How it works in simple words
When you pay online by entering your bank account details directly, you’ve interacted with Open Banking, even if you didn't know it.
Open Banking is a technology that allows banks and financial institutions to securely share your financial data with your consent.
What is Open Banking?
Your bank must let you share your financial data with authorised providers, who can only read your transactions and payments with your permission. Online banking has existed in the UK since 2017 and in the EU since 2018.
All providers can retrieve your information once you permit your bank’s mobile or online banking.
The technical aspects of open banking.
Open banking works through an API (Application programming interface), which allows banks and services like fintech companies to share data.
Facebook, Instagram, Google Maps, and Booking.com are already using this technology. Booking.com uses it to show hotel locations and directions to nearby activities.
Where can you see open banking?
Open banking can be used in many websites and apps that use your financial data to provide you with personalised services or recommendations on ways to save based on your business habits. For example:
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Budgeting apps. Some apps, such as Xero, can automatically provide budgeting tips and consolidate your finances from different business accounts. Some even evaluate the financial viability of renting specific properties.
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Online payments. Some retailers and services, like Amazon Pay, in the UK, now let you pay directly from your business bank account instead of entering card details. This is used for online shopping and paying faster with fewer commissions.
Is Open Banking Safe?
Open Banking raises questions about safety. Providers can only access the data you authorise, so if you allow access to your current account, they cannot view your credit card information without your explicit permission.
All providers must follow data protection rules, such as GDPR. Before you sign up, they must inform you about the data they collect, how long they keep it, and why. If you're unsure, ask questions. Don't share your data if something seems wrong.
