Open banking: how does it work?

Open banking enables third-party providers to securely access your bank data (with your permission) by way of APIs. You may have already used it when making an online payment or linking your account to an app, such as a budgeting tool. On this page, we’ll explore what open banking is, how it works, and how it can benefit consumers and businesses alike.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

Open banking can be defined as a practice that allows banks and third-party financial service providers, such as budgeting apps and cash flow management tools for businesses, secure access to your banking and other financial data by way of an Application Programming Interface (API).

Open banking in Ireland is regulated through the Payment Services Regulations 2018, which brings the second EU Payment Services Directive (PSD2) into law. Open banking and the PSD2 allows banks to share your financial data, such as your account details, regular payments, savings statements and other banking information, with authorised financial service providers, as long as you permit them.

Once you’ve granted permission, your financial data can be made available by one financial institution or a third party to another through an Application Programming Interface (API). This API open banking technology provides a secure, quick way for them to share your data. 

For example, you might connect your bank account to a budgeting app that analyses your spending. Because the budgeting app can see and interpret your spending habits, it can then recommend financial products, such as savings accountsthat might help you grow your savings. Open banking can also make it easier and quicker to pay bills, send money, and shop online.

TPP stands for third-party providers. When you see this on a bank transaction, it essentially means you’ve used an online service from an authorised provider that is independent of the financial institution you bank with. You might have, for example, given a third party permission to make payments on your behalf.

With open banking, you can give a TPP access to any account you might have that has an online banking facility. This can include current accounts, credit card accounts, and some deposit accounts.

Yes. Since the EU regulations were introduced in 2018, open banking has been growing in Ireland. 

Banks are required to permit payment account access to two main types of third-party providers:

• Account Information Service Providers – These offer read-only access to account details, balances, and transactions. Using the budgeting example, this would allow consumers to combine multiple current accounts from different banks in one place and sort their spending into categories.

• Payment Initiation Service Providers – Payment initiation refers to processes such as bill payments and transfers of funds. This means goods can be shipped right away, and it can also give you immediate access to the services you’ve purchased.

For details of the different APIs and third-party providers available in Ireland, you can check this open finance and banking directory.

Ultimately, open banking should streamline financial processes, making them quicker and more effective.

The main reason you might want to take advantage of open banking is that it could help you manage your money more effectively. If you have bank accounts or use financial services from different institutions, open banking could allow you to view and access all your accounts in one place at the same time. 

Open banking might also be useful if you’re applying for a loan or credit card, as some lenders may use the data they access to check your income and outgoings to see whether you meet their eligibility criteria.

Online payment systems are becoming increasingly complex, which can be seen as a good thing from a security point of view. Through an open banking system, retailers and service providers can receive payments directly and instantly from your bank account rather than through a payment provider such as MasterCard or Visa.

Open banking aims to provide many benefits to both consumers and lenders. For consumers, the benefits are that financial services are tailored specifically to your needs, and you can take control of your finances with up-to-date facts, figures, and spending information. Meanwhile, lenders are better able to protect vulnerable consumers by putting in payment blocks, identifying harmful spending patterns and taking a point of contact for a family member or friend. Additionally, having a 360° insight into consumers’ finances allows lenders to offer more appropriate products and services.

Open banking in Ireland is regulated under the EU’s Payment Services Directive 2 (PSD2). PSD2 is an EU regulation intended to increase competition and innovation in the financial space by removing the monopoly that banks currently have on their customer data and allowing third-party businesses to have access to that data too (with your permission). Open banking is a secure way for providers to access your financial information.

And it’s worth mentioning that the existing PSD2 regulations for open banking are set to be updated in 2026. The new rules will be included in the EU’s PSD3 regulations, and they aim at improving consumer protections and the efficiency of open banking.

The main purpose of open banking is to enable consumers and small businesses to receive better deals that suit their needs on financial products and services.

A high percentage of consumers are concerned about the safety of sharing financial data. However, open banking is regulated, meaning that it’s safe to take advantage of open banking services, as long as you only give explicit authorisation for your data to be shared between regulated financial service providers. Put simply; financial service apps will only be able to access your financial data if you’ve actively consented for them to do so.

All open banking service providers must also comply with data protection rules, including always indicating exactly what data will be used, how long it’ll be used for, and any actions they may need to take before you sign up. 

While the open banking regulations under PSD2 offer some security, if you’re unsure or if a financial service provider doesn’t make things clear, it might be best not to share your data. As with online banking, scams do exist, and scammers may try and trick you into opening up your data. You can also check whether a provider is regulated on the Central Bank of Ireland’s Registers.

The most important thing to remember when using open banking is that you shouldn’t share your login details or passwords with anyone. Should anything go wrong with a transaction using open banking, your bank should be able to help you get a refund.

Open banking may make managing finances quicker and easier. In fact, open banking has the potential to change the way Irish consumers use banks. 

In the future, open banking should help Irish savers by giving you more ways to access and view your savings at any time, as well as making it easier to compare and switch to different types of savings accounts. It may also help track variable interest rates, allowing you to manage your accounts better and make the most of your savings.

If you want to get a taste of how open banking works in a secure environment, you can register for a Raisin Account. While we don’t offer a complete open banking experience, through our marketplace, you can apply for savings accounts from a range of banks in one place and gain full financial visibility of all your accounts. 

All you need to do to open a savings account is register for a free Raisin Account, click apply, and transfer your deposit. There’s no need to fill out a new application each time you apply, and EU regulations mean your money is protected by the respective Deposit Guarantee Scheme.