What is open banking?

Updated:Apr 9, 2026

6 min read

Open banking is a secure way to share your bank account information with other financial companies. You give permission for a provider to access your data and can remove access whenever you want. Introduced in the UK in 2018, it is now used by more than 13 million people, according to Open Banking Limited.

How does open banking work?

The process is designed so your bank login details never leave your bank. Here's how it works step by step.

You choose a service that uses open banking, such as a budgeting app or a lender.
The service redirects you to your bank's own app or website.
You log in to your bank as normal, using Face ID, a fingerprint, or a PIN.
You see what data the service is requesting and the time period it covers, and confirm your consent before anything is shared.
Your bank sends only the approved data to the third party via a secure, encrypted API connection.
You can withdraw your consent at any time through your bank app or online banking settings.

What can I use open banking for?

Open banking powers a growing range of financial products and services. Here are the main ones.

See all your bank accounts in one place

If you hold accounts with more than one bank or building society, open banking lets you view them all in a single app. Rather than logging into several different apps separately, you can see your total financial picture in one place.

Pay directly from your bank account

Open banking enables direct bank payments, often labelled 'Pay by Bank' at online checkouts. Instead of entering card details, you confirm a transfer from your bank directly. These payments settle faster than traditional card transactions and no card details are stored by the merchant.

One trade-off worth knowing: paying this way means you lose the purchase protections that come with paying by credit card. If something goes wrong with a purchase and you cannot resolve it with the retailer, credit card protection gives you an additional route to a refund. Open banking payments do not offer the same safety net.

Open banking payments reached 351 million transactions in 2025, a 57% increase year-on-year, according to Open Banking Limited.

Get a fuller credit decision

Traditional credit scoring relies on your credit file. If you have a limited credit history, have missed payments in the past, or work for yourself, your file may not accurately reflect where you are financially right now.

Open banking lets lenders look at your real transaction history alongside your credit file. With your permission, a lender can see whether income is coming in regularly, what your main outgoings are, and what your spending patterns looking like day to day. That gives a more complete picture than a credit score alone.

A 2022 study by PwC and TotallyMoney found that at least 1 in 3 UK adults may struggle to access credit from mainstream lenders. Open banking gives lenders a way to look beyond a credit file to assess someone's real financial situation.

You can find out more on our pages on credit cards for bad credit and loans for bad credit.

Set up flexible automatic payments

Variable Recurring Payments (VRPs) are a newer payment type enabled by open banking. They work similarly to a direct debit but with more flexibility: a provider can collect different amounts each time, up to a limit you set, and payments settle instantly. VRPs are increasingly being used for utility bills, subscriptions, and automatically sweeping spare cash into a savings account.

Is open banking safe?

Yes. Open banking uses bank-level security and is regulated in the UK by the Financial Conduct Authority. Here is what protects you.

You never share your bank password. The data exchange happens directly between your bank and the third party via a secure API. You only ever enter your login details on your bank's own website or app.

Third parties must be FCA-authorised. Only companies regulated by the Financial Conduct Authority and listed in the Open Banking Directory can access open banking data. You can check whether a provider is authorised on the FCA register before sharing anything. If a company is not listed, do not connect your account to them.

You can revoke access at any time. Once you withdraw consent, the provider can no longer access your account. You manage this through your bank, not through the provider itself.

Your standard fraud protections remain in place. If an unauthorised payment leaves your account, your bank's standard fraud reimbursement rules apply.

There are 145 regulated third-party providers operating in the UK open banking ecosystem, all authorised by the FCA.

How did open banking start in the UK?

Open banking came out of a Competition and Markets Authority (CMA) investigation into the UK retail banking market. The CMA found that established banks faced too little competition, which was keeping prices high and reducing pressure to innovate.

As part of its remedy, the CMA required the nine largest UK current account providers (known as the CMA9) to give authorised third parties access to customer data by January 2018. The CMA9 are: Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, NatWest Group (formerly RBS Group), and Santander.

The Open Banking Implementation Entity (OBIE) was set up to develop the technical standards. It later became Open Banking Limited (OBL), which continues to oversee the framework.

The UK government is now working toward Open Finance, an extension of the same principles to cover savings, pensions, mortgages, and insurance. No implementation date has been confirmed yet, but the direction is clear: the ability to securely share and act on your financial data is expected to cover more of your financial life over time.

FAQs

What does 'open banking referencing' mean?

When a lender or provider says it is referencing your open banking data, it means it's accessing the financial information you have specifically given it permission to see. This typically includes your recent transaction history, your account balance, and your regular income and outgoings. It does not include accounts you have not shared, or any data beyond what you approved.

Can open banking help me get credit?

It can, particularly if your credit file does not tell the full story. Lenders who use open banking can see how you are actually managing your money, rather than relying solely on past credit events. This is especially relevant if you have adverse credit history, are self-employed, are new to the UK, or have a limited credit history.

If you are working on building your credit profile more broadly, our guide on how to improve your credit score covers what affects your score and what you can do about it.

What is open finance?

Open finance is the next planned phase after open banking. It would extend data-sharing rules to a wider range of financial products, including savings accounts, pensions, and insurance. The aim is to give people the same ability to share and act on data across their whole financial life, not just their current accounts.

How do I stop a provider accessing my data?

Log in to your bank app or online banking and go to the section for connected apps or open banking permissions. From there you can see which providers have access and remove consent for any of them. You can also revoke access directly through the provider's own app or website. Once you withdraw consent, the provider should no longer be able to access your account data.

Does open banking cost anything?

No. Open banking is free for consumers. Some apps or services that use open banking may charge for their own product, but sharing your data via open banking does not cost you anything.

This blog is for informational purposes only and does not constitute financial advice. Please speak to a qualified financial adviser before making financial decisions.

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