How Open Banking Is Forging the Future of Finance

Open banking is on the rise in Europe. A quick search on Google Trends demonstrates just how rapidly interest in the term has skyrocketed over the past five years. However, we are currently only witnessing the beginning of a phenomenon that will revolutionise financial services. Exactly who will benefit the most from open banking is widely speculated; my money is on the tech giants — here’s why.

When I founded Salt Edge in 2013, the company’s two products, an aggregation platform and personal financial management tool, aggregated customer data via screen scraping. Open banking didn’t exist yet; it would be another five years before the revised Payment Services Directive (PSD2) came into effect. Up until then, Salt Edge had neither access to banks’ APIs nor any idea of just how much open banking would change its business model — let alone the face of finance — over the next decade.

The impact of PSD2 on financial services

By mandating financial institutions share data with third-party providers (TTPs), PSD2 aimed to increase competition and innovation in the financial services sector, which has traditionally been dominated by retail banks. Initially, it seemed that TTPs had the most to gain from the new regulation, since banks were forbidden from monetising their APIs and had relinquished exclusive control over valuable consumer data. Two types of TTPs subsequently emerged: account information and payment initiation service providers (AISPs and PISPs), and the…