What is Open Banking?

A Guide to the Rails Reshaping Finance  

Ask 10 people what open banking is and you'll get 10 answers. However, most of them will either be too technical or too vague to be useful. Some will describe it as a regulation. Others will call it a fintech trend. A few will quietly admit they aren't sure. That confusion is a problem, because open banking is no longer a future concept. It is the connective tissue underneath modern financial services.

The numbers say the same thing. The global open banking market is projected to grow from roughly $35.3 billion in 2025 to more than $190 billion by 2034, and open banking API call volume is on track to reach 580 billion globally by 2027.

This blog plainly explains what open banking actually is, how it works, what's different about open data and embedded finance, and why any bank serving small and mid-sized businesses (SMBs) needs to have a point of view on it.

What Is Open Banking & How Does It Work?

Open banking, defined

Open banking is a regulated, API-driven framework that lets consumers and businesses share their financial data — securely and with explicit consent — between their bank and approved third parties. It turns financial data into a portable resource the customer controls, enabling new services like cash flow tools, faster lending decisions, account aggregation, and real-time payments.

Two ideas sit inside that definition and are worth pulling apart.

• Consent. The customer — not the bank, not the fintech — decides who can access their data, for what purpose, and for how long. They can revoke access at any time.
• APIs. The data moves through standardized application programming interfaces, not screen-scraping or downloaded statements. That means it is structured, real-time, and auditable.

Together, those two ideas turn what was previously a closed-loop relationship between a customer and their bank into an open ecosystem where data flows between trusted parties whenever the customer says it should.  

Four things happen, in order, when open banking is implemented:

1. The customer gives consent. An SMB owner or consumer authorizes a third party — say, an accounting platform, a cash flow tool, or another bank — to access specific financial data for a specific purpose.

2. An API connects the systems. The third party requests data from the bank through a regulated, encrypted API. No usernames or passwords are shared.

3. Data flows back, structured and standardized. Account balances, transactions, payment instructions — whatever the customer authorized — return in a format the third party can use immediately.

4. The third party turns data into something useful. Insights, forecasts, faster decisions, new payment flows, etc. This is where most of the visible value lives.

The bank remains the system of record. The customer remains in control. The third party gets the data it needs, only for as long as it needs it.

Open Banking vs. Open Data vs. Embedded Finance  

These three terms get used interchangeably, but they shouldn't. They build on each other.

• Open banking is the narrowest. It covers consented sharing of bank account data and payment initiation through regulated APIs.
• Open data is broader. It extends the same principle — consented, API-driven sharing — to financial and non-financial data far beyond banking: accounting platforms, payroll systems, e-commerce, payments processors, lending products. This is the direction Australia is already moving and the direction the US market is heading.
• Embedded finance is something different. It is the practice of inserting financial services — payments, lending, accounts, insurance — into non-financial software, like a vertical SaaS product or an e-commerce checkout. Embedded finance often runs on top of open banking infrastructure, but the two are not the same thing.

A useful way to remember it: open banking is the rails. Open data is the wider track network those rails connect to. Embedded finance is the train that runs on them.

Why Open Banking Matters in 2026

There are three reasons open banking is now a must for financial institutions.

1. Regulation has caught up to behavior

Customers were already linking accounts across providers long before regulators codified the right to do so. More than 87% of US consumers already use open banking to link financial accounts with third parties.

2. Data moves with the customer

Historically, in banking, data has been a byproduct of the customer relationship — held by the institution and used internally. Open banking inverts that. Data becomes a portable resource the customer carries with them. Institutions that compete on transparency, useful insight, and good experience win. Institutions that rely on data lock-in lose.

3. SMBs are the segment where this matters most

Small and mid-sized businesses live across a sprawling stack of accounting, banking, commerce, payments, and payroll tools. Nearly half of SMBs manage their finances across multiple providers, and most SMB owners are checking their financial position from a phone in between running the business. Open banking is the only practical way to give them — and their bank — a unified view of how the business is actually performing.

