What is Open Banking?

Open Banking represents an unstoppable shift in the way repeat and one-off payments are made. But what is it and how does it work?

About Open Banking

Open Banking is the concept that banking data is much more useful if it is accessible to third parties - under a high level of security and with the explicit permission of the account holders.

How does it relate to payments?

When you pay for something online, there are a number of third parties involved in the transaction. For card payments, there is the credit card network, payment processor, risk solution, and so on. If you use a wallet or Buy Now, Pay Later (BNPL) solution, you add even more complexity. As the payments value chain has become more and more complex over decades, paying online is expensive due to all the third parties involved, and risky due to the chance of fraud.

Open Banking is poised to remove all this complexity, and make online payments safer, faster, and cheaper. In terms of payments, this means that bank account holders should be able to make payments directly from their bank account to another, with only an Open Banking provider - such as Link Money - to facilitate the transaction. The simplicity of this process translates into lower costs, greater security and more convenience.

Open Banking around the world

Open Banking is a truly global initiative. In the E.U., it came to prominence in 2013 as part of the European Commission's revised PSD2 proposal, in which it recommended that banks allow third parties to access account data and initiate payments, paving the way for open banking. Open banking initiatives are also taking place in Australia, Canada, India, Hong Kong, and Mexico, among others.

While Europe has taken a regulatory approach to Open Banking, with laws mandating that banks enable it, the U.S. is taking an industry-led approach.

Link Money's approach

Link Money is an early Open Banking innovator in the U.S., particularly in the payments space. Our solution is a simple, secure way to drive transactions and increase savings that will directly impact a company's bottom line.

Link Money's mission is to utilize open banking principles to be at the forefront of the financial data revolution. We hope to empower consumers and businesses to maintain control over how their information is being used, while also allowing them to unlock additional economic benefits.