Open Banking: State of the Art

What It Is and Where It Comes From

Open banking starts from a straightforward idea: a customer's financial data belongs to the customer, not the bank. With their consent, that data can be shared with third parties through secure APIs, allowing other companies to offer more competitive financial services. What began as a European regulatory push with PSD2 in 2018 has grown into a global phenomenon, with distinct models taking shape across Europe, the UK, Brazil, India, and the United States.

What the Research Shows

The academic literature on open banking is young but already producing concrete findings. Babina et al. (2025) show, using UK data, that third-party access to customer data lowered barriers for fintechs to enter the market and expanded the range of services available to consumers. On the credit side, open banking reduced financing costs for small businesses and increased their likelihood of accessing non-bank lenders, though the effects on financial inclusion have been more limited than initially expected (Babina et al., 2024). Colangelo and Khandelwal (2025) draw a useful distinction between mandate-driven models, where regulators require banks to open their APIs, and market-driven models, where everything depends on bilateral deals between banks and fintechs. The first tends to produce more consistency and consumer protection; the second offers more flexibility but also more fragmentation. The Cambridge Centre for Alternative Finance (CCAF, 2024) reports that 60 jurisdictions have now implemented some form of open banking rules, with fostering competition in financial services standing as the leading goal in 44 of them.

In terms of maturity, the UK leads the pack: in 2025 it recorded 24 billion API calls and 351 million open banking payments, with API availability above 99.5% throughout the year (Open Banking Limited, 2026). Brazil and India stand out in emerging markets, with Pix and UPI together processing hundreds of billions of transactions annually, proving that it is possible to leapfrog legacy infrastructure when the system is designed from scratch. Australia illustrates the adoption challenge: despite a solid regulatory framework, only 0.31% of bank customers had an active data-sharing arrangement in 2024, and 51% of agreements that were set up were eventually revoked (Lux, 2025). Regulation creates the conditions, but it does not guarantee adoption. The most active research frontier right now is the convergence with artificial intelligence: open banking data feeds machine learning models for fraud detection, alternative credit scoring, and personalized financial services, but autonomous AI agents capable of executing financial transactions raise liability and governance questions that current regulatory frameworks have yet to answer (Nayak, 2026).

PSD3, PSR, and FIDA: The New European Framework

The EU is finalizing a sweeping overhaul of its payments regulatory framework. In November 2025, the European Parliament and the Council reached a provisional political agreement on the Third Payment Services Directive (PSD3) and a new Payment Services Regulation (PSR); the final texts were published on April 23, 2026, with entry into force expected in 2027 after a 21-month transition period. The most fundamental change is architectural: where PSD2 was a directive that generated national divergences, the PSR applies directly and uniformly across all EU member states, eliminating the regulatory arbitrage that developed under the previous regime. For open banking specifically, API obligations become more granular, with mandatory performance parity, consent dashboards for consumers, and the AISP authorization cycle extended from 180 to 365 days. On fraud, the PSR generalizes IBAN and payee name verification to all credit transfers and introduces clear liability for APP fraud cases in which a fraudster manipulates the user into authorizing a payment. Running in parallel, the Financial Data Access Regulation (FIDA), still in trilogue as of April 2026, goes further by extending data-sharing obligations to pensions, insurance, and investments, with full operationalization expected around 2029-2030. EY (2026) reports that European banking executives consider the impact of FIDA to be greater than that of PSD3/PSR combined.

Future Trends and the Impact on Bank Business Models

Open banking is increasingly viewed as the first step towards open finance and the era of embedded finance, where payments, credit, and insurance are built directly into non-financial platforms. The global value of open banking transactions is projected to grow from $57 billion in 2023 to $330 billion in 2027, an increase of over 500%. Account-to-account payments are gaining share from cards, compressing interchange revenues for banks, a pressure that the McKinsey Global Payments Report (2025) documents in detail. For incumbent banks, the disintermediation risk is real but not inevitable. The Mastercard Payments Trends Navigator (February 2026) is direct in its assessment: the shift from proprietary platforms to open ecosystems is the next operating model for banking. Banks that limit themselves to exposing compliance APIs risk becoming invisible infrastructure. Those that act strategically have four paths available: becoming aggregation platforms for third-party services, supplying licensed banking infrastructure to fintechs through Banking-as-a-Service, specializing in niches where proprietary data creates a defensible advantage, or pursuing consolidation, a rational move in a context where the technology budgets of the largest banks exceed those of regional banks by more than tenfold.

Mastercard's research with Financial Times Longitude (2026) finds that 75% of executives report direct revenue uplift from open finance initiatives, and the Mastercard/Harris Poll survey (2025) reveals that 93% of businesses expect industry momentum to increase over the next five years. Trust emerges as the decisive strategic variable: incumbent banks start with an advantage, as 66% of consumers trust banks to share their financial data, but they can lose that advantage if their digital experience falls short of what fintechs deliver. The McKinsey Global Banking Annual Review (2026) documents a growing bifurcation between banks that have shifted toward fee-based services and those that remain anchored to the balance sheet, a divergence that is showing up in market valuations. The convergence of open banking, artificial intelligence, and embedded finance is not a trend to monitor from a distance, but the next operating model of the financial industry.

References

Babina, T. et al. (2024). Customer data access and fintech entry: Early evidence from open banking. NBER Working Paper No. 32089.

Babina, T. et al. (2025). Customer data access and fintech entry. Journal of Financial Economics, 169.

CCAF (2024). The Global State of Open Banking and Open Finance. Cambridge Centre for Alternative Finance, Cambridge Judge Business School.

CEPR (2025). The impact of fintech on lending. VoxEU.

Colangelo, G. & Khandelwal, P. (2025). The many shades of open banking. Internet Policy Review, 14(1).

EY (2026). What banks need to know to prepare for the impacts of the FiDA regulation. Ernst & Young Global.

Freshfields (2026). PSD3/PSR: What the EU's new payments rules mean for your business.

Lux, M. (2025). Open banking: Lessons, challenges, and opportunities. Georgetown Fintech Policy.

Mastercard & Harris Poll (2025). Building trust in the age of open banking.

Mastercard & FT Longitude (2026). The state of open finance 2026.

Mastercard Business Intelligence (2026). Payments Trends Navigator, February 2026.

McKinsey & Company (2025). Global Payments Report 2025.

McKinsey & Company (2026). Global Banking Annual Review 2026.

Nayak, S. K. (2026). New era of finance: The impact of AI on open banking. SSRN.

Open Banking Limited (2026). Open banking in 2025: Now part of the UK's everyday financial life.

Xie, C. & Hu, S. (2024). Open banking: An early review. Journal of Internet and Digital Economics, 4(2), 73-82.