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What is Open Banking?

Open Banking is a regulatory initiative that forces UK banks to create open interfaces into previously-locked customer accounts and payment systems. The objective is to simplify how financial information is retrieved, shared and presented. Across multiple banks and bank accounts, consumers and businesses are now able to consolidate, view, and access their banking information, and securely initiate payments from a single interface or authorised Third Party Provider (TPP).

Synonymous to Open Banking, PSD2 (the revised Payment Services Directive) is a similar regulation that is being introduced and legislated in Europe.

68% of companies are multi-banked and could take advantage of Open Banking
Source: Bottomline Open Banking Webinar

When does Open Banking Start?
The Open Banking initiative came into effect on 13th January 2018. It is overseen by the Open Banking Implementation Entity (OBIE), governed by the Competitions and Market Authority (CMA), and is funded by the UK’s nine largest banks and building societies.

Why has Open Banking come about?
The Competition and Markets Authority (CMA) acknowledged that it was incredibly difficult for new banks and financial technology providers to gain access to the market and compete with larger, incumbent banks.

What general impact will Open Banking have?
The Open Banking initiative will stimulate greater innovation in the financial services sector and open up competition in the banking industry. It will bring change, opportunity and opens a whole new world of monetary management possibilities for those wishing to take advantage of it; specifically, new entrants to the market will be able to access the same data and services as traditional banks.

How will Open Banking affect me?
Impact on Banks: It means that customer data is no longer ‘owned’ by any financial institution, but by the customer, and customers are no longer tied to the packages and services offered by a single bank or provider. Competition will now increase and services and products that you offer must be attractive to win market share.

Impact on Providers: As an authorised TPP (third party provider), you will be able to offer innovative new solutions, to improve your competitive advantage, and drive new revenue streams. Specifically, you will be able to tailor offerings to the consumer or business’ circumstances and financial standing.

Impact on Customers: Open Banking consolidates how your bank account information is accessed and managed, and how you make payments. You will also have access to a greater choice of services. In practice, you will be able to have your current account with one provider, and a loan, mortgage, insurance policy, or investment policy from various other suppliers and be able to manage them from one user interface made available by an authorised provider of choice.

What do I need to do to be ready for Open Banking?
Banks: Every bank is mandated to create open and secure APIs (application programming interfaces) in order that customer data can be shared with authorised third-party applications in a secure, common and consistent format. This deadline was January 2018, although 5 of the 9 traditional banks were given an extension for such compliance.

Providers: There is no compliance deadline for providers, but any institution or business that wants to access accounts must be approved, registered & regulated by the Financial Conduct Authority (FCA) as a Third Party Provider (TPP).

Customers: There are no compliance requirements from a customer perspective, but you do need to give permission for your data to be shared by a bank. At present, his only applies to current account data:

  • Basic account information, such as name, number, sort code and account balance
  • Regularly-scheduled payments, including: Direct Debits and standing orders
  • Incoming and outgoing transactions
  • Account benefits, fees, services and interest


How can Bottomline help?

As an FCA-regulated organisation and a market-leading provider of business payment solutions for over 30 years, Bottomline Technologies is able to offer the appropriate technology and industry guidance to banks, third party providers and business wishing to take advantage of the Open Banking initiative. Our secure, cloud based platforms enable you to make light work of embracing new regulations, new payment schemes and innovative payment capabilities.

Our View
Bottomline Technologies believes that Open Banking is a game-changer. The playing field between traditional financial service firms, smaller fintechs and challenger banks will level out. Whilst we can expect to see an influx of innovative and competitive products disrupting existing market share, it is more likely that we’ll see competition evolve into collaboration. Without doubt, Open Banking is a catalyst for innovation, although there is still much to be done in educating financial decision makers on the risks and opportunities as new payment technologies emerge. The initiative is also fertile ground for fraudsters, so we expect that the issue of secure customer authentication needs tightening before both PSD2 and Open Banking can reach its full potential.

It is anticipated that Open Banking will impact other industry initiatives including Faster Payments (making it easier to use multi-banking), GDPR (conflicting stances on the use of personal data), New Payment Architecture (a new, single, integrated retail payment system operator for the UK), Request to pay (opens the potential for e-invoicing within payment system), and Enhanced Data (additional data to be contained within payment transactions) amongst others.

Unquestionably, Open Banking provides an opportunity for quicker responses on design, and the delivery of new standards and data streams. However, its success may hinge on consumers' willingness to trust and embrace it.

Press Coverage

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Continuing Content

On-Demand Webinar

Open Banking for Corporate Business Payments

Open Banking is here and will impact how you and your business makes payments. Find out what Open Banking means for your business payments by watching our on-demand webinar Open Banking for Corporates.

On-Demand Webinar

Understanding General Data Protection Regulation (GDPR)

The General Data Protection Regulation (GDPR) is a new piece of privacy regulation that is due to become law on 25 May 2018. Get started on managing GDPR for your stakeholder data by watching our expert-led webinar Understanding GDPR

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