Open Banking is a phenomenon that has revolutionized the financial world in recent years. Open Banking is a term that defines the opening of bank information and its availability to third parties (third party providers or TPP) via application programming interfaces (APIs) for the development of financial applications. The types of information shared by banks can be of all kinds, but generally, and to give an example, the banking institution will allow access via API to the information of a client, their bank balance, their movements, details of their transactions etc This movement was a revolution for the sector, since previously all information was exclusive to financial institutions and they had no obligation or intention to share it with fintechs or any other third party providers. However, today, thanks to the opening of the financial information held by banks, new fintech startups are capable of creating high value-added services by connecting users to their bank information and offering highly personalized services.

The origin of Open Banking cannot be traced back to a specific moment in time. Open Banking has been an evolutionary process, which is still in progress. Initially, Open Banking was born via “Scrapping”, that is, applications that automatically scanned different web pages and extracted the information sought. However, Open Banking, in a more formal way, has begun to be known in Europe as a consequence of the regulation of the European Union PSD1 and PSD2 that have partially formalized and regulated Open Banking. In the United States, however, it is a process that emerged naturally as a means of collaboration between large banking institutions and emerging companies in the Fintech sector, without the need for regulatory imposition. Companies like Plaid, or Envestnet Yodlee have been pioneers and examples of great success stories in the sector in the United States.

In 2007, the European Commission approved the Open Banking Directive PSD1 (“Payment Services Directive 1”), which for the first time regulated a framework for the financial revolution that was to come in the coming years. This first directive established for the first time the presence of a new type of company, payment service providers, implemented a regulatory framework that allowed non-banking companies to carry out financial transactions, and promoted the integration of the SEPA network of European payments.

In 2018, the PSD1 Directive was replaced by the new PSD2 Directive approved by the European Commission. This new directive improved the existing regulation and served to force even more the opening of banking information. This directive mainly changed the European banking paradigm, since it forced banks for the first time in history to open and offer their clients’ information publicly via API. In other words, customer information that until then was exclusive to the bank became the customer’s private information. What does this mean? By passing ownership of information from the bank to the customer, this means that the customer can authorize other companies or applications to use that information to provide innovative personalized financial services. This PSD2 regulation has been a big change for the sector, and the results of the regulation are still in their early stages.

As a consequence of PSD2, new type of regulated entities as well as AISP and PISP licenses emerged, which allow non-banking institutions to offer bank account information information, and to the latter, to initiate bank payments, all via APIs.

In 2007, the European Commission approved the Open Banking Directive PSD1 (“Payment Services Directive 1”), which for the first time regulated a framework for the financial revolution that was to come in the coming years. This first directive established for the first time the presence of a new type of company, payment service providers, implemented a regulatory framework that allowed non-banking companies to carry out financial transactions, and promoted the integration of the SEPA network of European payments.

Open Banking has created a revolution in the world of finance, however, this is not the only revolution. Open Banking refers only to the opening of information by banks of the banking information of individuals and companies. However, the revolution goes further, and is beginning to affect other sectors. Open Finance refers to the opening of information, not only banking, but financial in general. This revolution does not only affect the banking sector, but also the insurance sector, private banking, asset management, mortgages… This movement therefore affects the rest of the institutions that also have certain information about their clients and could be used by other emerging companies to improve the service and offer more specialized services.

Open Data refers to the evolution of the Open Banking and Open Finance movement towards a new stage, in which people are interested in the total opening of their information. Therefore, we are not only referring to information collected by banks or other financial services institutions. In this case, reference is made a little further, that is, to the opening of information contained in the companies that provide supplies such as telephone, gas, electricity, water or other types of services such as health, education…. This movement will allow new emerging companies to create new fully customized services based on the information contained in the clients. To contextualize, let’s take the example of health information. With this information, a health app could provide personalized recommendations to its users based on information about diseases and physical health that their doctor may have, for example. Therefore, the total opening of information is a new movement that little by little will affect us in all the different areas of people’s lives.

Thanks to Open Banking, Snab has been able to create a non-banking platform that allows our customers to access their information and banking movements from one place, centralizing all banking and treasury management in Snab, in a secure manner, and complying with all PSD2 regulatory standards.