Open Banking's Promise of a Financial Revolution: Are We Falling Short?

Abstract

This working paper examines the ongoing regulation and the impact of open banking on payments, competition in the banking markets and financial inclusion. Open banking has been defined in several ways. For our purposes, we see it as a financial ecosystem which provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and nonbank financial institutions using application programming interfaces (APIs). Consumer generated data can therefore be transferred (data portability) or accessed by third parties, with the purpose of increasing competition and innovation, thus benefiting both individuals and society more broadly. Open Banking is becoming progressively more widespread in the world, with approaches ranging from legislatively mandated (as in the EU) to industry-led voluntary systems (as in the US), with a range of roles for regulators in between.

Keywords: Account Information Services Providers (AISP), Application Programming Interfaces (API), Fintech, Platforms, Open Banking, Payment Initiation Service Providers (PISP)

JEL Classification: G21, G24, G38