells Fargo offer APIs to developers who build apps for budgeting, lending, and investing. This same infrastructure powers embedded finance, when financial services like payments, loans, or insurance are built directly into apps like Uber, Shopify, or even TikTok. You don’t leave the app to pay—you just tap, and the API handles the rest.
These systems aren’t just convenient—they’re changing who controls money. Before APIs, banks held all the data and tools. Now, fintech startups, small businesses, and even individual investors can build custom financial tools without needing a banking license. That’s why companies like Stripe and Plaid are worth billions—they’re not banks, but they move money behind the scenes. And it’s why compliance matters: Financial API connections must follow strict rules like FAPI (Financial-grade API Security Profile), which ensures your data isn’t stolen or misused. Without these protections, your bank login could be hacked through a third-party app.
What you’ll find below are real, practical guides on how these systems work—from how small businesses use virtual cards through APIs, to how crypto bridges connect blockchains using the same logic. You’ll see how companies track cash flow in real time, how KYC checks happen instantly, and why some financial tools succeed while others fail. No jargon. No fluff. Just clear explanations of the tech that’s already reshaping how you handle money.
Open banking lets you share bank account data with apps. Open finance expands that to include investments, loans, and crypto. Here’s how the scope is growing-and what it means for your money.