Open banking regulations are rules and guidelines established by regulatory bodies that govern how banks and third-party providers (TPPs) share financial data. The core principle is that consumers own their financial data and should be able to share it securely with authorized providers to access better financial services.
These regulations require banks to provide secure application programming interfaces (APIs) that allow licensed third parties to access customer account information and initiate payments—but only with explicit customer consent. The goal is to increase market competition, promote innovation, and improve consumer choice while maintaining strict data privacy and security standards.
Key Elements of Open Banking Regulations
Consumer Consent: Banks can only share data after obtaining explicit customer permission
API Standardization: Technical standards ensure secure, interoperable data exchange between systems
TPP Licensing: Third parties must be authorized and meet regulatory requirements to access data
Regulatory Oversight: Ongoing compliance monitoring, reporting requirements, and enforcement
Open banking regulation varies by region. The European Union pioneered the mandate model with PSD2 in 2018, requiring all banks to provide APIs. The UK went further with standardized OBIE APIs and the world's highest adoption rates. The US finalized Section 1033 in 2024, establishing federal open banking rights. Meanwhile, regions like Asia-Pacific and Latin America have developed innovative approaches tailored to local markets.
Account Information Services (AIS)
Access account data (balances, transactions) with consent. Powers personal finance apps, credit scoring, and account aggregation.
Payment Initiation Services (PIS)
Initiate payments directly from bank accounts. Enables account-to-account payments, reducing card network fees.
Confirmation of Funds (CBPII)
Verify available funds before card transactions. Helps merchants confirm payment capability securely.
Who Regulates Open Banking?
Open banking regulation varies significantly by region, with different regulatory bodies overseeing implementation based on local market structures and policy objectives. Here's a breakdown of the key regulators worldwide:
Regulators require banks to provide APIs. Used by EU (PSD2), UK, Australia (CDR), and Brazil. Ensures universal coverage.
Market-Led Model
Industry develops standards voluntarily. Used by Singapore, Switzerland. More flexible but may have uneven adoption.
Hybrid Model
Government guidance with industry implementation. Used by Japan, Hong Kong. Balances direction with flexibility.
Consumer Rights and Protections Under Open Banking
Consumer protection is fundamental to open banking's success. Regulations ensure that consumers maintain control over their financial data while benefiting from increased access to financial services. Here are the key rights that open banking regulations typically guarantee:
Right to Data Access
Consumers can access their financial data held by banks, including transactions, balances, and account details, in a convenient and timely manner.
Right to Data Portability
Consumers can share their financial data with authorized third parties, making it easier to switch providers or use multiple services.
Right to Privacy
Data can only be used with explicit consent and for specified purposes. Regulations like GDPR and LGPD enforce strict guidelines on data usage and storage.
Right to Withdraw Consent
Consumers can revoke data sharing permissions at any time, immediately stopping further data access by third parties.
Consumers have the right to report errors or unauthorized transactions and receive timely corrections and compensation where applicable.
Open Banking API Standards
Open banking API standards are technical specifications that enable secure and interoperable data sharing between banks and third-party providers. These standards define how systems communicate, authenticate users, and format data to ensure consistency and security across the ecosystem.
UK Open Banking Standard (OBIE)
Developed by the Open Banking Implementation Entity. Comprehensive standards covering APIs, data formats, security, and customer authentication. Used by the CMA9 banks and adopted as a model globally.
Pan-European standard developed by the Berlin Group. Provides specifications for PSD2-compliant APIs across EU member states. Supports both embedded and redirect authentication approaches.
Industry-led standard dominant in the US and Canada. Over 70 million consumers use FDX-connected applications. Supports Section 1033 compliance with robust data sharing protocols.
Financial-grade API security standard based on OAuth 2.0 and OpenID Connect. Adopted by UK Open Banking, UAE AlTareq, and Brazil Open Finance for high-security API implementations.
Open banking regulations require Strong Customer Authentication for electronic payments and account access. SCA requires at least two of three factors: something the customer knows (password/PIN), has (phone/token), or is (biometric). This significantly reduces fraud risk compared to legacy screen-scraping methods.
Open Banking vs Open Finance: What's the Difference?
Open banking focuses specifically on payment account data—current accounts, credit cards, and transaction history. Open finance expands this to include investments, mortgages, pensions, insurance, and other financial products, enabling comprehensive financial data portability.
Open Banking Scope
Current/checking accounts
Credit cards
Transaction history
Account balances
Payment initiation
Open Finance Scope
All open banking data, plus:
Savings & investment accounts
Mortgages & loans
Pensions & retirement accounts
Insurance policies
The EU's upcoming FIDA (Financial Data Access) regulation will extend open banking to open finance by 2027, covering mortgages, savings, investments, and insurance. Brazil already operates the world's largest open finance ecosystem, and Australia's CDR is designed as an economy-wide framework that can expand beyond banking.
Open Banking Regulation Timeline
2018
PSD2 Goes Live
EU's Payment Services Directive 2 requires banks to provide APIs for account access. UK Open Banking launches alongside with standardized OBIE APIs.
2020
Global Expansion
Australia's Consumer Data Right (CDR) launches. Brazil begins Open Finance implementation. Singapore SGFinDex provides government-integrated financial data.
2024
US Section 1033
CFPB finalizes Personal Financial Data Rights rule, establishing Open Banking in the United States. FDX becomes the dominant technical standard.
2026
PSD3 & Beyond
EU's next generation Payment Services Directive expected. FIDA extends Open Finance to mortgages, pensions, and insurance by 2027.
How Open Banking Regulations Impact Financial Innovation
Open banking regulations have fundamentally transformed the financial services industry by enabling secure data sharing between banks and third-party providers. This has created new opportunities for innovation while challenging established business models.
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Encouraging Competition
By requiring banks to share data, regulations allow smaller fintechs to compete with established players. New entrants can build innovative products without having to become banks themselves.
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Facilitating Collaboration
Open banking enables partnerships between banks and fintechs. Banks provide the infrastructure and trust, while fintechs bring agility and user experience innovation.
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Improving Consumer Experience
Access to financial data enables personalized services—budgeting apps that analyze spending, lending platforms that provide instant decisions, and account switching that takes minutes instead of weeks.
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Driving Technology Advances
The need for secure data sharing has accelerated development of API standards, authentication protocols (FAPI), and security frameworks that benefit the broader technology ecosystem.
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