open banking

Open banking is set to be the most significant piece of regulation to hit the financial services sector since the 2008 crisis. In short, open banking is the UK’s response to the Second Payment Services Directive (PSD2), an EU regulation which, in part, forces banks to open up their customer’s financial data via Application Programming Interfaces (APIs).

This will allow customers to give third-party providers direct access to their financial data for this first time, allowing for better product comparisons and new digital experiences for managing their finances.

Both PSD2 and open banking came into force in January this year, but five of the UK’s biggest banks have been allowed to push back the release of their APIs.

Open banking may look like an IT exercise – build some secure and reliable APIs and carry on as normal – but it’s much more of a fundamental shift to the way banks operate. No longer able to rest as gatekeepers to people’s financial lives, they are having to provide better digital experiences for their customers in order to compete with the innovative fintech apps that are now hitting the mainstream. If they don’t, the major banks risk losing that customer relationship altogether.

Here we run through the fundamentals of open banking as it happens here in the UK: its origins, what banks need to consider and some of the opportunities and threats the regulation brings. We also dig into some research being done into consumer appetite for open banking, and round up some of the myriad ways fintech companies, and the big banks themselves, are already looking to take advantage of this new world.

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