Open banking is a framework where banks expose customer data to external parties through APIs, enabling integration with third-party services. This system unlocks data previously confined within banks, giving rise to new financial services. This article explains the basics of open banking and specific ways to use it.

Basic Concepts of Open Banking

The core of open banking is providing bank data to external services with the customer’s explicit consent. This enables customers to control their own financial data and choose services best suited to their needs.

In Japan, the revised Banking Act took effect in June 2020, imposing a duty of effort on banks to release APIs. In response, major banks have sequentially published APIs, and many financial institutions now offer APIs in some form.

Personal Use Cases

For individual users, the most familiar application of open banking is PFM (Personal Financial Management) apps. By linking bank accounts to apps like MoneyForward or Zaim, users can centrally manage balances and transaction histories across multiple accounts.

Loan refinancing comparison services now use open banking APIs to retrieve current loan information and suggest more favorable terms. Integration with crowdfunding and investment services is also advancing.

Business Use Cases

For businesses, the most representative use case is accounting software linked with bank accounts. Cloud accounting tools like freee and MoneyForward Cloud integrate with bank APIs to automatically import transaction data and automate journal entries.

Open banking is also used in loan screening. By analyzing bank account transaction data, lending decisions become possible for businesses that were difficult to evaluate with traditional credit models, expanding financing options for SMEs and sole proprietors.

Open Banking Security

Security is one of the most important aspects of open banking. Japanese bank APIs comply with international security standards called FAPI (Financial-grade API), incorporating robust authentication and authorization mechanisms based on OAuth 2.0 and OpenID Connect.

API access permissions are finely controlled, allowing only the necessary data access scope for each service. Customers can disconnect integrations at any time, and unused access permissions are promptly revoked.

Conclusion

Open banking expands the scope of financial data utilization, delivering new value to both individuals and businesses. Its applications range from household budget management efficiency to business process improvement and advanced loan screening. Security frameworks compliant with international standards are in place, enabling safe usage.