Open banking (lower case) as a general term is used to describe the practice of integrating customer banking information and financial services to provide a personalised experience. The term applies to the exposure and consumption of these services. In the European Union, the Payment Services Directive (PSD2) requires banks to open up customers’ payment account information to regulated third parties. Outside Europe, some countries have adopted/are working on equivalent regulations. Others are allowing the market to progress on these initiatives.

Open Banking is a UK regulation. It’s a secure way to give providers access to your financial information. A dedicated operating company implements and governs not only the API standard and bank staff’s actions but also the actual processes. The regulatory initiative in the EU is PSD2, which requires banks to open up customer payment account information to regulated third parties. While the UK Open Banking Standard requires a company to run the processes, PSD2 sticks to the business rules and doesn’t impose any technology.

Banks, mandated by PSD2 regulation to share customer information, can act as TPPs and benefit from open data themselves. To go further, they can choose to partner with various service providers to enrich their portfolio and propose unique, value-added offers to their customers. Simultaneously, the business ecosystem is enlarged, and the adoption of open banking leads to better interconnectivity inside the developer community.

How to expand your ecosystem with Sopra Banking Software >>

Since September 2020, when the Digital Finance Strategy was proposed, the EU Commission has been working hard to gather feedback since the introduction of PSD2 across the EU.

In response to these developments, on June 28th, the European Commission (EC) released a set of actions aimed at modernizing payment services and facilitating access to financial services information. These initiatives include PSD3 as well as the newly formulated Payment Services Regulation (PSR).

PSD3 outlines guidelines concerning the approval of payment institutions, while PSR integrates components from PSD2. Collectively, they serve as successors to PSD2, introducing several changes and enhancements.

These propositions acknowledge existing challenges within the present data transmission processes within the financial sector, striving to enhance the flow of customer data by establishing a more robust framework for accessing financial information. Directives, including PSD3, require translation into the domestic legislation of member states, whereas regulations, exemplified by the recently introduced PSR, are enforced uniformly and immediately across the European Union. Anticipated to take effect roughly between 2024 and 2025, these documents are poised to begin implementation.

AISP (Account Information Service Provider) — An Account Information Service provides account information services as an online service to provide consolidated information on one or more payment accounts held by a payment service user with one or more payment service provider(s).

ASPSP (Account Servicing Payment Service Provider) — Account Servicing Payment Service Providers provide and maintain a payment account for a payer as defined by the PSRs and, in the context of the Open Banking Ecosystem are entities that publish Read/Write APIs to permit, with customer consent, payments initiated by third-party providers and/or make their customers’ account transaction data available to third-party providers via their API endpoints.

PISP (Payment Initiation Services Provider) — A Payment Initiation Services Provider provides an online service to initiate a payment order at the request of the payment service user with respect to a payment account held at another payment service provider.

TPP (Third Party Provider) —  Third-Party Providers are organizations or natural persons that use APIs developed to Standards to access customer’s accounts in order to provide account information services and/or to initiate payments.

All definitions

Open banking provides many advantages for various market participants, stakeholders, and consumers. 

For banks, cost minimization and competitiveness have long been considered the primary benefits. In reality, open banking is a digital transformation catalyst that enables banks to make their services usable by more consumers either directly or indirectly. Banks can then leverage customers’ trust and collaborate with various TPPs to provide new, data-driven products and services. 

For customers, open banking means easier and faster access to financial services, tailored customer journeys, and offers — and, as a result, enriched customer experience. 

For third-party providers, access to an existing customer base and their personal financial information means new, innovative services and revenue opportunities.

Benefit from open banking with Sopra Banking Software >>

The Marketplace was created with a simple goal in mind: position our customers to profit from the collective power of Fintech.
Thanks to the DBEP concept, our banking customers can easily combine all the available services (Sopra Banking and partners) and benefit from the DBEP foundational services. Services like the Authentication Brokerage, Authorization Management, and API Portal to build a streamlined and secure combination of services.