Introduction

Open banking is a way of giving regulated companies, secure, limited access to your bank account, with your permission, so that they can provide services that are helpful to you. For example, budgeting advice, or recommendations for other financial products that you are eligible for.

It's just as safe as using online banking, and it's safer than paying with a credit or debit card:

• Nobody gets access to your login details or banking passwords. 

• You control who sees your banking information. 

• You control their level of access to your account. 

• Companies can't take any payments without your authorisation. In fact they can't do anything that you don't specifically permit them to do.

For businesses, open banking is a technology that can enable them to take payments and fetch data directly from a customer’s bank account, with express permission, via open banking APIs. 

It has ignited a new generation of financial services, enabling businesses to build products that increase engagement, reduce costs and transform the customer experience.

How can open banking be used?

A good way to think about open banking is that it makes financial services more useful for you. For example, instead of having to log in to all your bank accounts separately, you can use one app to see all your accounts in one place. And instead of having to print or upload paper bank statements to prove your earnings and financial situation to a mortgage lender, for example, you can connect your bank account to that lender – online and hassle-free.

Businesses can use open banking to accept online payments from customers, accelerate new customer onboarding and to provide value added services to customers. For a complete list, see our blog post on open banking use cases for businesses.

What can open banking do?

As a consumer, open banking allows you to grant secure access to your bank account so that information about your income and expenses can be used to provide useful services to you, such as budgeting advice, or recommendations for other financial products you're eligible for.

It can simplify money management in several ways and can also allow you to make secure payments more easily than with conventional online banking.

Although open banking is a relatively new concept, it is already changing the way people use their bank accounts, for the better.

For businesses, open banking can reduce costs, reduce risk and improve customer experience. We cover the benefits of open banking for businesses and consumers in more detail in the section below.

In the UK, more than 3 million people and businesses are already using open banking-enabled apps and services in their daily lives. At the current rate of growth, 60% of the UK population will use open banking by September 2023.

What are the benefits of open banking for consumers?

For consumers, open banking provides the following key benefits:

1. It can simplify the way you manage your finances. Apps like Revolut, Monzo, Chip and Plum can pull together information from multiple bank accounts into one app. This could help you to budget better and save money. For example, such apps may help you to see your total financial picture and show you where you're paying too much for a utility bill, credit card or overdraft.

2. It can allow you to make payments quickly, easily and securely. Paying by open banking is faster than making a conventional online payment, especially on mobile. There's no need to type in your card details or log into your bank account. Once you've decided what you want to buy, you simply select your bank's name from the on-screen list and securely verify your payment using fingerprint or face ID. This takes just moments and the money is transferred instantly. It's as easy as using a touchless credit card in person and it uses bank-grade security.

3. It can provide proof of income for rental agreements, mortgages, loans and investments. Regulated companies can, with your permission, use open banking to get an overview of your income and expenses, for example so that they can make a fast decision on your loan or rental application. You can also sign up to some services and apps faster and without having to upload or print copies of payslips and bank statements.

What are the benefits of open banking for businesses?

For businesses, open banking also offers significant benefits: 

1. It can make online accounting easier by giving your accountant safe, secure access to your financial records. Some accounting packages use 'screen scraping' to access your bank account. This isn't ideal from a security perspective. Open banking is a safer way for online accounting software to access your bank account in realtime. It can even help classify business expenses for tax and accounting purposes.

2. It can help you access capital more easily. With your permission, potential lenders can use open banking to get an overview of your business finances so that they can make a fast decision on your loan application.

3. It can help you take payments online: with low fees, low fraud and high conversion. Any business that transacts online can take advantage of open banking to help them take instant bank payments, without using card networks. 
   

4. It can help you accelerate customer onboarding. If you need to collect financial information from your customers at sign up, such as proof of income or proof of bank account ownership for a payment, open banking can help you do that in a secure, automated way.

See our complete list of open banking use cases for businesses.

How does open banking work?

Open banking works differently in different countries but generally it involves banks or financial institutions opening up their financial data to third party providers, through open Application Programming Interfaces (APIs). The scope and format of that data varies and often depends on the specific regulations and implementation standards of a particular country. 

In the UK, open banking began in 2018 with rules requiring nine of the biggest UK banks to adopt standards for allowing secure access to customer data. This was followed by EU Regulations (PSD2) requiring all banks and payment service providers (PSPs) to open up access to their customers' financial data to authorised service providers, with their customers' consent.

Open banking information in the UK is made available in a secure, standardised way, through APIs. This makes it easier for companies to use the data to build services that are useful to consumers.

Companies that use open banking data are known as Third Party Providers (TPPs), and in the UK they must be regulated by the Financial Conduct Authority (FCA).

What are Third Party Providers (TPPs) in open banking?

A Third Party Provider is a company that has been authorised and regulated by the FCA (the Financial Conduct Authority) for open banking. Third Party Providers include:

• AISPs (Account Information Service Providers) which are authorised to access bank account information to provide information and advice to customers.

