What is Open Banking?
PSD2 Regulation requires banks in Europe and the UK to expose their customer data and payment initiation APIs to authorised third parties. This is what we call Open Banking.
Open Banking is a secure way to give customers control over their banking data, and to enable them to securely make payments directly from their bank account. This provides customers with better payment experiences and more control over their finances, and enables regulated companies to provide additional services.
As a consumer, you might use Open Banking-enabled services or applications to:
- Access information from multiple bank accounts in one place
- Give a budgeting app permission to access your bank account information, so you can better understand your spending patterns
- Give a lending service permission to access your bank account information to assess your credit application
- Give other service providers permission to access your bank account information to verify your identity
- Pay bills, such as for utilities or taxes
- Pay for goods and services online and/or in stores
- Make charitable donations
- Pay your credit card bills
- Add funds from your bank account to other accounts and digital wallets
Payments via Open Banking are processed via online banking, so the payer can quickly and easily approve them directly with their bank.
Is Open Banking safe?
Open Banking provides more safety in terms of risk management and fraud protection, as the technical standards required under its guidelines mean that stricter authentication and verification is needed. It is as safe as Online Banking, and customers are also protected under GDPR.
Customers (or end-users) are at the heart of Open Banking and know exactly what data they are sharing and can revoke them at any time.