What is Open Banking?

Open banking is a banking activity that offers transparent access to customer credit, investment, and other financial data from banks and non-bank commercial entities through the usage of application programming interfaces (APIs) by third-party financial service providers. Open banking allows institution-wide networking of accounts and data for use by consumers, financial institutions, and third-party service providers. Open banking may be many things including guidelines and regulations such as Payment Service Directive 2 (PSD2) in Europe and Open Banking in the UK; it usually refers to the ability of banking clients to allow third parties to view their bank account details either to gather account information or to facilitate transfers. Under open banking, banks enable third-party service providers, which are typically tech startups and online financial service vendors, to access and control customer personal and financial data. Customers are usually expected to offer some sort of permission to make the bank approve this access, such as checking a box on an electronic device on terms of service page. Third-party users APIs will also utilize mutual consumer data (and financial counterparty data for the company). Uses may involve matching client accounts and activity background across a variety of commercial service alternatives, aggregating data from participating financial firms and companies across build brand profiles, or creating new purchases and account adjustments on behalf of the company.