Open Banking : definition and operation
Open Banking is mandatory, established by PSD2. Banks must share certain financial data with authorized third parties, via secure APIs and with the customer’s consent.
In practical terms, a company can connect its bank accounts to external tools to automate financial operations or initiate payments directly from a bank account.
This model is primarily based on two services :
- AIS (Account Information Service): allows you to aggregate and view banking data
- The PIS (Payment Initiation Service): allows you to initiate a payment without using a bank card
Open Banking relies on several technologies:
- Banking APIs
- Strong authentication
- Instant transfer
- The European security protocol
What are the uses of Open Banking in business?
Open Banking is not limited to a technical concept. It is integrated into the daily operational practices of businesses. Payments, cash management, accounting automation, and financial analysis are just some of the many use cases that are multiplying and impacting several key functions.
Pay by Bank
Pay by Bank allows you to pay directly from your bank account, without a card. The customer authenticates with their bank and confirms the payment in real time.
It is found mainly in :
- E-commerce
- B2B invoicing
This model reduces the steps in the payment process and limits abandonment related to cards or forms.
Bank account aggregation
Open Banking allows you to connect multiple bank accounts in a single interface. Businesses gain a consolidated view of their cash flow, even when using several banks.
Main use cases :
- Financial departments
- Multi-company groups
- Cash management
This centralization facilitates the monitoring of flows and improves the overall understanding of finances.
Accounting automation and bank reconciliation
Bank transactions are automatically retrieved and then synchronized with accounting tools or ERP systems. They can be categorized and reconciled without manual entry.
The benefits are tangible :
- Reduction of repetitive tasks
- Reduction in data entry errors
- Accelerating accounting closings
Finance teams are becoming more efficient in their daily operations.
Financial data verification
Open Banking provides access to a customer’s banking data with their consent. This information is used to analyze their financial situation in real time.
These uses are common in :
- Credit
- Insurance
- Rental
- Installment payment (BNPL)
The decisions are based on actual, not self-reported, banking data, which strengthens the reliability of the analysis.
Sectors that use Open Banking
The use of Open Banking is no longer limited to financial players but now extends to many sectors.
E-commerce
E-commerce sites use Open Banking to offer direct account-to-account payment at checkout. The customer confirms their payment through their bank, without using a credit card. This approach reduces shopping cart abandonment and speeds up payment collection.
Fintech
Fintech companies leverage Open Banking to connect users’ bank accounts to their services. They develop account aggregation, financial management, and payment solutions based on real-time banking data.
Insurance
In the insurance sector, Open Banking is primarily used to analyze customers’ banking transactions. Insurers can assess risk more quickly and automate certain underwriting steps thanks to reliable and up-to-date financial data.
Real estate
Real estate professionals use Open Banking to verify tenants’ creditworthiness. They gain secure access to income and expenses, simplifying and accelerating the application process.
SaaS B2B
SaaS software providers are integrating Open Banking to automate payments and receipts directly within their platforms. Financial flows become smoother and less dependent on external solutions.
Mobility and digital services
In the mobile and digital services sector, Open Banking enables payments to be triggered seamlessly within the user journey. Payment is processed immediately after use, without requiring card re-entry, resulting in a smoother experience.
PSD2 and PSD3: the framework of Open Banking
PSD2 structured the Open Banking market in Europe. It mandated the opening of banking data to authorized third-party providers and secured exchanges through common standards. Above all, it enabled the emergence of the first large-scale, practical applications.
PSD3 continues this momentum with a broader ambition. It seeks to strengthen the efficiency of payments and accelerate the adoption of Open Banking solutions in everyday use.
PSD2: The basics of Open Banking
- Opening up banking data via API
- Creation of AIS (aggregation) and PIS (payment) services
- Implementation of Strong Customer Authentication (SCA)
- Regulation of third-party actors (fintech, PSP)
PSD3: Towards a generalization of uses
- Harmonization and standardization of banking APIs
- Strengthening security and the fight against fraud
- Improvement of payment processes
- Expansion of use cases in Europe
Impact for businesses
PSD2 and PSD3 are not limited to a regulatory framework. They have a direct impact on how companies integrate and use Open Banking in their operations.
Easier integration of Open Banking solutions : standardized APIs and common rules facilitate connections between banks, fintechs, and business tools. Companies reduce integration time and complexity.
Faster and more reliable payments : account-to-account payments are processed in real time. Transactions become more stable and have higher success rates, especially compared to bank cards.
Increased automation of financial flows : banking data flows more easily to accounting and financial tools. Companies automate reconciliation, reporting, and cash flow monitoring.
Reduced friction in the customer journey : payment steps are simplified. The customer validates directly from their bank, without card entry or complex redirection.
