Open banking is a core part of the UK’s financial infrastructure, and it shapes how individuals share financial data and how businesses move money. Nearly one in three UK adults use open banking as of 2025. Companies rely on it to improve onboarding, run better risk checks, and create payment experiences that feel immediate and dependable. In this article, we’ll discuss what open banking is, what problems it’s meant to solve, and how to choose the best open banking provider for your business.

What’s in this article?

• What is open banking in the UK?
  
• What problems was open banking designed to solve?
  
• How do businesses benefit from open banking?
  
• What technical standards need to be met under open banking?
  
• What challenges do organizations face when adopting UK open banking solutions?
  
• What should companies consider when choosing an open banking provider?
  
• How Stripe Financial Connections can help
  

What is open banking in the UK?

Open banking in the UK is a regulated way for individuals and businesses to share their banking data or initiate payments through trusted third-party services. Customers can choose what’s shared, with whom, and for how long, and they can turn access off at any time.

What problems was open banking designed to solve?

Open banking was created to fix structural issues in the UK banking market that were limiting competition and keeping customers from benefiting from newer, smarter financial services. These issues included:

• Hard-to-access financial data: Before open banking, customers had no secure way to share their transaction histories with budgeting software, lenders, or other services. The work-around was often screen scraping, which required customers to hand over usernames and passwords—a risky and unreliable practice.

• Difficult product comparisons: Customers struggled to compare banking products based on their actual behavior (e.g., overdraft usage, monthly patterns). Without easy data portability, many people kept accounts that weren’t cost-effective.

• Slow, costly payment options: Many transactions still ran through card networks or legacy payment processes that added fees or delays. Open banking introduced a regulated way to initiate faster, lower-cost payments between accounts.

• Lack of customer control and transparency: People couldn’t see or manage how third parties used their financial information. Open banking flipped this dynamic by making consent explicit, time-limited, and revocable.

How do businesses benefit from open banking?

The real advantage of open banking comes from combining regulated data access with real-time payment capabilities. This creates opportunities to build more intuitive products.

Here are some of the benefits for businesses:

• Faster onboarding and account verification: Open banking lets companies confirm account ownership instantly, without microdeposits or manual checks. Pulling verified account details directly from the customer’s bank minimizes errors, accelerates onboarding, and helps prevent fraud at the earliest stage.

• Income and affordability checks in real time: Lenders, rental platforms, and financial services can retrieve transaction histories to identify income patterns, recurring expenses, and financial stability. Automated analysis replaces the old cycle of bank statement uploads and manual review, and makes faster, more accurate decisions.

• Smarter Know Your Customer (KYC) workflows: Verified bank information can serve as another signal during identity checks, especially when it’s combined with standard KYC tools. Mismatches between user-entered data and bank-verified data flag risk early and reduce downstream compliance issues.

• Cash flow data for lending decisions: Direct visibility into spending and deposit behavior gives lenders a clearer picture of an applicant’s financial reality. This supports more inclusive underwriting and strengthens risk models with current, behavior-based data.

• Account aggregation and financial visibility: Budgeting systems, savings apps, and financial dashboards use open banking to show customers their accounts across multiple banks in one place. Real-time data powers personalized insight, spending categorization, and recommendations.

• Improved payment experiences: Businesses can offer “Pay by Bank” at checkout, giving customers an option that authenticates through their banking apps and settles instantly. This can decrease the number of failed payments, make funds available sooner, and lower fees for high-value transactions.

• New product models: With reliable access to first-party financial data, companies can build features such as automated savings, real-time rewards, and financial wellness resources. These services can strengthen engagement because they react to the customer’s financial behavior.

What technical standards need to be met under open banking?

Open Banking Limited maintains the technical standards and central directory that help banks and verified third parties trust each other’s requests. Regulators such as the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) oversee the authorizations, security expectations, and health of the whole framework.

