What is Open Banking?

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​The UK government has described open banking as a “key step” for both retail banking and the fintech sector. But what exactly is open banking, and how can it help your business?

Put simply, open banking lets authorised third parties access customer transaction and financial data to enable faster, simpler payments. It gives consumers a modern way to pay and merchants a direct, efficient way to receive funds from their customers.

In this article we explore how open banking differs from traditional banking and highlight the practical advantages it brings to businesses and their customers.

How Open Banking Differs from Traditional Banking

The biggest shift is ownership of data. In traditional banking, financial institutions alone control customer information. Open banking returns that control to the customer, who decides which providers may access their data and can revoke permission at any time. Any app seeking access must be registered with the Financial Conduct Authority (FCA), ensuring consumer protection standards are met.

Traditional banks often require lengthy planning, paperwork and testing before launching new products. Open banking accelerates innovation by allowing secure data sharing, so new services reach the market much faster. Access to real-time financial data also helps providers create more personalised offers that match each customer’s specific needs and circumstances.

Benefits of Open Banking for Businesses

Open banking delivers clear advantages in both data insights and payment processing.

By removing repetitive card-detail entry, open banking streamlines the customer journey and improves conversion rates on e-commerce sites. Payments are initiated directly through the customer’s banking app, resulting in higher success rates than card transactions. Funds arrive instantly rather than after several days of processing, while lower fees and the absence of chargebacks help protect both margins and brand reputation.

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Benefits of Open Banking for Customers

Customers gain greater control over their own financial data. They can safely use budgeting tools, comparison services and other apps that provide clearer visibility of their finances and support better day-to-day money management.

At checkout, open banking offers a smoother payment experience: no need to re-enter card details, faster refunds and a more transparent process overall.

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