An open banking API is an application programming interface that a bank provides so that licensed third parties can, with the customer's permission, read account information or initiate payments. It is the technical channel through which open banking works, and the main entry covers the legal background, services and risks.
Open banking APIs usually come in two groups, matching the two core regulated services: account information APIs used for the account information service, and payment APIs used for the payment initiation service. Common specifications include the UK Open Banking Standard and the Berlin Group's NextGenPSD2 framework in the EU, both built in response to PSD2. Customers authorise access at their own bank, which issues the third party a limited token instead of sharing a password.
An open banking API is a narrower idea than a general bank API, which may also serve a bank's corporate clients or partners outside any regulatory regime.