Open banking
Also called account information services, payment initiation services.
Letting customers give licensed third-party apps access to their bank account data, or let them start payments, through secure bank APIs.
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What it is.
Open banking connects banks and third-party providers through APIs, with the customer's consent. In the EU it rests on PSD2, which defines two services: an account information service gives consolidated information on one or more of a user's payment accounts, and a payment initiation service starts a payment order from a user's account held at another provider.
Third-party providers need to be authorised, and every connection needs the customer's consent and strong customer authentication at the bank. Other countries have their own open banking rules and standards.
Why it matters
Open banking makes features possible that used to need screen scraping or manual uploads: instant income checks, account-to-account payments with no card fees, budgeting across banks, and faster reconciliation. Most products reach it through an aggregator rather than connecting to every bank.
In a product build
In a product build, open banking usually means an aggregator integration, consent screens, handling expired consents and mapping messy transaction data into the product's own model.
Common mistakes.
- 01
Ignoring consent expiry, so connections quietly stop updating.
- 02
Assuming transaction data is clean. Descriptions and categories vary by bank.
- 03
Keeping more account data than the feature needs.
Read the official text.
Primary sources this definition is based on.
- Directive (EU) 2015/2366, PSD2 (Official Journal)checked 2026-10-25
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Related terms.
- Strong customer authentication (SCA)The EU rule under PSD2 that online payments and account access must be confirmed with two independent factors from different categories.
- ReconciliationChecking that two records of the same money agree, such as your ledger and the bank or provider's statement, and explaining every difference.
- Settlement (payments)The point when money for a payment actually moves into the receiver's account, after the payment was approved and cleared.
- KYC (know your customer)The checks a regulated business runs to confirm a customer is who they say they are and to judge the risk they pose.
