- The use of open APIs that enable third-party developers to build applications and services around the financial institution.
- Greater financial transparency options for account holders ranging from open data to private data.
- The use of open source technology to achieve the above.
Open banking, as a concept could be considered as a subspecies to the open innovation concept, a term promoted by Henry Chesbrough. It is linked to shifts in attitudes towards the issue of data ownership illustrated by regulations such as GDPR and concepts such as the open data movement. The banks turn into financial service platforms, technically implemented through a Banking as a Service-concept.
In October 2015, the European Parliament adopted a revised Payment Services Directive, known as PSD2. The new rules included aims to promote the development and use of innovative online and mobile payments through open banking.
Support for the concept is not unanimous. Mick McAteer of the UK's Financial Inclusion Centre, thinks that only the tech-savvy will benefit. He says that open banking is "a daft idea", which will lead to more financial exclusion for those on low incomes. He says it is naïve of regulators to expect consumers to own their data and be able to get better deals from banks, and points out the danger of consumers being exploited, either by businesses offering new types of expensive payday loans, or misuse of data and personal information that people have revealed in places such as social media.
In August 2016, the United Kingdom Competition and Markets Authority (CMA) issued a ruling that required the nine-biggest UK 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 down to the level of transaction-account transactions.
The direction came into force on January 13, 2018, and using standards and systems created by Open Banking Limited, a non-profit created especially for the task. However, enforcement rests with the Competition & Markets Authority. Protection for consumers is the responsibility of the Financial Conduct Authority (FCA) (for account information and payment initiation services, under the PSD2 directive) or the Information Commissioner's Office (for data).
The CMA direction only applies to the nine largest banks and works alongside the broader PSD2 rules that apply to all payment account providers.
As of January 2020, there are 202 FCA-regulated providers who are enrolled in Open Banking. Many of them provide financial apps that help manage finances and also consumer credit firms who use Open Banking to access account information for affordability checks and verification.
Adoption in the rest of the world
A number of other countries launched open banking initiatives based on the European and UK models. These were either through industry collaboration or through legislative changes. An open banking project was launched in Australia on the 1 July 2019 as part of the Consumer Data Rights project by the Australian Treasury department and Australian Competition and Consumer Commission. The CDR legislation was passed by the Australian parliament in August 2019. 
Open banking made banks open their application programming interfaces (APIs) to third-party FinTech companies, which comes with security risks. Customers using open banking apps will now be in an entirely new trust relationship. Hackers can target third-party apps and excessive access privileges could be given to employees. Malicious actors will get new opportunities to trick banking customers as well as third-party companies with phishing scams.
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