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How safe is Open Banking?

Written byKoyo Loans
First published17th October 2022
  • Introduction
  • How safe is Open Banking?
  • How will Open Banking affect banks?
  • Does Open Banking include credit cards?
  • What is PSD2 Open Banking?
  • What is ASPSP in Open Banking?
  • Conclusion

In 30 seconds…

Open Banking is a safe and secure way of managing your financial data and accessing a broader range of products and services. Facilitated by APIs and regulated by the FCA, Open Banking is as guarded as the internet banking service offered by your bank or building society. Also known as ASPSPs, the biggest banks in the UK are now required to offer Open Banking to all customers, which encompasses a range of services and products, including credit cards. Ultimately, opting in to Online Banking can transform the way that you access financial products and services.


In the past few years, Open Banking has revolutionised the financial services industry. While it’s still a relatively new concept, we’ve already seen some big changes in relation to how financial data is managed and shared. Below, we explain some key terms and answer some important questions that will help to improve your understanding of Open Banking in the UK.

How safe is Open Banking?

Open Banking is very safe. All providers that sign up for Open Banking software are required to comply with strict UK Data Protection regulations and can only share and access your data in certain ways, provided you opt-in in the first place.

What’s more, Open Banking API endpoints have been built by financial institutions and have been tested extensively before being implemented. This means that the way your data is shared and transferred is extremely secure. Open Banking is essentially as safe as online banking, so you don’t need to worry too much about the security of your financial data when you opt in.

All third parties that are registered to use Open Banking are listed on the FCA’s Open Banking Directory, and all companies must undergo a stringent assessment to be approved. Businesses are also regularly audited and analysed by the FCA, ensuring that they adhere to the strict standards that Open Banking necessitates.

How will Open Banking affect banks?

Open Banking has been introduced to improve the financial industry for all stakeholders. Banks are legally required to facilitate access to customer account information through APIs.

Ultimately, the primary impact that Open Banking will have on banks is surrounding the custody and protection of their client’s data. By its very design, Open Banking requires banks to share this information with third parties, which is something that they have understandably baulked at in the past. The sharing of this information will lead to an improvement in the financial products and services offered to their clients.

It’s also thought that by increasing transparency and inviting third parties to be more involved in the provision of financial products and services, Open Banking will increase the development of profitable services in the future for banks, even if it does result in the sacrifice of some degree of control at the same time.

Does Open Banking include credit cards?

When you opt-in for Open Banking, you will be able to share your data for any type of payment account that you hold. This includes current accounts, credit cards, and a range of other prepaid accounts.

Open Banking presents creditors and lenders with an opportunity to gain an insight into a potential borrower’s creditworthiness without having to rely solely on their credit score. This is because credit card companies can look at an individual’s finances overall to get a much clearer picture of how suitable they are for the proposed line of credit.

Although the number of credit card providers offering Open Banking in the UK is currently limited, we’re likely to see an increase in the near future. Overall, Open Banking is likely to have a positive impact on the credit card market and will help people who may not have been eligible previously access the credit that they require.

What is PSD2 Open Banking?

PSD2 stands for Payment Services Directive 2 and is a piece of EU legislation that is designed to facilitate the rollout of Open Banking and other initiatives across the European common market.

The overarching goal of PSD2 is to make Open Banking more secure by enforcing better standards of security through multi-factor authentication and requiring financial institutions to supply their customers’ data to trusted third-party applications. PSD2 was announced in Europe in 2016, and Open Banking in the UK followed two years later.

PSD2 influences all stakeholders within the financial service industry, including banks, payment providers, credit agencies, and individual customers. The hope is that PSD2 will create a much more competitive financial services industry and provide customers with more control over how their data is managed and accessed by third parties.

What is ASPSP in Open Banking?

ASPSP stands for Account Servicing Payment Service Provider. In most instances, ASPSPs are banks and other financial institutions, and it’s their job to maintain payment accounts for customers.

Within Open Banking, ASPSPs are responsible for publishing APIs and ensuring that their customers’ data can be safely and securely shared with trusted third parties. Since the passing of PSD2 in 2016, all ASPSPs in Europe must participate in Open Banking and support third parties to access their customers’ data.

One of the most difficult things with Open Banking is that there is a lot of jargon and so many terms to get your head around, which can make it confusing for customers. Be sure to check out our simple and easy-to-understand guide to Open Banking, which clears things up and helps you understand what you can expect if you opt in.


Open Banking is relatively easy to understand, but there are lots of terms that you need to get your head around before opting in. We hope this article has helped by explaining some of the key terms associated with Open Banking and will help you make your decision about whether or not to utilise it in the near future.

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Key Takeaways

So, is Open Banking safe? It’s a vital question to ask, given that you share your financial data with third parties. But thanks to API endpoints, strict GDPR, and the fact that all third parties are regulated by the FCA, you can rest assured that Open Banking is completely secure.

Open Banking is also transforming the way that ASPSPs – banks, building societies, and other financial institutions – are required to share and manage data, which can only be a good thing for the transparency of the financial services industry. Since the passing of PSD2 legislation in Europe, Open Banking is enforcing higher standards throughout the sector and putting customers in total control of how their data is managed and shared.

The fact that Open Banking encompasses a broad spectrum of financial products and services is great for all stakeholders. Affecting credit cards, loan applications, and various other payment services, Open Banking has positively influenced the way that financial institutions access and manage your financial data and is undoubtedly a positive initiative and a step in the right direction toward better transparency.

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