What is Open Banking?

Open banking is an initiative that has been led by the CMA, the UK Competition and Market Authority, to push the UK’s 9 biggest banks to comply with the UK implementation of PSD2, the European Payment Service Directive 2. Both PSD2 and open banking initiatives are aimed at increasing competition and customer centricity in retail banking, by requiring banks to provide authorised third parties, or TPPs, access to their customers data and initiate transactions on behalf of their customers, through a designated interface that is called  the Application Programing Interface (API).

Open Banking is part of a series of initiatives that should increase competition in retail and Small Business banking, by letting customers decide who can access their data and initiate payments on their behalf. As simple as it may sound, this new initiative fundamentally changes and shifts the balance of power between banks and customers.

Open banking is an ongoing process and will continue to expand to other types of data, accounts and services including pensions and other investment accounts, loans, mortgages accounts switching. In addition, there are different assumptions about the coverage of Social Networks’ data as part of open banking.