Quick answer
Open banking means you can let regulated third-party apps read your bank account data or start payments from your account, with your explicit permission and through a secure bank API. The Basel Committee defines it as sharing customer-permissioned bank data with third parties to build services[1][2].
Key points
- Open banking is built on customer permission: nothing is shared unless you agree.
- It has two main services: account information (reading data) and payment initiation (starting payments).
- Each region has its own rules, such as PSD2 in the EU and the CFPB's 1033 rule in the US.
On this page
#What is open banking in one paragraph?
Open banking is the system that lets you tell your bank to share some of your account data, or to accept a payment instruction, from another company you trust. The Basel Committee on Banking Supervision describes it as the sharing and leveraging of customer-permissioned data from banks with third-party developers and firms to build applications and services[1]. 'Open' means open to firms you approve, not open to the public.
#What are the two main open banking services?
UK law, following the EU's PSD2, defines an account information service as an online service giving consolidated information on your payment accounts held with other providers, and a payment initiation service as an online service that starts a payment order at your request from an account held elsewhere[2]. The first powers budgeting and lending apps; the second powers pay by bank.
Worked example
Example
You connect a budgeting app to your current account and your savings account. The app sends you to each bank, where you log in and approve read access. From then on, the app shows both balances and your spending by category. It cannot move money, because you approved only account information. In the UK, such a provider must not use the data for any purpose other than the service you asked for[3].
#Where does open banking exist?
In the EU, PSD2 has applied since 13 January 2018[4]. UK open banking passed one billion payments by mid-2026, more than eight years after launch[5]. Australia's Consumer Data Right covers banking and energy[6]. In the US, the CFPB's 2024 rule is barred from enforcement while the agency reconsiders it[7]. The full guide is what is open banking, and the technology is explained in how banking APIs work.
Frequently asked questions
Is open banking safe?
API-based open banking keeps your password at your bank, but scams can still trick people into approving connections or payments. Only connect apps you chose yourself.
Is open banking the same as open finance?
Open finance extends the idea beyond payment accounts to other financial data; the European Commission proposed such a framework in 2023[8].
Sources
- Report on open banking and application programming interfaces (APIs) — Bank for International Settlements (Basel Committee on Banking Supervision), 2019 Primary
- The Payment Services Regulations 2017, regulation 2 (Interpretation) — legislation.gov.uk, 2017 Primary
- The Payment Services Regulations 2017, regulation 70 (Account information services) — legislation.gov.uk, 2017 Primary
- Payment Services Directive (PSD2): Regulatory Technical Standards (RTS) enabling consumers to benefit from safer and more innovative electronic payments (MEMO/17/4961) — European Commission, 2017 Primary
- Open Banking surpasses one billion payments and 100 billion API calls — Open Banking Limited, 2026 Primary
- What is CDR? — Australian Government (Consumer Data Right) Primary
- Forcht Bank, NA et al. v. Consumer Financial Protection Bureau et al., No. 5:24-cv-00304, Document 90 (order granting preliminary injunction, 29 October 2025) — US District Court for the Eastern District of Kentucky (via Justia), 2025 Primary
- Modernising payment services and opening financial services data: new opportunities for consumers and businesses (IP/23/3543) — European Commission, 2023 Primary
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