For most of banking history, your financial data lived locked inside your bank, and only your bank could use it. Open banking changed that — not by taking control away from you, but by handing it to you. It lets you decide that a budgeting app, a lender or another service can securely see your account information, on your terms.

The result is a wave of tools that can read your finances to help you, while you stay firmly in charge of who sees what.

This article is general information, not financial advice. For guidance on your own circumstances, consult an authorised provider or a free service such as MoneyHelper.

What open banking is

Open banking is a system that lets you securely share your banking data, with your explicit permission, with regulated companies other than your own bank.

The principle behind it is simple but significant: your financial data is yours, and you should be able to let trusted services use it on your behalf. Instead of your information being trapped in one place, you can choose to connect it to apps that turn it into something useful — a clearer budget, a quicker payment, a fairer lending decision.

Crucially, you do this without handing over your banking password. The sharing happens through secure, behind-the-scenes connections that you authorise through your own bank.

How it works

Open banking runs on APIs — secure digital connections that let one system request specific information from another in a controlled way. If you want the full picture of how those work, our plain-English guide to APIs explains the concept.

A typical open banking connection goes like this:

  1. You choose a service — say, a budgeting app — and ask to connect your bank account.
  2. You are sent to your own bank to approve the request, using your normal bank login or app. The app never sees your password.
  3. You confirm exactly what you are sharing, such as read-only access to your transactions, and for how long.
  4. The data flows securely through the bank's API to the app, which uses it to provide the service.

The golden rule: a genuine open banking service never asks you to type your banking password into it. You always approve access through your own bank.

This design means the third party gets only the specific access you granted, and only because you actively allowed it.

What makes open banking trustworthy is consent. Nothing is shared unless you say so, and you remain in control throughout.

  • You choose who gets access, from a market of regulated providers.
  • You choose what they can see or do — often read-only access to certain accounts.
  • You set a time limit. Permissions expire and must be renewed, typically at least every 90 days, so access does not linger forever.
  • You can withdraw consent at any time, through the app or directly with your bank, and access stops.

This is a meaningful upgrade on older, riskier workarounds where people shared their actual login details with third parties. With open banking, you grant permission, not your password — and you can revoke that permission whenever you like.

What people use it for

Open banking powers a growing range of genuinely useful tools:

  • Budgeting and money management. Apps can read your transactions to show where your money goes, often pulling several accounts into one view. This pairs naturally with the habits in our guide to making a budget.
  • Account aggregation. See balances and spending across different banks in a single place.
  • Affordability checks. With your permission, a lender can view your real income and spending to assess affordability more accurately and quickly than relying on estimates alone. Lenders such as Credicorp explain their approach to responsible, customer-focused lending, and open banking data can make those checks both faster and fairer.
  • Faster payments. Account-to-account payments let you pay directly from your bank without entering card details, often instantly.
  • Smarter financial decisions. Tools can spot wasteful subscriptions, suggest savings, or help you compare products based on how you actually bank.

For more on how lenders weigh up your finances, see our explainer on how credit scoring works in the UK.

How it is kept secure

Security is built into open banking at several levels, which is why it can be trusted with sensitive data:

  • Regulation. In the UK, only firms authorised and regulated by the Financial Conduct Authority can provide open banking services. You can check a provider on the FCA register.
  • No password sharing. Access is approved through your bank, so your banking credentials are never given to the third party.
  • Strong customer authentication. Approving access usually requires confirming your identity securely, often with two-factor authentication.
  • Encryption. Data travels through secure, encrypted connections rather than being exposed in transit.
  • Data protection law. Your information is also covered by UK data protection rules overseen by the Information Commissioner's Office.

That said, the usual caution applies. Stick to apps from reputable, FCA-authorised providers, read what you are consenting to, and review your active connections from time to time. Scammers may try to imitate legitimate services, so the same care you would apply to any unexpected message asking for access is worth bringing here too.

The bottom line

Open banking lets you securely share your bank data, with your explicit and revocable permission, with regulated providers you choose — powering budgeting tools, account aggregation, faster payments and fairer affordability checks. It works through secure APIs, never by handing over your password, and only FCA-authorised firms can take part.

The core idea is empowering: your data, your choice. Used with sensible caution, open banking turns your financial information from something locked away into a tool that can work for you.