Open Banking was created as a result of the PSD2 regulation, which aimed to encourage innovation and increase competition in the financial services sector. According to PSD2, banks must provide dedicated APIs for securely sharing customers’ financial data for aggregation and payment.
Standards and regulations are implemented by authorities for standardizing and assessing open banking compliance. The government provided open banking guidelines and norms that enabled all of this to happen.
What Is Open Banking?
Open banking primarily refers to the process of granting access to customer banking data to outside financial service providers. Data like transactions and payment history can be viewed and tracked by them. This is made possible technically through the use of APIs.
Based on that data, businesses can provide consumers with a range of advice through applications and services. Many clients find it necessary to have access to information on creating and maintaining a budget, receiving spending and income notifications, pricing comparison information, lending choices, and even real-time stock updates.
Open Banking Regulations
For banks and API users to deliver the advantages of open banking, open banking regulations offer a policy and legal framework. The Payment Service Directive in Europe is the earliest known open banking law. Payment services and payment service providers are governed by the European Commission’s Directorate General for the Internal Market throughout the European Union and the European Economic Area (EEA). PSD2 was implemented in 2015 after PSD1 in 2007.
In the UK, the Open Banking Implementation Entity was established by the Competition and Market Authority. In 2017, the Open Banking Implementation Entity released the first iteration of the open banking standard and adopted the PSD2. It outlined the procedures that banks must follow when allowing an API consumer to seek payments from them and access their personal data with their permission.
Open Banking Standards
‘Open banking standards’ describe the laws and technology that enable outside providers to access consumer banking information. A variety of uses can be found for this data, services such as banking, mobile apps, and online banking are provided and maintained.
There are specifications to explain the implementation of standards for the open banking needs, in addition to regulations enacted in various regions. The list of open banking specifications that have already surfaced is as follows:
- The UK’s Open Banking Implementation Entity released the Open Banking Standard.
- The Berlin Group’s framework for implementing NextGenPSD2 and XS2A in Europe
- The Australian Consumer Data Standards
- Mexico’s Open Data ATM API specification
- Playbook API for Singapore
- Nigerian Open API Standards
- India’s unified payments interface
- The Brazilian Joint Resolution
- Bahrain’s Open Banking Framework
- Georgia’s Open Banking Standard
- The Saudi Arabian Open Banking Policy
In Conclusion
These standards and regulations were created and are updated virtually year to assist civilize the market and safeguard the interests of crucial customers. Fin tech players can work together to compete on moral grounds. In all, these laws serve a positive purpose as proactive regulators that are not oppressive, and all of us benefit from them.
