Open banking is a model in which banks expose customer account information and payment services to authorised third-party providers through standardised APIs, after the customer gives consent. The customer, not the provider, decides who sees their data.
Why it matters
It enables apps that aggregate accounts, analyse spending, verify income or let a customer pay directly from their bank without a card. Instead of sharing a banking password, which is risky, the customer is redirected to their own bank to approve access, and the third party receives a limited token via OAuth-like flows. In the EU and UK, regulation such as PSD2 requires banks to provide such access; other markets rely on industry schemes or government-led platforms such as India's Account Aggregator framework. Standards and coverage differ by region.
Example
- A budgeting app asks to view your accounts.
- You are sent to your bank's login and consent page.
- You approve read-only access to balances and transactions for 90 days.
- The bank issues an access token to the app.
- The app calls the bank's API to fetch data until consent expires or you revoke it.
Common mistakes
- Giving a third party your internet banking password.
- Not checking whether the provider is authorised by a regulator.
- Treating consent as permanent. It often expires and can be withdrawn.
Rules vary by country; this entry is a definition only.
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