Back to Basics: What Is Open Banking and How Is It Enforced Globally?

Open banking is transforming financial services by giving consumers more control over their financial data while fostering innovation and competition. But how does it work, and how do regulations differ across regions? This guide breaks down the fundamentals of open banking and how it’s enforced around the world.

What Is Open Banking?

At its core, open banking allows consumers and businesses to securely share their financial data with third-party providers (TPPs) through application programming interfaces (APIs). This enables a range of new financial products and services, such as:

• Aggregated financial dashboards that provide a single view of multiple bank accounts.
• Personalised lending and credit services based on real-time financial data.
• Seamless payment experiences, removing the need for traditional card networks.

Open banking shifts the power dynamic in financial services—moving control of data from banks to consumers—while ensuring security through strong regulatory frameworks.

How Open Banking Is Enforced Around the World

Different countries have taken unique approaches to enforcing open banking, often driven by regulatory mandates or market-led initiatives.

United Kingdom: The Global Pioneer

The UK was the first to introduce a regulated open banking framework through the Second Payment Services Directive (PSD2) and the UK Open Banking Standard.

• Mandated by the Competition and Markets Authority (CMA), it requires the nine largest banks to provide API access to licensed TPPs.
• Open Banking Ltd, the designated implementation entity, ensures compliance and API standardisation.
• The framework has driven competition, with over 7 million UK consumers and businesses using open banking-powered services.

European Union: A Broader Regulatory Approach

The Revised Payment Services Directive (PSD2) sets the foundation for open banking across the EU, with some flexibility in implementation among member states.

• Banks must provide access to account data and payment initiation services via APIs to regulated TPPs.
• The European Banking Authority (EBA) provides technical standards, but individual countries enforce compliance.
• While PSD2 paved the way, many in the EU are looking ahead to PSD3, which aims to enhance API functionality and security.

United States: A Market-Driven Model

Unlike the UK and EU, the US has no federal mandate for open banking, relying instead on market-driven adoption.

• The Consumer Financial Protection Bureau (CFPB) is shaping a regulatory framework through Section 1033 of the Dodd-Frank Act, requiring financial institutions to provide consumers access to their data.
• The Financial Data Exchange (FDX), an industry-led initiative, has set voluntary API standards, with more than 60 million consumer accounts using open finance APIs.
• The US model is evolving towards open finance, extending beyond banking to investments, insurance, and loans.

Australia: The Consumer Data Right (CDR)

Australia’s Consumer Data Right (CDR) goes beyond open banking, creating a framework for cross-industry data sharing.

• Open banking launched in July 2020, requiring major banks to share data with accredited data recipients (ADRs).
• The framework now includes energy and telecommunications, expanding into a broader open data economy.
• The Australian Competition and Consumer Commission (ACCC) and the Office of the Australian Information Commissioner (OAIC) oversee enforcement and compliance.

Other Notable Markets

• Brazil: A structured rollout of open banking and open finance, mandated by the Central Bank of Brazil, following a phased approach similar to the UK.
• India: The Account Aggregator framework allows consumers to share financial data across banks and fintechs through consent-driven mechanisms.
• Canada: Developing a government-led open banking framework, expected to launch in 2025, balancing regulatory enforcement with industry innovation.

Why Open Banking Matters

Open banking is more than just a regulatory requirement—it’s reshaping financial services by enhancing competition, driving innovation, and giving consumers greater control over their financial lives. Whether driven by government mandates or market forces, the global shift towards open data is unlocking new opportunities for banks, fintechs, and consumers alike.

Looking to navigate the complexities of open banking? Fiskil helps banks and fintechs harness the power of open data with secure, compliant APIs. Let’s talk.