What is Open Banking?

In 2016, the Competition and Markets Authority published a report about banking, highlighting that customers were given little choice and control over their money or financial information. Consequently, Open Banking was born, transforming the way customers bank online. Open Banking was created to re-energise banking by making it easier for customers and businesses to gain insight to their transaction data and access better products and services. This access empowers people to control their transaction data in a secure and safe way, revolutionising the way we manage our money, all with the consent of the customer.

Open Banking embodies a global movement that is actively supporting data sharing across secure channels. It allows consumers to give consent to regulated Third Party Providers (TPPs), to access their bank data via secure channels. It requires that banks make this data available to TPPs via secure APIs (application programming interfaces) enabling data sharing in safe and secure manner. The APIs standardise data sharing, enabling the advent of new and innovative services that have the end customer in mind. For instance, consumers can have an overview of all their accounts with multiple banks in one place, as provided by a regulated TPP, or they can move and managed their money more effectively. Every Third- Party Provider involved in Open Banking is regulated by the FCA, or a European equivalent and must comply with data protection laws. Being able to leverage APIs has made it much easier to access and put users in control of their data.


Open Banking is charged with setting standards for PSD2-compliant technologies at banks, so that service providers, such as other banks and TPPs can retrieve financial data as quickly, consistently and accurately as possible.

The PSD2 (Payment Service Directive 2) came into force in January 2018 and is an EU-wide directive that is demanding that the banking sector becomes more of a level playing field. It represents a government-sponsored rollout, that is proving it’s influence on a global scale and overall transforming the whole industry.

PSD2 supercharges the speed at which we can connect to user financial data, by requiring banks to make such data available to users who wish to access it through an App for instance.

How? The App asks if it can access consumer transaction data account safely and securely with Open Banking. If the consumer consents, they will be redirected to their bank’s website where they will be redirected to their online banking login. Once they have logged in, the money manager will analyse their transaction information to show them how much money they are spending and on what types of things, helping them to get a firm grip on their finances easily and effectively. Alternatively, consumers may want to give account access to insurers or lenders to calculate affordability decisions.

You may be wondering how gaining access to customer transaction data is secure. However, the Account Information Service Provider (AISP) and Payment Initiation Service Provider (PISP) who use bank data have to be authorised by the FCA, who have created a safety standard across the industry, and provided a legal framework that businesses must adhere to , to access Open Banking data. In addition, all providers have to comply with data protection rules, including a GDPR regulation that came into force in May 2018. The provider will tell consumers you exactly what data it will access, how long for, and how it will be using the data.

What does open banking mean for customers?

Open Banking is changing the way people manage their finances. Viewing all their bank accounts in one place means that budgeting becomes easier, through having a clearer lens looking into how much money they have. An example of how it works in practice: say a customer is looking for a new car insurance policy. Open Banking would allow an insurance provider to access their banking information, so that the suggested products would be tailored to them, based on what they can afford and on their typical spending. So, overall, Open Banking is about putting users in control of their data, offering a secure environment for the use of personalised products and services that specifically meet people’s needs. It represents a shift in the way consumers and businesses bank, providing a platform for better matched financial management according to our circumstances.