Open Finance vs. Open Banking: 5 Essential Differences Explained

In 2025, APIs and consent-based access are reshaping payments, lending and financial services across the UK, EU and globally. Open banking gives regulated access to bank account data and payment initiation; open finance expands that access to investments, pensions and insurance. APIs matter because they provide secure, standardized interfaces that let third parties integrate without screen scraping and enforce consent scopes and strong authentication.

Dimension	OB (banking)	OF (finance)
Scope	Bank accounts, payments	Plus investments, pensions and insurance
Participants	Banks, TPPs	Banks, insurers, asset managers, pension schemes, aggregators
Data types	Balances, transactions, payments	Portfolios, policies, pension records, savings
Regulation	PSD2 / UK OB rules	PSD3 proposals / UK OF developments

Sharing always happens under regulated frameworks, not unregulated models. Regulators and industry reported rising API activity in 2024–25: the FCA and ECB noted higher API call volumes and user authorisations, while the BIS observed growing cross-border interest. Fintechs and merchants gain faster onboarding, personalized offers, alternative underwriting and cheaper account-to-account payments.

Modern API-first integration platforms use secure interfaces and data frameworks to enable open payments and financial connectivity across the ecosystem.

What Is Open Banking?

Permissioned access to current account data and payment initiation via secure bank APIs defines open banking. It began with PSD2 across the EU/EEA and the UK’s CMA/OBIE programme. By 2024–25 AIS and PIS traffic rose noticeably, and FCA and ECB reports record double-digit API adoption and steady improvements in reliability and uptime. This foundation set the stage for wider fintech integration in 2025.

Key participants are ASPSPs (banks), TPPs such as AISPs and PISPs, merchants, fintechs and consenting consumers. Core capabilities include balances, transactions, identity verification, account-to-account payments, SCA and scoped consent windows.

Modern API-first platforms leverage secure APIs and consent frameworks to orchestrate access, provide tokenized credentials, and enable webhook-based eventing for real-time updates and monitoring.

Benefits: transparency, competition, faster onboarding, improved checkout UX, lower costs, personalization, reduced fraud, real-time reconciliation.
Limitations: limited scope, variable API quality, market fragmentation, consent UX differences, and versioning complexity.

Dimension	Banking	Broader finance
Scope	Bank accounts, payments	Accounts plus investments, pensions, insurance

What Is Open Finance?

Open finance lets people share a wider range of financial records with consent: investments, pensions, insurance, savings and more. Users grant granular consent, can revoke access, and expect purpose limits and data minimization.

Secure API frameworks enable permissioned financial data sharing for payments, risk insights and wealth management. Regulators ran consultations and pilots in 2024–2025, and FCA and European Commission reports show growing, cautious adoption.

Dimension	Bank APIs	Finance-wide
Scope	Accounts	Investments, pensions
Participants	Banks, TPPs	Insurers, asset managers
Data	Balances, transactions	Portfolios, policies
Regulation	PSD2	PSD3, FCA, EC pilots

Pros: faster onboarding, personalized offers, portability, control.
Cons: privacy surface expansion, consent fatigue, interoperability gaps, data quality variance.
Tip: choose providers with strong uptime, consent dashboards, and sandbox testing.

For a deeper look at how PSD2 shaped Europe’s open banking framework and the transition toward secure API-based access, see PSD2 and Open Banking in Europe 2025.

Key Differences Between Open Finance and Open Banking

Dimension	Open Banking	Open Finance
Scope	Accounts & payments	Investments, pensions, insurance
Participants	Banks, TPPs	Banks, insurers, asset managers, pension schemes
Data Types	Balances, transactions	Holdings, policies, retirement data
Consent	Scoped, SCA	Granular, revocable
Regulation	PSD2	PSD3, UK & EU proposals
Use Cases	A2A checkout	Holistic advice, embedded products
Maturity	Live deployments	Industry pilots

Participants expand beyond banks to insurers, asset managers and aggregators. Reliable connectivity and consistent standards are essential to reduce friction and improve data quality. Consent management must scale with user expectations of revocation and portability.

Modern API-based platforms help bridge these layers through secure interfaces and tokenized access. FCA and ECB reports (2024–2025) show rising TPP registrations and improving API performance.

How Financial Data Sharing Powers Innovation

APIs, standardized data models, strong authentication and tokenized access enable secure, consented data flows.

Modern API frameworks orchestrate open payments and integrations across banking and finance. FCA and ECB metrics show rising AIS/PIS usage in 2024–2025.

