// GLOSSARY -- PAYMENTS & FINTECH

What is Open Banking?

1 min read Updated

Open banking is a regulatory and technology framework that requires banks to share customer financial data with authorized third parties through APIs — enabling competition, innovation, and better financial products.

WHY IT MATTERS

Open banking mandates (PSD2 in Europe, similar initiatives globally) require banks to provide API access to customer account data and payment initiation. This breaks banks' data monopoly and enables fintech innovation.

The parallel to crypto is notable: both aim to reduce financial intermediary power. Open banking does it through regulation and APIs; crypto does it through decentralization and smart contracts. They're converging as crypto services integrate with banking APIs.

Account-to-account payments through open banking rails are growing as an alternative to card networks, offering lower fees and faster settlement — similar benefits to what crypto payments provide.

FREQUENTLY ASKED QUESTIONS

How does open banking relate to crypto?
Both reduce financial intermediary power. Open banking provides API access to traditional finance. Crypto provides permissionless finance. Fiat on-ramps increasingly use open banking APIs for cheaper deposits.
What is PSD2?
Europe's Payment Services Directive 2 — the regulation that mandates open banking in the EU. It requires banks to provide APIs for account information and payment initiation to licensed third parties.
Is open banking secure?
It uses OAuth-based authentication and requires explicit user consent. Authorized third parties must be licensed. The API approach is more secure than screen-scraping methods it replaced.

FURTHER READING

Enforce policies on every tool call

Intercept is the open-source MCP proxy that enforces YAML policies on AI agent tool calls. No code changes needed.

npx -y @policylayer/intercept
github.com/policylayer/intercept →
// GET IN TOUCH

Have a question or want to learn more? Send us a message.

Message sent.

We'll get back to you soon.