What Open Banking Looks Like in Practice

• Account aggregation. An SMB owner sees every business and personal account, across every institution they use, in a single dashboard. The same view feeds their bank's understanding of their full financial position.
• Cashflow forecasting. Combining real-time bank data with accounting data (receivables, payables) produces forward-looking cash projections, which is far more useful to a business owner than a backward-looking statement.
• Faster, fairer lending. Lenders use consented data, including accounts at other banks, to underwrite SMBs that would otherwise look thin-file or unbankable, and they are able to do it in hours instead of weeks.
• Payment initiation. Customers can authorize payments directly from their bank account through a third-party app, bypassing card networks for certain use cases and reducing friction at checkout.
• Identity and verification. Bank-verified data can replace the document uploads and manual checks that slow down onboarding for new customers and new financial products.

Each of these is already in the market today. The next wave is less about new use cases and more about depth — better insights, smarter automation, AI-driven personalization — running on data that is finally clean, consented, and structured.

What About Security and Trust?

This is the question that comes up first, and the answer is more reassuring than the headlines suggest. Open banking is more secure, by design, than the screen-scraping and statement-emailing it replaces.

Three structural protections matter:

• No credential sharing. Customers never hand over usernames and passwords. Authentication happens through the bank, using secure tokens.
• Granular, revocable consent. Customers can see exactly what data a third party can access, for how long, and revoke that access at any time.
• Regulated participants. Third parties have to meet specific licensing, security, and data-handling standards to participate. The industry has converged on certifications like ISO 27001 and SOC 2 Type 2 as table stakes.

Customer trust is rising as a result. Visa research finds the majority of US consumers are now comfortable using open banking-powered services — particularly when they understand the value they are getting in return for sharing.

What Comes Next

If you are leading a banking team, these shifts are worth tracking closely.

• Open data, not just open banking. The frame is widening from bank accounts to the whole financial life of a customer or business. The institutions that already aggregate accounting, commerce, and payments data are several steps ahead.
• AI on top of clean data. Generative AI gets the headlines, but its usefulness in financial services depends entirely on the underlying data layer. Banks with structured, consented, real-time data across the customer's full financial picture are the ones that will get real value out of AI; banks running models on fragmented internal data will not.

Where 9Spokes Fits

9Spokes builds the data layer banks need to turn open banking from a regulatory checkbox into an actual SMB growth engine. The platform aggregates SMB financial data across 800+ banking, accounting, commerce, payments, and payroll sources, then translates it into insight — both for the SMB customer and for the relationship managers, credit teams, and product leaders inside the bank.

Ready to go from understanding to execution?

Download The Open Banking Playbook for SMB Growth →

Frequently Asked Questions

What is open banking in simple terms?

Open banking is a system that lets you securely share your financial data — like account balances and transactions — with apps or other banks you trust, using regulated APIs and your explicit consent. You stay in control: you decide who gets access, to what, and for how long, and you can revoke it at any time.

Is open banking safe?

Open banking is generally safer than the alternatives it replaces. Customers never share their banking username or password with third parties. Authentication happens directly with the bank using secure tokens. Every connection is encrypted, and consent is granular and revocable. Participating third parties also must meet defined licensing, security, and data-handling standards.

What is the difference between open banking and open data?

Open banking covers consented sharing of bank account data and payment initiation. Open data extends the same principle to a much broader range of financial and non-financial data — accounting, payroll, commerce, payments, social media, etc. — so a customer can connect their full financial/business life, not just their bank account.

How is open banking different from embedded finance?

Open banking is the underlying infrastructure for sharing financial data. Embedded finance is the practice of putting financial services — like payments, lending, or accounts — directly inside non-financial software (a SaaS product, an e-commerce checkout, a marketplace). Embedded finance often runs on top of open banking, but they are not the same thing.

Who benefits from open banking?

Three groups, in different ways. Customers get more choice, better tools, and a unified view of their finances. Banks get the ability to see and serve a customer's full financial picture, which means better lending decisions, more relevant cross-sell, and stickier relationships. Fintechs and software providers get regulated access to the data they need to build new products. The shared upside is a financial system that is more transparent and more competitive.

Why does open banking matter for small businesses?

SMBs run their operations across a sprawling stack of accounting, banking, commerce, payments, and payroll tools, and almost half of them bank with multiple providers. Open banking is the only practical way to bring all of that together into a single, real-time view — for the business owner trying to manage cash flow and for the bank trying to serve them well.