Benefits: faster onboarding, personalized offers, reduced fraud, lower costs, transparency, control.
Pros: speed, personalization.
Cons: integration complexity, variable data quality, governance requirements.

Tips:

• Start with high-impact use cases.
• Choose vendors with consent dashboards and uptime SLAs.
• Enforce least-privilege scopes and secure token refresh.
• Document retention and deletion policies.

Regulations and Compliance in Open Ecosystems (PSD2, PSD3, and Beyond)

PSD2 created AIS/PIS, required SCA, and set standards for secure third-party access. Regulators found that API quality and consent UX are as critical as compliance. FCA and ECB reports (2024–2025) show wider adoption but highlight the need for improved uptime and telemetry.

PSD3 and PSR proposals aim to strengthen consumer protection, reduce fraud, and tighten supervision. The UK advances its own open finance framework through FCA pilots. Global peers—Australia (CDR), Brazil, and Singapore—pursue comparable rules.

Dimension	Open Banking	Open Finance
Scope	Bank accounts	Broader financial services
Participants	Banks, TPPs	Banks, insurers, asset managers
Regulation	PSD2 / PSD3	PSD3 + national frameworks
Maturity	Established	Emerging

Compliance essentials: consent logging, scope management, SCA, data minimization, privacy-by-design, and TPP due diligence.
Avoid overbroad consent, require explicit permission with revocation, and monitor API changes and regulatory updates.

Secure API-based frameworks support regulated data access aligned with FCA, EC and BIS guidance.

Real-World Examples of Open Finance Applications

Consumers get unified money views across bank accounts, investments, pensions and insurance. Apps automate savings and coverage insights. Merchants and fintechs use A2A checkout, instant KYC/AML, cash-flow lending and consented risk scoring.
Providers such as Plaid, Tink, TrueLayer and Yapily power many flows. FCA 2024 reports show double-digit growth in API connections across Europe.

Dimension	Banking	Finance
Scope	Bank accounts, payments	Investments, pensions, insurance
Participants	Banks, TPPs	Banks, insurers, asset managers, aggregators
Data	Balances, transactions	Portfolios, policies, projections
Regulation	PSD2, UK Open Banking	PSD3 / UK Open Finance proposals

Benefits: faster onboarding, better personalization, lower payment costs.
Limitations: integration complexity, data quality variance, governance overhead.
Implementation notes: select providers with high uptime, regional coverage and robust consent tooling; plan fallbacks and monitor SLAs.

The Role of Modern API Platforms in Open Finance

Modern API-first payment orchestration and secure data frameworks enable banks, fintechs and merchants to integrate efficiently within regulated ecosystems. Regulators’ 2024–2025 reports (FCA, ECB, BIS) highlight rising API adoption and improved reliability.

Dimension	Open Banking	Open Finance
Scope	Bank accounts, payments	Accounts, investments, pensions
Participants	ASPSPs, TPPs	Banks, insurers, asset managers
Data	Balances, transactions	Portfolios, policies
Regulation	PSD2, UK framework	PSD3, UK proposals

Benefits: faster onboarding, personalization, lower costs, stronger consumer control.
Challenges: integration complexity, data quality variance, governance burden.

Secure traffic management, tokenization, and audit trails aligned with PSD2/PSD3 strengthen regulatory compliance. Integrators must enforce least-privilege scopes, explicit consent, and revocation policies.

Conclusion: The Road Toward a Fully Connected Financial Ecosystem

Banking APIs created secure, regulated access to account data and payments, and the model now expands across investments, pensions, insurance and savings. Policymakers accelerated work in 2025 with PSD3 and UK proposals. The FCA, ECB and BIS report growing consent-based access and higher API traffic, signaling steady maturity.

Dimension	Banking	Broader finance
Scope	Bank accounts	Investments, pensions, insurance, savings
Participants	Banks, TPPs	Insurers, asset managers, pension providers, aggregators
Data	Balances, transactions	Portfolios, policies, pension records
Regulation	PSD2 rules	PSD3 and UK framework proposals

Next steps:

• Map top use cases and audit consent flows.
• Select providers with uptime SLAs and certification.
• Design with privacy-by-design and explicit consent.
• Ensure portability and consistent revocation UX.

Modern API-first platforms enable open payments and secure integrations, helping fintechs and merchants innovate responsibly, reduce costs and support a resilient financial ecosystem.