Architecting Scalable API Infrastructure for Open Banking: Challenges and Best Practices

The financial services industry is undergoing a seismic shift, driven by Open Banking — a movement that promotes customer-centric banking through APIs. By enabling secure data sharing and seamless integrations between financial institutions and third-party providers, Open Banking unlocks new business models and customer experiences. However, the journey to building a scalable API infrastructure for Open Banking is rife with challenges, especially in emerging markets.

In this article, we talk through the challenges of architecting such infrastructures and the best practices to overcome them. We also shed light on how our team at OnePipe, a trailblazing fintech organization in Nigeria, is addressing these challenges head-on.

Challenges of Architecting Scalable API Infrastructure

To build a scalable API infrastructure, you must brace yourself for the following challenges: 😑

1. Compliance with Regulatory Standards
Open Banking ecosystems must comply with complex and evolving regulations such as PSD2 in Europe, CBN’s Open Banking regulations in Nigeria etc. These mandates often require implementing stringent security measures (e.g., compliance with GDPR [NDPR in the case of Nigeria], adherence to PCIDSS standards, ISO 27001 certification and other security standards) while maintaining operational agility.

2. Handling High Volumes of Traffic
Open Banking APIs deal with varying demand as third-party apps integrate and grow. A sudden spike in traffic during busy times (like loan disbursements or salary processing) can overwhelm poorly designed systems, causing slowdowns or even crashes.

3. Security and Fraud Prevention
Exposing APIs to external developers / parties increases the risk of data breaches and fraud. Ensuring secure access control, monitoring API usage, and enforcing rate limits are paramount to maintaining trust.

4. Data Standardization
Open Banking mandates consistent data formats to enable interoperability. Achieving this in markets where legacy systems still dominate can be challenging and resource-intensive. While Open Banking is still taking shape in some parts of the world like Africa, key players like OnePipe are taking proactive steps to create standards that bridge the gap between modern APIs and legacy systems, helping drive the industry forward.

5. Latency and Real-Time Processing
Things are moving fast these days. Users demand low-latency systems, particularly for time-sensitive transactions like payments. Architecting your systems to achieve sub-second response times while scaling appropriately requires significant expertise.

6. Integration with Legacy Systems
Oops! Many financial institutions rely on outdated legacy systems. Integrating these with modern, microservices-based API infrastructures requires strategic planning and often a phased approach.

So, what best practices can we adopt when architecting scalable API infrastructure?

1. If Possible, Adopt a Microservices Architecture
Breaking down monolithic systems into loosely coupled microservices can allow the Open Banking APIs to scale independently, ensuring optimal performance during traffic spikes. It also enhances fault tolerance, so failures in one service don’t impact the entire system. Engineering this with containers and tools like Kubernetes and Docker can ensure a more flexible, efficient, and resilient infrastructure.

2. Implement an API Gateway
Use API gateways (e.g., Kong, AWS API Gateway) to manage traffic, enforce rate limits, and provide centralized security. Also, building your own API gateway is certainly possible, and it can provide your organisation or startup with full control over traffic management, security, and custom features tailored to your specific needs. The advantage of building your own is the flexibility to implement unique policies, optimize performance for your use case, and avoid the limitations of third-party solutions, which can be crucial in the early stages of scaling.

3. Leverage Event-Driven Architectures
Given the fast-paced nature of today’s world and the need for speed in transactions, event-driven systems can help enable efficient handling of high-volume, asynchronous operations, ensuring smooth processes without blocking. They also allow real-time event processing, which is crucial for timely responses in Open Banking applications. Imagine a customer, Damilola, who’s in an urgent situation and needs to make a payment to cover an emergency medical bill. As she initiates the payment, the transaction can trigger an event-driven system where the payment request is immediately authorised and processed asynchronously. Behind the scenes, an event broker like Kafka picks up the payment event, sends it to the payment gateway/provider, and verifies the transaction in real-time without holding up any other processes. Damilola doesn’t have to wait for the system to process everything in a sequential manner; she gets a quick confirmation that her payment is being processed. Within seconds, the system updates her account balance and the healthcare provider’s system, all in real-time. This is the power of event-driven architectures in action: fast, efficient, and seamless transaction processing — exactly what Damilola needed during her time-sensitive emergency.

