Open banking lets you give an authorised company access to your bank account data, or permission to start a payment, without handing over your online banking password. In the UK it has moved from a regulatory remedy to a widely used piece of financial infrastructure.
Where it came from
The UK’s version began with the Competition and Markets Authority’s retail banking investigation, which concluded in 2016 that older, larger banks faced too little competition. The CMA’s 2017 order required the nine largest current account providers to open up customer data, with the customer’s consent, to third parties. The Payment Services Regulations 2017, which implemented the EU’s second Payment Services Directive, gave the framework a legal footing, and the system went live in January 2018.
Two roles are regulated by the Financial Conduct Authority (FCA):
- Account information service providers can read your account data, with your consent, to power budgeting apps, affordability checks or accounting tools.
- Payment initiation service providers can start a payment from your account at your instruction, often at the checkout in place of a card.
How big it has become
Open Banking Limited, which has run the standards, reported more than 16.5 million live user connections across the UK in January 2026, with about 351 million payments made through open banking during 2025, up 57% on the previous year. Variable recurring payments, which let you authorise a provider to make flexible payments within limits you set, are now being used for sweeping money between your own accounts and are being developed for wider uses.
Common examples include:
- Lenders verifying income and spending directly instead of asking for bank statements.
- Budgeting apps showing balances from several providers in one place.
- “Pay by bank” at retailers and for tax or utility payments.
- Business accounting software importing transactions automatically.
How the permission works
When you connect a service, you are sent to your own bank’s app or website to sign in and approve exactly what is shared and for how long. The third party never sees your banking password. Access is time-limited and consent has to be renewed periodically, so connections do not run forever by default.
How to check and withdraw
- Look in your banking app’s security or data-sharing settings for a list of connected services. Most major banks have a dashboard for this.
- Remove any service you no longer use. Cancelling an app does not always end the underlying consent, so check.
- Before connecting a new provider, confirm it is on the FCA Register as an authorised or registered firm. A reputable provider will name its regulator and explain what data it takes and why.
- Read what the provider will do with the data. Authorisation covers how data is accessed; what a firm does with it is also covered by data protection law and its own terms.
What open banking does and does not protect against
Payments made through open banking are covered by the Payment Services Regulations, so you have rights if something goes wrong with an unauthorised payment. Authorised push payment fraud, where you are tricked into sending money yourself, has its own reimbursement rules for payments over Faster Payments and CHAPS, covered in how modern UK bank transfers work.
Open banking does not make a bad financial product better. A budgeting app that sells your data or a lender that targets people in financial difficulty is a different problem from the connection itself. Also, the data is only as complete as the accounts connected, so it can paint a partial picture of someone’s finances.
Why it matters beyond apps
The wider effect is on competition. Switching costs fall when data moves easily, and smaller firms can build products that the larger banks had little incentive to offer. The same idea underlies how digital banking is changing customer behaviour, where convenience and comparison tools shape how people choose and use providers.
This is general information, not financial advice. Check the FCA Register before sharing your data with any provider.
Sources: Competition and Markets Authority, Retail banking market investigation final report (2016) and Order (2017); Payment Services Regulations 2017; Open Banking Limited impact reporting (January 2026); Financial Conduct Authority guidance on open banking.
