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what is open banking

What is Open Banking?

Open Banking is a system that allows corporates to share their banking data with registered providers in a secure manner.

What is Open Banking?

In the era of Open Banking banks have opened up their infrastructure to allow corporates to share their banking data with registered Third Party Providers (TPPs), in a standardised and secure manner. This enables corporates to take advantage of new innovative services that are coming to market. All of this operates in a secure and safe environment, based on clients’ explicit consent.

In essence, Open Banking is about making life easier for users of financial services, including corporates. Traditionally it has been onerous for corporates, especially smaller ones, to access and share their data that banks hold. Whilst this can be done via SWIFT, this does not suit all businesses as the requirements for implementing SWIFT connectivity can be prohibitive to smaller corporates.

Why have we got Open Banking?

There are three main drivers for Open Banking, these are: customer demand/ behaviour, regulatory change, and new entrants into the financial sector.

Customer demand/behaviour

Corporates’ expectations have evolved. They now expect services to be tailored to their specific needs, which means that established banks have had to re-think how they serve existing clients, and target new ones. This has created opportunities for new entrants to enter the market and provide banking and financial services in a modular fashion.

Regulatory change

A range of new and imminent regulation around the world makes Open Banking possible and secure. There are two pieces of regulation in Europe which are designed to implement and support Open Banking. These are the revised Payment Services Directive (PSD2), which was introduced by the European Commission, and the CMA Order which was introduced by the Competition and Markets Authority (CMA).

New entrants

Open Banking has provided opportunities for entrants to enter the market and provide services that would traditionally be provided by banks.

With the introduction of new entrants into the market, there is a danger of banks becoming utility functions, if they do not manage to respond to the opportunities presented by Open Banking, and the advantages they may bring.

The new entrants are generally, but not exclusively, innovative Fintechs that are focused on providing specific banking and financial services, such as payments, in a highly customer centric manner.

What does Open Banking mean to Corporates?

Open Banking can provide corporates with benefits such as improved Treasury Management. This includes real time access to their account information, even when they are multi-banked, and new ways of initiating payments. 

Improved treasury management

Open Banking can help make Treasury Management easier for corporates, as they will be able to access their balance and transaction information in real time. Whilst this information has always been available, it will now become easier to obtain it and integrate it directly into their back office systems. Real time account information will enable corporates to make more informed decisions and manage their liquidity more efficiently.

New business models – AISP and PISP

Solution providers are able to register as either an Account Information Service Provider (AISP) and/or a Payment Initiation Service Provider (PISP). Becoming an AISP enables them to access their client’s data (when their client gives consent) and understand their behaviours, they are then able to provide them with tailored processes and services. Becoming a PISP enables corporates to provide transactional services to their customers, allowing for alternative ways for collecting receipts and online payments.

Strong customer authentication

In conjunction with Open Banking, strong customer authentication is being mandated as a part of PSD2 to ensure that there is trust in the solutions being provided. Strong Customer Authentication is a concept that aims to meet the needs of corporates without lowering security standards. It ensures that banks have adequate security protocols in place to authenticate customers when using their online platforms and services. The requirement is to implement at least two of the following factors (2-factor authentication):

  • Knowledge (something only the user knows) – for example, a password 
  • Possession (something only the user possesses) – for example, a smartcard
  • Inherence (something only the user is) – for example, a fingerprint.

What is Barclays’ solution for Open Banking?

Barclays has built a range of APIs that enable corporates to share their data in a safe and secure way as well as the ability to initiate payments.

Read more about our Open Banking solutions here

Read related insights

Open Banking Opportunities

Open Banking has created new opportunities for corporates to achieve efficiencies and effectiveness in their treasury function.

Insight

PSD2

The revised Payment Services Directive PSD2 came into effect in 2018, the implications of which have been wide reaching for both, banks and corporates alike.

Secure, Innovative APIs

Our Corporate Open Banking secure APIs are live and ready for third party partners and developers to explore, test and drive digital innovation.

Solutions

Corporate Open Banking Service

Whether you want to share your financial information securely with third parties or innovate financial solutions, Barclays is your Open Banking partner.