Open banking and fraud
What is Open Banking?
Quick definition: Open Banking is a regulated way for customers to let authorised third-party providers access account data or initiate payments with consent.
At a glance
- The customer must give permission before data is shared.
- Authorised providers can offer account information or payment initiation services.
- Open Banking uses secure connections rather than sharing online banking passwords.
- Consent can usually be withdrawn.
Explain it simply
Open Banking lets you choose to share certain bank account information with another authorised service, such as a budgeting app, or to make a payment through a regulated provider. You do not hand over your banking password to the app. Instead, your bank asks you to approve the connection. You stay in control of whether to give permission. Open Banking is not the same as posting your bank details online, and you should only use services you trust.
Student explanation
Open Banking is a UK framework for secure data sharing and payment initiation between banks and authorised third-party providers. It can support budgeting tools, affordability checks, account dashboards and alternative checkout payments. The customer gives consent, usually through their bank's authentication process, and can normally withdraw that consent. Students should understand the difference between an Account Information Service Provider, which accesses account information, and a Payment Initiation Service Provider, which can initiate a payment with permission.
Professional explanation
Open Banking is a regulated ecosystem enabling secure access to payment account data and payment initiation through application programming interfaces, customer consent and strong authentication. In the UK, it developed from competition and payment services reforms and is implemented through standards, directory services, authorised or registered third-party providers and account servicing payment service providers. Key concepts include consent scope, re-authentication, account information services, payment initiation services, variable recurring payments, data minimisation, operational resilience and liability allocation. Open Banking should be distinguished from screen scraping, informal credential sharing and general financial data aggregation.
UK example
A budgeting app asks Marcus to connect his current account through Open Banking so it can categorise recent spending with his permission.
Why it matters
Open Banking explains how regulated apps can access account data or start payments without customers sharing passwords.
Common misunderstanding
Open Banking does not mean any company can freely look inside a bank account; access depends on authorisation, consent and defined permissions.