May 26, 2022

Open Banking Guide

Carla McMorris
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How does open banking let consumers share financial information more easily?

Open banking lets consumers share their financial information with third-party financial service providers, such as fintechs, through open APIs. Also known as open bank data, open banking follows uniform security standards for data access and user-based permission and control. 

Many banks and other firms are reluctant to provide access to consumer data due to privacy and security concerns. Open banking’s reliable interfaces help address the risks of consumer data sharing.

What is open banking?

Open banking gives consumers the power to share their financial data securely with other financial institutions. Third-party financial service providers (fintechs) and others are given access to consumer financial data by their bank using application programming interfaces (APIs). By allowing the networking of a wide array of accounts across multiple institutions, open banking empowers financial institutions, third-party service providers, and consumers with the innovation to shape the future of banking. 

How do the parties in open banking interact with their APIs?

APIs provide a common language for sharing data between two applications. Financial APIs allow consumers to securely connect their financial accounts to apps and services they choose. Here’s an example of how APIs can connect and fund accounts from separate institutions: A consumer downloads a financial app to their phone and creates an account, and then approves linking the app to an existing bank savings account to fund the new account. The app sends an API request to the consumer’s bank to verify that the account exists and holds enough money to fund the new account in the app. The bank then uses the app’s API to authenticate the consumer’s account and also authorize the transfer of funds. 

Why is open banking considered a major point of innovation in the banking industry?

Fintech startups under open banking guidelines gain access and control of consumers’ personal information using their permission to use that shared data to add value by comparing plans and rates for other services to find cheaper or more feature-rich products that closely match their profile. This network approach to financial services, instead of the traditional silo, is the reason why open banking is regarded as an important catalyst for the future of the banking industry. 

What are some of the benefits of open banking?

Consumers are accustomed to accessing personalized services instantaneously through their phones, and they expect the same from financial services providers. Thanks to open banking, consumers can now more easily access products that allow them to obtain credit and transfer money. Open banking can also help consumers improve their financial health by working with fintech firms. For example, an online wealth management startup could offer better financial advice with a complete picture of a consumer's assets and liabilities. Through open banking, it can gain access to the consumers’ information in digital form and in real-time, adding value to the consumer on the go. 

Like the applications for consumers, open banking can have the same value for businesses helping them identify lending opportunities, source the best investment opportunities and even protect against fraud threats.

What are the use cases for open banking?

With open banking, banks provide access and control of customers' personal and financial data to third-party service providers such as fintechs and online financial service vendors. To grant access, consumers generally check a box through an online app. 

For example, the P2P payment platforms Zelle and Venmo use APIs to connect to consumers' banking accounts, allowing for quick payments between consumers using different banking accounts. Consumers only need each other's email or phone numbers to send money, rather than more sensitive information like bank account or routing numbers.

How fast is the open banking market growing?

Given the desire to share money and financial information more efficiently through applications on our phones and computers, the open banking market is growing quickly. According to Vantage Market Research, the market's global revenue was $10.4 billion in 2021 and is estimated to rise to $37.7 billion by 2028. That represents a compound annual growth rate of nearly 24%.

Are there risks associated with open banking?

Though open banking eases access to financial data, it also risks compromising the security of consumers' finances and eroding their financial privacy. Thus, open banking faces risks from data breaches or hacking. Open banking gives consumers control over what financial data they share with other firms when signing up for an app. Still, some countries are enacting regulations to curb the risk of security breaches. For example, the European Union's Payment Services Directive 2 (PSD2) specifically addresses open banking.

What does open banking mean for the fintech industry?

Fintechs are taking advantage by developing innovative products and services that can be targeted to a more specific audience than a large bank would be able to serve.


Deposit Hub from Synapse* is a platform that enables fintech firms to open deposit accounts for individuals or businesses via an API call. Build experiences including: Cash Deposits, For-Benefit-Of Sub-Accounts, Custody Accounts, and Clearing Accounts. Interested? Learn more here

*Synapse Financial Technologies, Inc. is not a bank. Deposit, Banking and Card services are provided by Synapse Financial Technologies, Inc.’s partner banks.

Open Banking Guide

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Carla McMorris
May 26, 2022

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