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).

It means that all UK-regulated banks have to allow you to share financial data electronically and securely through Application Programming Interfaces (APIs) - as long as you give permission. It opens the way to new products and services that could help both you and your customers get a better deal and give you a more detailed understanding of your accounts.

68% of companies are multi-banked and could take advantage of Open Banking

Following a slow start as the industry found its feet, Open Banking Payment Initiation Services (PIS) and Open Banking Account Information Services (AIS) are gathering momentum, allowing payment initiation providers (PISP) to provide businesses customers a new way to pay to increase conversion at the checkout and help them save up to 50% on card fees.

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

Source: Bottomline Open Banking Webinar

When did 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 does Open Banking have?

The Open Banking payment 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 prepare 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 and 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, this 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 you take advantage of the Open Banking payment initiative?

As a market leader in business payment solutions, Bottomline can offer the appropriate products, technology and industry guidance to banks, third-party providers and businesses wishing to take advantage of the Open Banking initiative

Payment Initiation Services (PIS) are provided by Bottomline Payment Services, who are authorised by the Financial Conduct Authority under the Payment Services Regulations for the provision of payment services with FCA registration number 616279.

Our view

Bottomline 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 

Enhanced Data: additional data to be contained within payment transactions and more...

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.

Learn more about Pay Direct and the Open Banking payments service:

Bottomline boosts the way businesses collect cash with Pay Direct

Bottomline has announced the launch of Pay Direct. This new Open Banking payment initiation service (PIS) gives companies a more efficient and cost-effective way to receive online payment from customers by enabling online businesses to receive funds directly from the payer’s bank account via Faster Payments.

View Press Release

How can Open Banking make payments faster and easier?

73% of us regularly interact with our banks online and via our mobile devices, watch this short video to find out how Pay Direct can support your open banking requirements.

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video time: 01:26 video title: PTX Pay Direct the new way for customers to pay

How the Payments landscape is changing for the businesses in light of Open Banking and Request to Pay

In this episode on the Payments Podcast we talk about the benefits and changes both ‘Request to Pay’ and ‘payment direct from bank account’ will have on the landscape.

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video time: 17:00 video title: How Open Banking and Request to Pay is Changing the Payments Landscape

Open Banking: Changing the Way Businesses Pay and Get Paid

This white paper on Open Banking offers practical advice on the scope of the evolving payments landscape, focused specifically on Open Banking and PSD2.

Open Banking: Changing the Way Businesses Pay and Get Paid

Download White paper


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