The Trusted Advisor Analogy
Open banking is like giving a trusted financial advisor a carefully controlled set of keys to your house. Not the master key—just access to specific rooms, at specific times, with a detailed log of every entry.
Powerful? Absolutely. Revolutionary for customer experience? Without question. But it demands guardrails that many organizations are still learning to implement.
What Open Banking Actually Means
Open banking enables financial institutions to share customer data with licensed third-party developers through secure APIs—but only with explicit customer consent.
The best definition I've encountered: "Permissioned access to account data and services through APIs."
Notice the keywords:
- Permissioned – Customer must consent
- Access – Read and sometimes write capabilities
- Account data – Not just balances, but transaction history, patterns, insights
- APIs – Standardized, secure, programmable interfaces
The Regulatory Landscape
The European Union's PSD2 (Revised Payment Services Directive) from 2015 established the framework:
- Account Information Service Providers (AISPs) can access account information to offer consolidated financial views
- Payment Initiation Service Providers (PISPs) can initiate payments directly from user accounts
- Strong Customer Authentication (SCA) requirements ensure secure access
PSD3, anticipated to be finalized by 2024-2025 and implemented by 2026-2027, will strengthen these protections further.
The Security Risks
Open banking expands the attack surface significantly:
API Vulnerabilities
- Broken authentication and authorization
- Injection attacks through API parameters
- Mass assignment vulnerabilities
Third-Party Risks
- Compromised TPP credentials
- Data handling by fintechs with varying security maturity
- Supply chain attacks through API integrations
Security Requirements Breakdown
Strong Authentication
Every open banking implementation must enforce multi-factor authentication, dynamic linking for payments, and proper session management.
Secure Applications
SAST and DAST testing throughout development, penetration testing of API endpoints, and secure coding practices.
Data Protection
Encryption in transit and at rest, data minimization, purpose limitation, and retention limits.
The Trust Equation
Open banking succeeds only when all parties trust the ecosystem:
- Customers trust that their data is protected
- Banks trust that TPPs are legitimate and secure
- TPPs trust that bank APIs are reliable and accurate
- Regulators trust that controls are effectively implemented
Security isn't just a requirement—it's the foundation that makes open banking possible.