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What Is Open Banking


Open banking is an innovative fintech initiative brought in by the UK Competition and Markets Authority in 2017 to allow licensed startups direct access to the data in the certain major UK banks. The UK is the pioneer in this technology with around 30 other jurisdictions now following.   

The objective is to unlock competition in retail banking for the benefits of customers and small businesses. They can share bank and credit card transaction data securely with trusted third parties. The technology also facilitates the development of innovative payment services potentially competitive with card payments or direct debits.  With this service powered by Opening Bank technology, millions of consumers benefit from saving time and money in almost real time payment transactions.   

The 9 largest retail banks in Britain and Northern Ireland are required to implement Opening Banking, while other banks are free to take part.  The Open Banking Implementation Entity (OBIE) was set out to implement the initiative. 

Is bank customer’s consent required to use Open Banking?

Yes. The initiative is a consent driven one, and customer’s express consent is required. Customers may specify the period of time in giving their consent on data access, for instance, consent to 6 months or 12 months etc of data to be shared. Its implementation is also heavily regulated with continued efforts to improve the governance of OBIE. 

Open Banking and GDPR

Would personal data protection be compromised in Open Banking? As Open Banking enables third parties to have access to data, there may be increased opportunity for things to go wrong if they are not GDPR compatible.      

Data security is key to digitalization of financial services. Extra caution is expected when it comes to private information on personal finances. The GDPR regime in the UK contains stringent privacy requirements for the collection, processing and retention of personal information and data subjects have substantial individual rights, including right to withdraw consent.  There will be a mandatory notification requirement by all stakeholders to inform customers about the collection, use and disclosure of their personal information. 

Future of Open Banking

The Competition & Markets Authority anticipates that by end of 2023, 60% of the UK population will be using the future ecommerce payments offered by Open Banking, gradually converting from or replacing the card network infrastructure.  

From law firm’s perspective, Open Banking may become a useful tool for customer due diligence (CDD) checks, especially for firms which have subscribed software services for anti-money laundering checks. With the evolvement of fintech and the increasingly popular transactions in digital assets, checking client’s source of funds could present bigger challenges. The access to Opening Banking data facilitates effective source of funds or source of wealth checks, saving clients time and efforts in the CDD process.   

Should you require any additional information in relation to Finance matters then please get in touch at [email protected] or call us on 0330 127 8888 and our team will be more than happy to help.


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