Will ‘open banking’ sizzle or fizzle in the U.S.?

In the U.S., open banking may not yet be law like it is in the U.K., but its impact will continue to ripple across the pond. Here's how experts say the concept will affect banking providers worldwide, including American institutions.

Open banking allows third-party developers to build applications and services that plug into the technology backbone of a traditional financial institution. Using open-source technology and APIs, third-parties can build new financial tools leveraging private customer data that was previously inaccessible. This is why — in theory, at least — open banking promises to accelerate innovation, thereby giving consumers more options and greater convenience.

In the U.K., open banking has been law. In August 2016, regulators there issued a ruling requiring the nine biggest banks — HSBC, Barclays, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske Bank, Lloyds and Nationwide — to allow licensed startups direct access to their data, including account transactions. Europe followed in January 2018 with the PSD2 rules requiring European banks to share customer transaction data with third parties that request it (with customer consent).

In the U.S. and elsewhere, open banking freaks out most executives working in the financial industry. The prospect of opening up all the information they have about their customers is a scary proposition. But like it or not, open banking is a reality, and it’s here to stay.


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