Open Banking—one minute guide
Open Banking—one minute guide

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • Open Banking—one minute guide
  • What is the background to the Open Banking concept?
  • What is meant by the term ‘Open Banking’?
  • What are the PSD2 provisions relating to open banking?
  • The CMA’s Open Banking remedy?
  • What are the main differences between PSD2 and CMA Open Banking remedy?
  • What has been the FCA response to the open banking initiatives?

What is the background to the Open Banking concept?

Despite great technological advances in the retail banking sector over the last few decades, from telephone and online banking, it is arguable that the traditional retail banking business model has remained broadly unchanged.

While an increasing number of customers have migrated from branch banking to new channels, retail banking is still a simple model of deposit taking and money lending. The ‘closed’ retail banking system has also consistently retained ownership of customers and, crucially, their data.

However, recent legal and regulatory developments have given rise to the concept of ‘Open Banking’. These developments, which were launched in the UK simultaneously on 13 January 2018, are:

  1. the implementation of the recast European Payment Services Directive (Directive 2015/2366/EU) (PSD2)—PSD2 replaced the original Payment Services Directive. PSD2’s scope is broader than the PSD and covers two types of third-party providers (TTPs), namely payment initiation service providers (PISPs) and account information service providers (AISPs)

  2. the Competition and Market Authority’s (CMA) ‘Open Banking remedy’—in August 2016, the CMA published its final report on the UK’s retail banking market which found that large established banks do not have to compete hard enough for customers’ business, and smaller and newer banks found it difficult to grow and access the market. The CMA proposed several remedies, including ‘Open Banking’ and