• PISPs (Payment Initiation Service Providers) which are authorised to make payments from a customer's bank account, with the customer's consent.

Is open banking safe?

Open banking is one of the safest ways to make a payment or share your financial data. 

As a consumer, you control:

• what information is shared 

• which providers you allow to access your information

• for how long they will have that access 

• all payments

You never have to give your password or login details to any organisation. 

Open banking providers in the UK:

• can only access your account if you have given it your explicit consent

• must only access the data, or initiate the payments that you have specifically consented to 

• must use Strong Customer Authentication (SCA) on all payments (a new regulation to protect against fraud). This makes open banking payments very secure.

• do not  store your banking credentials, making open banking inherently more secure than credit or debit card payments.

Open banking vs card payments

When buying online the advantage lies with open banking. Open banking payments are quicker, easier and more secure than card payments. You don’t have to key in your card details manually or trust a website to store them for you. Simply select your bank from a list and approve the purchase with your face ID or fingerprint (the merchant can’t store your payment details). This virtually eliminates fraud.

For businesses, open banking payments:

• are cheaper, because there's no card processing cost

• settle more quickly than cards (instantly compared to 1-3 days)

• convert up to 40% better than cards, because they’re designed for digital and for mobile, the process is less manual and payment success rates are higher.

Open banking vs standing order

A standing order is a regular, automated payment of a fixed amount of money, for goods or services, which is set up and controlled by a bank account holder. It’s a popular option for regular payments to friends or family, or between accounts.

Standing orders can also be set up through open banking. This makes it simple for consumers to set up regular, automatic, fixed-amount payments using an app or other open banking service.

Open banking vs direct debit

A direct debit is similar to a standing order, except that it is managed by a provider, not the bank account holder (although they must give authorisation). Unlike standing orders, direct debit allows for variable payment amounts. 

Currently in the UK it is not possible to set up variable, repeated, automated payments using open banking. So open banking is not a substitute for direct debit – at the moment. However, this situation is likely change in the future as new regulations requires the banks to provide this feature.

Open banking vs manual bank transfer

To make a manual bank transfer, you need to log into your online banking and manually input payee and payment details. For businesses, manual bank transfers are cheap but difficult to manage – for example reconciliation is time consuming.

How is open banking regulated?

There are different regulatory frameworks for open banking around the world, but most start with the fundamental principle that consumers have a right to access their bank accounts and financial data via accredited third party providers (and banks must facilitate this access).

Most frameworks also include a regulatory or overseeing body who grants third party providers the permission to deliver open banking services. 

In Europe, under the Revised Payment Services Directive (PSD2), payment service providers must allow their customers to securely share their data with third parties. 

In each member state there is a national competent authority which oversees PSD2 and gives providers permissions to use open banking. For example:

• The Autorité de contrôle prudentiel et de résolution (ACPR) in France

• The Federal Financial Supervisory Authority (BaFin) in Germany

• Banco D’Italia in Italy

There is also an overarching regulator for banking (including PSD2) in Europe, which is the European Banking Authority (EBA).

In the UK, the Payment Services Regulations (PSRs) are the UK equivalent of PSD2 and create the legal and regulatory framework for open banking. Open banking is regulated in the UK by the Financial Conduct Authority (FCA). Only companies that are authorised by the FCA can use open banking to access financial information from consenting customers.

Open banking and TrueLayer

TrueLayer is a global open banking platform. Businesses use our open banking network to securely access financial data and enable instant payments. For example, If you top up your Revolut, Nutmeg, Freetrade or Trading 212 account, you’re using TrueLayer in the background.

More than half of the open banking traffic in the UK, Ireland and Spain goes through TrueLayer and our payments convert 20% higher than other open banking providers.

TrueLayer was one of the first to be regulated in the UK to provide:

• account information services (AIS)

• payment initiation services (PIS) 

These open banking services allow consumers to view their accounts in one place, or pay from their bank without having to enter credit card details. TrueLayer's APIs are fully compliant with UK and European Open Banking standards. 

TrueLayer also provides electronic money services to its merchant clients and acts as a technical service provider or intermediary for regulated open banking providers. We can also help merchants who are not regulated yet to access open banking through our agent model.  

Why use an open banking intermediary?

Some third party providers choose to connect with individual banks’ APIs themselves. However, maintaining these connections can be difficult and resource intensive. That’s why some providers use an intermediary like TrueLayer – a company that specialises in connecting to all the banks itself, and provides its clients with a single API. 

Here are some of the advantages and disadvantages of connecting directly vs connecting via an intermediary like TrueLayer.

TrueLayer as an Electronic Money Institution

TrueLayer is also an Electronic Money Institution, meaning we can provide more complex solutions for our clients. For example, in addition to initiating payments from one bank to another, we can enable merchants to provide instant refunds to consumers, which isn’t possible with simple open banking payments. Find out more about our payments solution.

