Open banking

Open banking is a framework in which banks give licensed third-party providers secure, standardized access to customer financial data and payment initiation through APIs, with the customer's consent. It lets people and businesses share their bank account information with apps and services they choose, and it lets those services start payments directly from a bank account.

Open banking rests on a simple shift: the customer, not only the bank, controls who can see their financial data and move money on their behalf. Banks expose APIs that licensed providers can connect to, and a customer grants explicit consent for a specific provider to access account information or initiate a payment. Two broad capabilities follow. The first is data access, which powers account aggregation, budgeting tools, and affordability or identity checks. The second is payment initiation, which lets a service move money straight from a bank account without a card in the middle. The framework is driven by regulation in some regions and by market adoption in others, so what is available and how consent works depends heavily on geography. A broader extension of the same idea, sometimes called open finance, widens access beyond bank accounts to other financial products. For a subscription business, a platform such as Recurly is where these methods would be enabled and managed when they make sense.

Why open banking matters for subscription businesses

Cards are not the only way to move money, and they carry costs and failure modes of their own. Open banking gives subscription businesses a path to account-to-account payments that can lower processing costs and sidestep card-specific issues like expiries and declines. On the data side, consented access to account information can support smoother onboarding, verification, and affordability checks without manual document collection. Because access is consent-based and standardized, it can also improve the customer experience compared with older methods of connecting to a bank. The caveats matter: availability, rules, and maturity differ by region, consent has to be obtained and managed properly, and bank-based payments behave differently from cards in areas like refunds and timing. It is an option to weigh, not a universal replacement.

For an operator, the value of open banking is having more payment methods and data connections available where they make sense, without taking on the full complexity of bank APIs directly. That means regionally appropriate payment-method support and consent-based data access that reduce reliance on cards alone.

How to use open banking

Start with where your customers are, since open banking's availability and rules vary by region.

• For payments, consider offering an account-to-account method alongside cards where it is supported, and design for how bank payments differ from cards in settlement timing and refunds.

• For data, use consented access to streamline verification or affordability checks rather than collecting documents manually.

• Build consent handling in from the start, since customers must grant access explicitly and that consent has to be captured, honored, and revocable.

• Measure the effect on cost per transaction, payment success, and conversion, and compare it against your card methods rather than assuming a blanket improvement.

Benefits and examples

Open banking opens payment and data options beyond cards.

• It enables account-to-account payments that can reduce processing costs and avoid card-specific failures.

• It supports consented data access for onboarding, verification, and affordability checks.

• It puts the customer in control of who can access their financial data and initiate payments.

Example: A subscription business operating in a region with mature open banking offers a bank-based payment option at checkout. A customer consents once, and future charges draw directly from the bank account rather than a card, avoiding declines from an expired card. The change in processing cost or payment success from adding this method is significant, with the industry reporting an open banking transaction costs reduction of between 20%-70% when compared with cards, and a 10%-20% success rate when compared to cards due to durable banking information.

Frequently asked questions

What is open banking? It is a framework that lets banks share customer financial data and let payments be initiated through secure APIs, with the customer's consent. It gives people control over which apps and services can access their accounts or move money for them.

How does open banking work? Banks expose APIs, and a customer grants a licensed provider explicit consent to access account data or start a payment. That enables things like account aggregation, verification, and account-to-account payments, depending on what the region supports.

How is open banking used in payments? It enables account-to-account payments, where money moves directly from a bank account instead of through a card. For subscriptions, that can lower processing costs and avoid card-specific problems like expired cards and declines.

Is open banking available everywhere? No. Availability, rules, and maturity vary by region, driven by regulation in some places and market adoption in others. What you can offer depends on where your customers bank.

What is the difference between open banking and open finance? Open banking focuses on bank account data and payments. Open finance is a broader extension of the same idea that widens consented access to other financial products beyond bank accounts.