The process of integrating third-party fintech services into a bank’s systems and sharing data via Application Programming Interfaces (APIs) is commonly referred to as

Question

BlackTom AI · Accepted Answer

Open banking refers to the practice of banks exposing customer-permissioned account data and payment initiation capabilities to third-party developers through standardized, secure APIs.

1. Relevant knowledge points and concepts
- APIs (Application Programming Interfaces): technical interfaces that allow different software systems to communicate and exchange data.  
- Third-party fintech integration: non-bank companies accessing bank functionality (e.g., account data, payments) to build apps or services.  
- Customer consent and security: open banking frameworks require explicit customer permission and strong authentication.  
- Regulatory drivers: laws such as PSD2 (EU) mandated that banks enable third-party access under defined rules, creating “open banking.”  
- Distinct models: open banking focuses on data sharing and consented access; Banking-as-a-Service (BaaS) offers embedded banking products via partner platforms, while the API economy is a broader term for API-driven business models.

2. Step-by-step reasoning
- The phrase mentions "integrating third-party fintech services into a bank’s systems" — implies external developers/apps connecting to bank infrastructure.  
- It also specifies "sharing data via Application Programming Interfaces (APIs)" — an exact mechanism central to open banking.  
- Combining third-party access + API-based, consented data sharing matches the commonly accepted definition of open banking.

3. Intermediate steps (concept mapping)
- Identify actors: bank + third-party fintech.  
- Identify mechanism: APIs.  
- Identify action: integration and data sharing with customer permission.  
- Map to term: open banking = banks exposing data/services to third parties via APIs under consent/security rules.

4. Why the correct answer is correct
Open banking is explicitly defined as the standardized practice of allowing third-party providers to access bank account information and initiate payments through APIs, subject to customer consent and regulation. The question’s wording exactly describes this model.

5. Why other similar terms are less correct
- Banking-as-a-Service (BaaS): focuses on banks providing backend services for partners to offer financial products, not specifically the regulated, consented data-sharing model described.  
- API banking/API economy: broader or more generic terms; they don’t emphasize the regulated, customer-consent data sharing between banks and fintechs that "open banking" denotes.

6. Conclusion
The correct term is open banking, which matches the provided answer: open banking.

The process of integrating third-party fintech services into a bank’s systems and sharing data via Application Programming Interfaces (APIs) is commonly referred to as Short answer

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