Open Banking

How does Open Banking work?

How does Open Banking work?
Photo by Vinicius Wiesehofer

Open Banking is a secure way to give Third Party Providers access to your financial information.

You will need to provide your consent to use a third-party service that uses Open Banking. This process is relatively straight forward.

Mobile Banking Consent

To provide Mobile Banking consent you will:

  1. select your bank.
  2. then be redirected to your Mobile Banking application.
  3. login using your usual authentication method – E.g. FaceId or PIN.
  4. authorise consent for the action.
  5. then be redirected back to the third-party website of mobile application.

Online Banking Consent

To provide Online Banking consent you will:

  1. select your bank.
  2. then be redirected to your Online Banking website.
  3. login using your usual login details and any 2FA credentials.
  4. authorise consent for the action.
  5. then be redirected back to the third-party website of mobile application.

You will likely need your card reader to approve payment requests using Online Banking.

Removing Consent

Under current Open Banking rules:

  1. You will need to renew consent at least every 90 days.
  2. You should be able to easily revoke access using the third-party.

Note: You must NEVER enter your credentials into a website or mobile app that is not provided by your bank.

Next: See HSBC Consent Example

Open Banking

When did Open Banking start?

When did Open Banking start?
Photo by Anastasiia Tarasova

Open Banking and PSD2

Open Banking as a legal requirement came into force on 13 January 2018. But Open Banking started as a result EU Payment Service Directive 2.

On 8 October 2015, the European Parliament adopted the European Commission proposal to create safer and more innovative European payments (PSD2, Directive (EU) 2015/2366)

EU Directives must be transposed into national law within 18 months. As a result, the UK transposed PSD2 into UK law under the Payment Service Regulations 2017.

Strong Customer Authentication

At the time the EU could not agree all parts of PSD2. Only in 2017 did the EU agree the Regulatory Technical Standards.

More info

Payment Service Regulations 2017:

Open Banking

Can I use Open Banking APIs?

Can I use Open Banking APIs?
Photo by: averie woodard 

Despite it’s name, Open Banking is not directly, instantly available to everyone. Adding protection to consumers was one of the driving factors for its inception. It does however provide a framework for innovation and for individuals and small businesses to take advantage of APIs.

To use Open Banking APIs you either need to be a regulated Third Party Provider or use the services of an already authorised Third Party Provider.

For more information see How does my company become a AISP or PISP?

Open Banking

5 Benefits to your Small Business from using Open Banking

Open Banking for Small Businesses
Photo by: Гоар Авдалян

Small Businesses and Open Banking

3 Million customers in the UK have used Open Banking. Despite this many small business owners have not heard of Open Banking.

Why is this? Well it’s mostly because banks don’t want you to know about the benefits!

What is Open Banking?

Open Banking is a secure way to give Third Party Providers (TPPs) access to your financial information.

Open Banking was created to protect customers and spur innovation in Banking and Financial services. Open Banking provides a number of benefits to small businesses.

Benefit 1: Accounting Imports

If you use Xero or other similar accounting packages you may already be using Open Banking in your small business.

Open Banking is what powers and secures these financial management tools access to your banking transactions.

There are also a number of innovative Financial Management tools being developed on top of Open Banking. These are known as Account Information Service Providers (AISPs).

Benefit 2: Payment Matching

Authorised Payments Institutions can initiate payments from your customers (with their approval) to your account. The payments are made directly by bank transfer from your customers account straight to your account.

These payments can be initiated with a reference chosen by you, on the date you chose, with the amount you choose.

This vastly improves your matching and reconciliation process, reducing time and effort on your bookkeeping.

In the UK These bank payments usually clear in around 10 seconds so can be suitable for POS style checkouts.

Benefit 3: No Chargebacks

If you are a business taking credit and debit cards there are some huge improvements available for your business in moving away from card payments to direct bank payments.

Chargebacks are payment reversals triggered by Customers who wish to reverse a Card based payment. Sometimes known as Section 75 these leave the Merchant spending hours arguing and proving they deserve the customers original payment.

With Bank Payments there are no chargebacks.

Benefit 4: Reduced Costs

As well as savings on costs incurred from fraud and chargebacks, small businesses can save by reducing their merchant services fees, as there is no need for Card Readers and POS Terminals.

Savings can also be made on individual payment fees too. With Open Banking there are often reduced merchant fees due to the reduced Fraud and absence of acquirer, MasterCard and Visa fees.

Open Banking can support very large payments too often at reduced fees when compared to Card based payments.

Benefit 5: Improved customer experience

Since its launch in 2018 the vast majority of Banks now offer a very slick Mobile Banking approval process.

While online banking payments often need a card reader and your personal login details, Mobile banking initiated payments use biometrics including face ID an thumb prints to secure and simply approve access and payments.

Unlike Paypal, which has recently had to introduce SMS text messages to approve card payments, Open Banking payments can be approved using your Mobile Banking app. This is because your Mobile Banking app has built in 2 factor Authentication using device identifiers and Face Id, thumbprint or pin.


In summary Open Banking makes for a slick, efficient payment experience that can save you time and money accounting for your payments, leaving you more time to spend with your customers.

Robin Morris @

Paydog Ltd is fully Authorised Payments Institution FCA no 934908 offers immediate and recurring payment links and QR codes to SMEs powered by Open Banking.