Open banking has revolutionized the financial industry in recent years by enabling the secure sharing of customer financial data between banks, non-bank financial institutions, and third-party financial services providers. The value of open banking transactions worldwide reached 57 billion U.S. dollars in 2023, and it is
in the following years. The number of open banking Application Programming Interface (API) calls, which serve as the technological bridge that enables secure data sharing, is also expected to go through a significant surge in the upcoming years. Estimates are that the number of these calls will
, signaling the rapid expansion of open banking services and their integration into various financial ecosystems. Open banking gained particularly significant traction in Europe, with the
. Third party providers (TPPs) are authorized entities that can operate across borders within the European Economic Area (EEA) under the passporting scheme.
Open banking in the United Kingdom
The concept of open banking originated in the United Kingdom (UK), aiming to bring transparency in the banking industry. The country emerged as a front-runner in the open banking revolution, paving the way for its widespread adoption, which can be seen in the
increasing number of users and TPPs. Over the past few years, the number of open banking regulated providers in the UK witnessed a remarkable growth. In the second quarter of 2023, the UK had by far
the highest number of TPPs in Europe, with a total of 217 registrations, demonstrating the significant expansion of the market and the increasing availability of open banking services to consumers. The UK’s open banking success is also evident from the
escalating number of API calls and payments facilitated through this framework. The market experienced a tremendous rise in API calls in 2022 and 2023, with over one billion successful calls recorded almost every month. This staggering figure reflects the widespread utilization of open banking infrastructure and the seamless integration of financial services across various platforms.
Open banking vs Banking-as-a-Service: The use of APIs in the United States
The use of APIs from a financial service point of view is often labelled as open banking. There is, however, another use case with APIs, which gets overlooked in the UK but calls attention in the U.S.: Banking-as-a-Service (BaaS). Although open banking and BaaS both involve the use of APIs, they have distinct focuses and objectives. Open banking primarily centers around enabling secure data sharing and granting third-party access to customer accounts,
aiming to enhance customer experience, launch new digital services, and increase revenue. On the other hand, BaaS focuses on leveraging APIs to provide a platform for banks to
offer their products or services to third-party companies. This enables third-party entities, such as fintech startups or non-financial organizations, to embed banking functionalities into their own applications and
provide tailored financial solutions to their customers.
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