When did open banking start?

Modern open banking is only a few years old, although its roots go back to the early 1980s.

Open banking works on the premise that the sharing of customer data can benefit financial institutions and customers alike. The sharing of account information with third-party suppliers creates the opportunity for offering new customer-friendly services that a customer’s home bank might not be able to provide. Modern open banking is only a few years old, although its roots go back to the early 1980s.

The European Union and United Kingdom (UK) have pioneered the implementation of open banking concepts, although many other countries also are adopting them. The European Parliament adopted the Payment Services Directive (PSD2) in 2015 to promote the development of digital payment systems through open banking. Support for PSD2 wasn’t unanimous. Opponents claimed that open banking would benefit only tech-savvy customers. They also pointed out the potential for the misuse of personal data. Open banking has been slow to be adopted in the US because of financial regulators’ desire to safeguard customer confidentiality. 

The Competition and Markets Authority (CMA) in the UK issued a ruling in 2016 that required the nine largest banks in the country to allow direct access to their data at the transaction level by licensed businesses. This ruling went into effect on January 13, 2018. The Financial Conduct Authority (FCA) is responsible for protecting consumers from unauthorized use of their account data. The FCA introduced rules for customer authentication that require banks to provide three types of authentication for online transactions greater than €30.

At least 202 FCA-regulated businesses were enrolled in open banking under the CMA by January 2020. Other countries had also launched their own open-banking initiatives by that time, either through legislative changes or industry collaboration. For example, the Australian Treasury launched its Consumer Data Rights (CDR) project in 2019, which was passed into law that year.


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