OpenBanking

Open Banking is a financial services model that enables secure sharing of consumer bank data and the initiation of payments with licensed third-party providers through standardized, open APIs. With the customer’s explicit consent, account information and payment services can be accessed by AISPs and PISPs, enabling new apps such as account aggregation and streamlined payments.

Regulatory frameworks underpin Open Banking. In the European Union, PSD2 requires banks to grant access to payment accounts to qualified third-party providers, subject to strong customer authentication and consent. In the United Kingdom, the Open Banking regime, overseen by the Competition and Markets Authority and implemented through the Open Banking Implementation Entity, publishes API standards and governs consent and security requirements. Common security standards include OAuth 2.0 and OpenID Connect.

What happens in practice: ASPSPs (account servicing banks) expose APIs; AISPs provide account information services; PISPs initiate payments. Customers authorize access via their bank’s interface; tokens and consent are issued to third parties. The Open Banking Standard, maintained by OBIE, defines data models, endpoints, and workflows to enable interoperability across participating banks and providers.

Benefits include increased competition, more transparent pricing, and access to innovative budgeting and payment tools. For banks and fintech firms, it can reduce customer switching costs and unlock new revenue streams. Adoption and implementation vary by market, with ongoing work to enhance security, data portability, and consumer understanding of consent.

Critics note privacy and security risks, potential consent fatigue, and dependency on technology providers. Global adoption is uneven, with the EU and UK leading through PSD2/open banking frameworks, while other regions pursue similar data-access regimes in different forms.