Open banking is a financial services model that allows third-party platforms and applications to access bank account data and initiate payments through secure APIs, with the customer’s consent. For supply chain finance platforms, open banking enables faster onboarding, real-time financial visibility, and seamless payment execution — without requiring businesses to manually share statements or route payments through legacy banking infrastructure.
What It Is #
Historically, a company’s financial data was locked inside its bank. The only way to share it was to export statements, send PDFs, or grant full account access. Open banking changes this fundamentally. Banks are required — or in many markets, incentivised — to expose their data and payment infrastructure through standardised APIs. Authorised third parties can then access this infrastructure directly, with the account holder’s explicit consent.
In Europe, open banking is mandated under PSD2 (Payment Services Directive 2), which requires banks to provide API access to authorised Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs). In the UK, the Open Banking Standard governs implementation. Similar frameworks are emerging across the US, Australia, Singapore, and Latin America.
For businesses using a supply chain finance platform, open banking means faster onboarding (no manual statement uploads), real-time cash flow visibility, and direct payment initiation — all within a single system.
How Open Banking Works #
- User grants consent — the business authorises the platform to connect to their bank account via a secure, standardised API
- Data is shared — the bank transmits account data (balances, transactions, payment history) in real time
- Platform uses data — the data is used for credit assessment, cash flow analysis, and working capital insights
- Payments are initiated — with payment initiation permissions, the platform can execute payments directly without requiring the business to log into their bank separately
- Consent is revocable — the business can withdraw access at any time, and data is not stored beyond the agreed scope
Key Open Banking Services #
| Service Type | What It Does | Use Case |
|---|---|---|
| Account Information (AISP) | Read-only access to account balances and transaction history | Credit assessment, cash flow modelling, onboarding |
| Payment Initiation (PISP) | Initiate payments directly from business bank accounts | Supplier payment execution, SCF program settlements |
| Variable Recurring Payments (VRP) | Authorise automated recurring payments within set parameters | Scheduled invoice settlements, DPO management |
| Financial Data Aggregation | Combine data from multiple bank accounts | Unified treasury dashboard across multiple entities |
Open Banking vs. Traditional Banking Integration #
| Open Banking | Traditional Integration | |
|---|---|---|
| Data access | Real-time via API | Manual exports, batch files |
| Payment initiation | Direct, instant | Via bank portal or SWIFT |
| Onboarding speed | Hours | Days to weeks |
| Security model | Consent-based, revocable | Credential-based |
| Cost | Lower — no intermediary | Higher — correspondent bank fees |
| Regulatory framework | PSD2, Open Banking Standard | SWIFT, SEPA |
Open Banking and Credit Assessment #
One of the most valuable applications of open banking for supply chain finance is credit assessment. Rather than relying solely on annual financial statements or credit bureau scores — which are backward-looking — open banking provides real-time transaction data that reflects a business’s current financial health.
This enables:
- Faster credit decisions — minutes instead of days
- More accurate risk pricing — based on actual cash flows, not just reported financials
- Access for underserved businesses — SMEs with thin credit histories but healthy cash flows can qualify for financing
- Dynamic limit adjustments — credit limits can respond to real-time financial changes rather than annual reviews
PSD2 and Regulatory Context #
PSD2, effective across the EU since 2019, is the regulatory backbone of open banking in Europe. It mandates that banks provide API access to authorised third parties and establishes Strong Customer Authentication (SCA) standards to protect account holders.
Key PSD2 provisions:
- Third-party access rights — banks cannot block authorised PISPs and AISPs from accessing accounts
- Strong Customer Authentication — two-factor authentication required for account access and payment initiation
- Liability framework — clear rules on who bears responsibility for unauthorised transactions
- Data minimisation — third parties can only access data necessary for the service being provided