The legal basis for Open Banking is the Second Payment Services Directive 2 (PSD2), which regulates payment services and payment service providers in the European Union (EU) and was transposed into national law in Germany in 2018. The PSD2 harmonized the rights and obligations for payment service providers, banks, merchants, and consumers across Europe to a) increase payment security, b) strengthen consumer protection, c) promote innovation, and d) increase competition in the market.
Among other things, banks are required to set up interfaces (Application Programming Interfaces; APIs) (Open Banking), through which third-party providers can access bank customers’ payment account and transaction data (with their prior consent) and provide products and services.
In addition, PSD2 created two new groups of payment services and payment service providers: Account Information Service Providers (AISPs) and Payment Initiation Services Providers (PISPs).
Account information services collect and aggregate payment and transaction account information from various accounts and banks and make it available to account holders in a consolidated form via one or more payment service providers.
Payment initiation services, in turn, initiate electronic payment transactions between customer accounts and provider/merchant accounts. They are often offered as a payment option on the websites / online stores of the merchants or providers.
Open Banking has paved the way for the development of various application options in the form of products, services, or apps.
These range from personalized savings and personal finance management, personalized offers and customer loyalty measures to mobile payment and instant credit at the point of sale.