What is open banking?
Open banking is the regulated sharing of bank account data and payment initiation through secure APIs, with the account holder's consent. It lets accounting software pull bank transactions directly, and lets businesses be paid by bank transfer started from an invoice link, known as pay by bank, instead of by card or a manually keyed transfer.
Also calledpay by bankaccount-to-account paymentsPSD2 APIs
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- UK launch
- January 2018
- UK active users
- Over 18 million
- EU basis
- PSD2
How open banking works
Two kinds of regulated provider use the APIs. Account information service providers read balances and transactions, which powers bank feeds into ledgers and cash forecasting tools. Payment initiation service providers start a payment from the payer's account, which the payer approves in their banking app; the money then moves over the local rails, such as Faster Payments in the UK or SEPA in the euro area. In the UK, open banking followed a 2016 Competition and Markets Authority review that required the nine largest banks to build standard APIs, and it went live in January 2018; it now has over 18 million active users. In the EU, the second Payment Services Directive (PSD2) requires banks to give regulated providers access. For finance teams, open banking means cheaper collections, payments that arrive with the invoice reference and fewer manual bank imports.
Common questions
What is pay by bank?+
A payment taken straight from the payer's bank account through open banking. The payer picks their bank, approves in their banking app and the money moves by instant bank transfer, without card fees or manual entry.
Is open banking secure?+
Providers must be authorised by a financial regulator, the customer has to give explicit consent, and login happens in the bank's own app or site, so the provider never sees the bank password.
How do bank feeds use open banking?+
Accounting software connects to the bank through an account information API and imports transactions daily, replacing statement uploads or screen scraping.
Software that uses open banking
MimoSupplier payments and collections auto-reconciled into Xero.Profile →
EmbatReal-time treasury with automated reconciliation and forecasting.Profile →
XeroCloud accounting for small businesses with a large app ecosystem.Profile →
TideBusiness banking with invoicing and bookkeeping built in.Profile →Part of Accountio’s accounting technology coverage · Glossary
