Open Banking

Open Banking is a system where banks and financial institutions allow third-party developers access to their data through APIs (Application Programming Interfaces). It’s not a specific type of payment, loan, or bank per se. Instead, it is a practice or system that can be adopted within the financial and banking industry.

What Open Banking Implies:

  1. Data Sharing: Open Banking allows banks to share customer data securely with third-party developers, provided they have the customer’s consent.
  2. Innovation: It fosters innovation in the financial sector, enabling the development of new apps and services which can provide consumers and businesses with better ways to manage their money, access loans, make payments, etc.
  3. Consumer Control: Customers have better control and oversight over who has access to their financial data and how it’s used.
  4. Competition: It enables smaller fintech companies and startups to compete with established banks by providing them access to essential financial data that allows them to create innovative services.

Distinctive Features:

  • API Usage: Unlike traditional banking, open banking heavily relies on APIs to facilitate the secure sharing of customer data among financial institutions and third-party developers.
  • Customer-Centric: It is typically more customer-centric, allowing customers more freedom and flexibility to manage their financials and choose between different service providers.
  • Third-Party Services: It encourages the development of third-party services that can provide additional value to banking customers, like personal finance management tools, alternative payment methods, and better loan options.

How it Works:

  1. Data Access: Third-party providers (TPPs) access financial data from banks through secure APIs, once they have received permission from the customer.
  2. Creating Solutions: Developers utilize this data to build financial solutions, applications, or platforms that offer services like payment initiation, account information services, or other value-added services to customers.
  3. Utilizing Services: Customers utilize these third-party platforms or apps to manage their finances, execute transactions, or avail other financial services.
  4. Secure Transactions: Security protocols, often managed through API interactions, ensure that all transactions and data exchanges occur in a secure environment.


  • Banks: Traditional financial institutions provide access to their customer data, complying with regulations and ensuring security and privacy.
  • Fintech Companies: They create innovative financial services and apps using the data accessed via open banking APIs.
  • Third-Party Developers: Developers build applications and platforms which can offer various financial services utilizing the data obtained from banks.
  • Regulators: In many jurisdictions, financial regulators oversee and regulate the practice of open banking to ensure customer data protection and fair competition.


  • Personal Financial Management: Apps that help users manage their money, budget, invest, or save by aggregating information from various accounts.
  • Alternative Payment Platforms: Solutions that offer alternative payment methods, leveraging bank account access to initiate transfers.
  • Loan & Credit Services: Platforms that use open banking data to assess creditworthiness and offer personalized loan or credit card offers.
  • Automated Business Solutions: Services aimed at businesses to manage payroll, invoicing, or expense tracking by integrating banking data.

In conclusion, Open Banking provides a framework that promotes innovation, competition, and enhanced services in the financial sector, thereby granting consumers and businesses access to better, more tailored financial products and services while ensuring that their data remains secure and under their control.

This page was last updated on June 12, 2024.

Share with others...