Open banking

Open banking is a financial services concept that enables regulated third-party providers (TPPs) to access consumers' financial data through the use of application programming interfaces (APIs), provided that they have the consumer's explicit consent. This system promotes innovation and competition within the financial sector by broadening the range of services and products available to consumers.

Once third parties gain access to this data, they can offer a variety of services that include, but are not limited to:

The implementation of open banking is underpinned by the principles of security, privacy, and consent. Regulatory frameworks such as the European Union’s PSD2 (Payment Services Directive 2) and the UK’s Open Banking Standard govern how data is accessed and used, ensuring that consumers' financial information is handled securely and transparently.

Despite its benefits, open banking also poses potential risks such as data privacy concerns and increased exposure to cybersecurity threats. It is crucial for all participants in the open banking ecosystem to uphold stringent security measures and for consumers to understand the permissions they grant to TPPs.

Overall, open banking represents a shift towards a more open and interconnected financial ecosystem, where consumers can benefit from more personalized, convenient, and cost-effective services.