What is an open banking app?

An open banking app is any mobile application or a piece of software that uses open banking APIs to provide you with a service. Such services may include instant payments, a dashboard of your finances showing your accounts from different banks, proof of income, credit status verification and money-saving advice.

What is an open banking app?

An open banking app is any mobile application or a piece of software that uses open banking APIs to provide you with a service. Such services may include instant payments, a dashboard of your finances showing your accounts from different banks, proof of income, credit status verification and money-saving advice.

What is an authorised provider?

An authorised provider in the UK is a company that has been checked and authorised by the FCA (Financial Conduct Authority) to provide open banking services, and is subject to the Payment Services Regulations (the law applicable to open banking providers in the UK). In short, this means that the company can be trusted to provide open banking services to consumers.

A provider may be authorised to supply services relating to account information, or to provide payment services, or both.

How do I check if a provider is authorised?

The Financial Conduct Authority (FCA) authorises and supervises open banking providers in the UK. You can check whether a firm is authorised to provide these services on the FCA Financial Services Register.

What happens if I experience fraud with open banking?

Account information services (AIS)

Fraud is very unlikely. Your data can only be accessed if you give explicit consent to a regulated provider – and you must do so in a way that meets the requirements of Strong Customer Authentication (eg with your Face ID or fingerprint).

Even with your permission, third party ‘AIS’ providers only have access to account data eg information about your transactions. They have no access to security credentials that could be used to take money from your account. Their access is also ‘read-only’ meaning they cannot change any information or take any actions within your account. 

Once an AIS provider has fetched data from your account, they must ensure the data is secure. They can only share it with another party at your instruction and are subject to requirements under the General Data Protection Regulation (GDPR).

Payment Initiation Services (PIS)

Fraudulent transactions are extremely unlikely. In fact, compared with payment methods such as credit cards, open banking is exceptionally secure. This is because each payment needs to be authorised by you providing your secure banking credentials to your bank.  

In the unlikely event of a mistaken or fraudulent transaction, open banking customers are covered by consumer protection laws that oblige their bank to refund any legitimate losses back into their bank account.

Learn more about more about consumer and buyer protections for open banking.

Which banks support open banking?

Open banking requires consumers to have their own bank account. But not all banks or bank accounts are covered by open banking.

Initially, nine of the biggest UK banks were required to sign up to Open Banking. These were: Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group and Santander.

However, other banks have signed up since then, and the list is growing all the time. The current banks and building societies who offer open banking in the UK are:

• Allied Irish Bank

• Arbuthnot Latham & Co Limited

• Bank of Ireland UK

• Bank of Scotland

• Barclays

• BFC Bank

• C Hoare & Co

• Clydesdale Bank

• Contis

• Coutts & Company

• Coventry Building Society

• Creation Financial Services

• Cynergy Bank

• Danske

• Ghana International Bank

• Halifax

• Hargreaves Lansdown Savings

• HSBC

• ICBC (London)

• Industrial and Commercial Bank of China

• Investec

• Lloyds Bank

• M&S

• MBNA

• Metro Bank

• Mizuho Bank

• Nationwide

• NatWest

• NewDay

• Permanent TSB

• Prepay Technologies

• Project Imagine

• Revolut

• Sainsbury’s Bank

• Santander

• SG Kleinwort Hambros Bank

• Starling Bank

• Tesco Bank

• The Co-operative Bank

• The Governor and Company of the Bank of Ireland

• The Royal Bank of Scotland

• The Royal Bank of Scotland International

• Tide Platform

• TSB Bank

• Turkiye Is Bankasi As

• Ulster Bank

• Ulster Bank Ireland DAC

• Union Bank of India

• Vanquis Bank

• Virgin Money

• Wirepayer

• Yorkshire Building Society

What accounts can I use open banking with?

Open banking requires a bank account with online or mobile access and the ability to make payments such as personal and business current accounts. It can't be used with savings accounts, investment accounts, restricted payment accounts or accounts for which online access is not available.

Can I use open banking with business bank accounts?

As long as your business bank account has online or mobile access and has the ability for direct payments to be made, you can use it with an open banking app. There are numerous open banking apps specifically designed for use by businesses and SMEs.

Some online accounting software can also make use of open banking to increase security when checking bank balance information. Open banking is more secure than 'screen scraping' which is the old way for online accounting packages to check balances.

Not all providers support access to business accounts. If you're a business looking to use an open banking intermediary, you should check which types of bank accounts that provider supports.

Can I use open banking with credit cards?

Yes, in the UK credit cards are classed as payment accounts and customers have a right to access their credit card data through third party providers. 

Open banking glossary

Open banking concepts

Regulatory terms

Open banking protocols and standards

Organisations

Technical terms in open banking

TrueLayer products and add-ons