4. Use Cloud-Native Infrastructure
Cloud platforms like AWS, Azure, or GCP provide the elasticity to handle traffic spikes without requiring upfront capital investment. Features like auto-scaling and serverless functions enhance cost efficiency and scalability.

5. Prioritize Security
Always be ready for the “Bad Guys” — they’re constantly on the lookout for ways to exploit your system. Implement strong, secure authentication, add web application firewalls (WAFs), intrusion detection systems, and run regular security audits to stay one step ahead and keep the risks at bay!

6. Design for Observability
Don’t be blind to what’s happening with your transactions! Use distributed tracing, logging, and monitoring tools (like ELK Stack, Prometheus, Grafana, CloudWatch etc) to get real-time insights into system health and API performance. This way, you can troubleshoot and keep things running smoothly before they turn into big problems!

How OnePipe Is Solving Open Banking API Infrastructure Problems

The OnePipe Mantra — “The world needs a new type of financial services ecosystem. One where everyone has a role to play, and everyone has some value to capture. And while there’s a need for some gatekeepers, their influence needs to be minimal.”

As Open Banking continues to evolve in Nigeria, OnePipe has proactively worked with banks to standardize their APIs, enabling seamless collaboration with fintechs and other industry players, and driving innovation across the financial ecosystem. By addressing the region’s unique challenges through innovative solutions, OnePipe has delivered:

1. A Unified API Platform
OnePipe provides a single API that connects multiple banks, fintechs, and merchants, streamlining integrations. This eliminates the need for third parties to build and maintain multiple connections.

2. Middleware API for Legacy Integration
Many banks in Nigeria still operate on legacy systems. OnePipe acts as a middleware layer, translating requests from modern API consumers into protocols compatible with legacy systems.

3. Scalable Cloud Infrastructure
OnePipe leverages cloud-native solutions to ensure high availability and performance. With auto-scaling capabilities, the infrastructure is able handle traffic spikes during high-demand periods, such as payday transactions, lending and other banking as a service events.

4. Security at the Core
Recognizing the sensitive nature of financial data, OnePipe employs robust security measures such as tokenized access, rate limiting, and continuous security watch. The platform also complies with Nigeria’s Open Banking regulatory framework, NDPR (Nigeria Data Protection Regulation), and PCIDSS (Payment Card Industry Data Security Standard), ensuring the highest levels of data protection. All of this helps maintain trust among stakeholders and ensures your data is in safe hands.

5. Event-Driven Architecture
OnePipe uses an event-driven model to ensure real-time processing of financial transactions.This reduces latency and provides a smooth user experience for both financial institutions and end-users.

6. Localized Innovations
Unlike global solutions that may overlook local market nuances, OnePipe is deeply attuned to Nigeria’s financial landscape and works closely with its partner banks. Products like PaywithTransfer, GrowTrade, and PaywithAccount, among other popular regional payment methods, are being layered on top of the ground classic API infrastructure, enabling the organization to deliver products for financial inclusivity

The Impact of OnePipe’s Innovations

Through its innovative architecture, OnePipe has:

• Empowered businesses across Africa to launch financial services quickly and cost-effectively.
• Enabled a number of banks and fintechs to collaborate, fostering a robust Open Banking ecosystem in Nigeria.
• Reduced the technical and financial barriers for small businesses to participate in Open Banking.

Conclusion

I hope you were able to gain some insights into what it means to architect a scalable API infrastructure for Open Banking and the technical challenges it comes with. By embracing best practices like microservices, cloud-native architectures, and rock-solid security protocols, fintechs can create systems that not only innovate but also pave the way for financial inclusion.