Open banking explained

Open banking is a secure data sharing system that gives authorized third-party providers direct access to financial data from banks and financial institutions through application programming interfaces (APIs). 

With open banking, businesses can accept payments directly from bank accounts, confirm account ownership, and check a person's income. This allows them to create faster payment experiences, reduce the risk of fraud, and get better financial information.

The benefits of open banking include:

• Direct bank payments. Initiate payments directly from a customer's bank account without using traditional card networks.

• Verify customer information. Instantly verify account ownership and perform real-time income checks.

• Reduced fraud. Lower the risk of fraudulent transactions.

• Improve customer experience. Create faster checkouts and accelerate the user onboarding process.

• Financial insights. Access financial data from consumers to improve business decisions.

• Better services. Develop new and innovative checkout flows and financial products.

Open banking works by using secure APIs to connect a shopper's bank account to a business or third-party service provider, requiring user consent for every transaction or data request. 

The entire process is designed for security and transparency, ensuring the shopper always has complete control over their personal financial data.

Here’s how open banking works step by step:

1. Select the bank. The business application presents a bank selector screen, allowing the shopper to choose their financial institution from a list of available providers.

2. Redirect to banking environment. The system seamlessly redirects the shopper to their selected bank's native mobile app or secure web portal.

3. Authenticate and authorize. The shopper logs in using their standard online banking credentials and explicitly authorizes the requested scopes, such as sharing account information or approving a payment mandate.

4. Select specific accounts. If the shopper possesses multiple bank accounts, they choose which specific account to use for data sharing or transactions.

5. Return to business. The bank redirects the shopper to the business's callback URL, allowing the business application to instantly retrieve the required information and proceed with the customer journey.

Open banking offers advanced data capabilities like instant account verification and real-time income checks to streamline business operations and risk management. These account information services rely on secure APIs to confirm user details and evaluate their finances.

Here are the primary use cases for account information services:

Account verification

Businesses can verify account access and account holder information in real time. This is highly valuable during the onboarding process for new customers or suppliers, such as a mobility platform verifying new drivers or a marketplace authenticating independent sellers.

Income checks

Businesses can securely identify the recurring income of an individual or company to perform affordability checks. This is critical for verticals with strict regulatory and financial requirements, where users must meet specific financial criteria or not exceed certain deposit thresholds.

Adyen offers open banking as a white-label solution available through APIs and across major operating systems, including web, iOS and Android devices. Our open banking interface provides secure access to Adyen’s APIs, enabling third-party providers to use financial data through standardized connections.

Adyen’s open banking gateway offers a single API for account information services and online payments, dynamically routing traffic to providers like Tink, Yapily, and Plaid based on coverage, conversion, performance, cost, and fraud rates. 

By centralizing integrations, Adyen’s open banking solution helps businesses scale into new markets, monitor performance, and customize user experiences without managing multiple provider connections.

Ready to optimize your payment flows and streamline user verification? Connect with our team to learn how our unified platform and open banking solutions can drive scalable growth for your business.

• Open banking uses secure APIs to share direct bank data with third-party providers.

• The technology requires explicit shopper consent for all data sharing and financial transactions.

• Businesses use open banking to initiate secure payments, verify accounts, and perform automated affordability checks.

• The standard user flow involves selecting a bank, authenticating directly within the banking app, and returning to the business site.

• Adyen’s Open Banking Gateway offers a single API integration that intelligently routes traffic to the optimal regional open banking provider.