Data Modeling
Mathematical and Computational Data Modeling | Online ISSN 3143-9217
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Volume 2 Number 1 2020
RESEARCH ARTICLE (Open Access)
Open Banking APIs and PSD2: A Review of Opportunities, Challenges, and Data-Sharing Dynamics in Financial Services
Tahmida Khair 1, Kamruzzaman Mithu1*
Data Modeling 2 (1) 1-8 https://doi.org/10.25163/data.2110897
Submitted: 21 May 2020 Revised: 10 July 2020 Accepted: 18 July 2020 Published: 20 July 2020
Abstract
The movement toward open banking — in which customers can, with their consent, authorize third parties to access their financial data through Application Programming Interfaces (APIs) — has reshaped how banks, fintech firms, and regulators think about ownership of financial data, particularly following the introduction of the Second Payment Services Directive (PSD2) in the European Union. This paper undertakes a literature review, synthesizing peer-reviewed research, regulatory publications, and industry analysis on open banking APIs published between approximately 2012 and 2021, with particular attention to the regulatory environment established by PSD2 and the Open Banking Working Group in the United Kingdom and European Union. This study finds that open banking APIs offer clear potential benefits — reduced reliance on insecure screen-scraping practices, new revenue streams for financial institutions, and a wave of fintech applications spanning account aggregation, personal finance management, and small-business accounting (e.g., Plaid, Yodlee, Mint) — yet adoption remains constrained by persistent customer hesitation around data sharing and by banks' own anxieties over losing control of customer relationships. Taken together, the evidence suggests open banking is best understood as a still-unfolding transition rather than a completed one, in which regulatory frameworks such as PSD2 provide the scaffolding but customer trust and institutional willingness to collaborate will ultimately determine how far, and how fast, the model spreads.
Keywords: open banking; application programming interface (API); PSD2; fintech; financial data sharing
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