The UK’s framework enforces rules through shared application programming interface (API) definitions, strict security requirements, and expectations for customer control. Here are the main technical aspects:

• Standardized APIs: The UK’s Read/Write API specifications define how banks share account data, balances, and transactions, and how they initiate payments. These APIs follow consistent schemata so data behaves predictably across institutions.

• Security architecture: The system relies on OAuth 2.0 and OpenID Connect and is reinforced by the financial-grade API (FAPI) security profile. This creates encrypted, certificate-verified connections to ensure that every request is authenticated and tamper-resistant.

• Strong Customer Authentication (SCA): Customers approve data access or payments using two-factor authentication (2FA), often inside their banks’ apps with biometrics or device-based confirmation. Permissions must be reauthorized on a regular schedule.

• Customer data and consent controls: Access is always controlled so third parties receive only the exact data a customer approves. Consent screens follow standardized guidelines to clarify what’s being shared and can be revoked at any time.

• Logistical performance: Banks are expected to meet minimum uptime and responsiveness thresholds, with centralized monitoring that reveals outages or slowdowns.

What challenges do organizations face when adopting UK open banking solutions?

Companies that plan to use open banking need to understand how to integrate new data flows and meet regulatory expectations. Here are some common challenges with adoption:

• Security expectations: Banks and third-party providers must maintain strong controls, protect sensitive data, and monitor constantly for misuse or irregular access.

• Customer trust and understanding: Customers might still hesitate to share financial data, often because they’re unclear about how open banking works or what “permissioned access” means. Businesses need to offer reassuring experiences that explain why data is being requested and how it’s protected.

• Regulatory nuance: Becoming an authorized provider requires FCA approval, ongoing supervision, and well-documented controls. Even companies that partner with an authorized provider must address the rules of the revised Payment Services Directive (PSD2), data protection requirements, and regulators’ shifting expectations.

• Technical burden: Integrating open banking involves handling authentication flows, working with inconsistent bank implementations, and processing highly varied transaction data. Businesses might also need to build enrichment layers or connect to multiple providers to maintain coverage and performance.

• System fragmentation: Bank API quality can still vary, which affects reliability and the user experience (UX). Businesses often need safeguards such as retries, fallbacks, and a well-designed UX to manage these inconsistencies.

What should companies consider when choosing an open banking provider?

Choosing an open banking provider is a major decision that affects everything from the UX to compliance and long-term scalability. Look for the following in a provider:

• Bank coverage: The provider should cover the major UK banks and building societies your customers use, and offer reliable connections for both data and payments.

• Supported capabilities: Confirm whether the provider supports account information sharing, payment initiation, or both, and whether it offers extras such as transaction categorization and enriched data.

• Performance and reliability: High uptime and low-latency responses are important for easier onboarding and stable payment flows. Look for transparent status reporting and a strong track record of maintaining bank integrations.

• Security and compliance: Find a provider that is approved by the FCA for the services they deliver. They need to be able to demonstrate strong controls for data protection, token handling, and consent management.

• Developer experience: Clear documentation, sandbox environments, and responsive support shorten development time and reduce integration risk.

• Scalability and road map: Consider whether the provider plans to support broader open finance use cases or emerging capabilities such as Variable Recurring Payments (VRPs).

How Stripe Financial Connections can help

Stripe Financial Connections is a set of APIs that allows you to securely connect to your customers’ bank accounts and retrieve their financial data, enabling you to build innovative financial products and services.

Financial Connections can help you:

• Simplify onboarding: Offer a seamless, instant bank account verification process that does not require manual identity and account verification.

• Access rich financial data: Retrieve comprehensive information about your customers’ bank accounts, including balances, transactions, and account details.

• Automate recurring payments: Enable your customers to securely link their bank accounts for recurring payments, improving payment success rates.

• Enhance risk management: Analyze customers’ financial data to make more informed decisions about credit, lending, and other financial products.

• Comply with regulations: Financial Connections helps you meet KYC and Anti-Money Laundering (AML) requirements.

• Innovate with confidence: Build new financial products and services on top of the secure, reliable Financial Connections infrastructure.

Learn more about Financial Connections, or get started today.