What is Open Banking?

The idea behind Open Banking is to give you control over how you use your bank accounts, rather than your bank having control.

For example, you could use it to download an app to your phone that connects to your bank feed to help you find savings on your bills. Or you could use it to put money in a separate savings account every time you spend on your debit card.

With Open Banking, instead of always having to use your bank for everything, you can easily connect to other services and apps so you get more choice when managing your money.


In more detail

Open Banking is a specific kind of financial services technology innovation which came about in 2018. In the UK it is regulated by the Financial Conduct Authority (FCA) and has a very clear scope, defined by the Open Banking Implementation Entity (OBIE).

That scope splits into two types of Open Banking, both made possible by APIs:

  • One is about sharing data, to send transaction and account data from one or more banks into a separate app, for example to aggregate accounts or judge credit risk.
  • One is about digital payments. Open Banking makes payments quicker and easier for people with banking apps.

Before Open Banking it wasn’t possible for people to safely and automatically take their banking data to other companies. An example of when someone might want to do this might be when a mortgage lender asks for bank statements. The idea with Open Banking is that, by making this possible, people will be able to move banks or lenders easily and that will make the financial services market more competitive, bringing down the cost and improving access and speed.

Similarly, Open Banking payments make it possible for people to more easily pay for goods and services directly from their bank account rather than using a debit or credit card. The difference here is that by getting around Visa and Mastercard, Open Banking payments should be cheaper for retail companies and banks, and they should be able to pass on those savings to their customers.

The data sharing part of Open Banking was first to be launched and there are lots of services that use this innovation available now. The payments part of Open Banking is newer and just getting off the ground in the UK as of 2022.

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