Open banking is the practice of banks, fintechs, and financial service providers sharing financial data through application programming interfaces (APIs) – with customer consent – to create financial products and services and promote competition in the financial services industry. As many as 645 million users worldwide are expected to become open banking customers by 2029. While the EU and UK enforce regulatory standards for open banking, the US has taken a more market-driven approach. The financial industry leads adoption in the country, encouraged by strong customer demand for integrated, personalised financial services.

Below is a guide on open banking in the US, including how it works, how it's regulated, and how it compares to open banking in other regions.

What's in this article?

• What is open banking?
  
• How does open banking work?
  
• Open banking regulations in the US
  
• How US open banking compares with that of the EU and UK
  
• Benefits of open banking for customers and businesses
  
• Challenges in adopting open banking in the US
  
• Best practice for open banking
  
• How Stripe Financial Connections can help
  

What is open banking?

Open banking is the practice of banks and financial companies sharing customers' data – with their consent – with third-party developers using open APIs. Developers use this data to build financial applications and services. Open banking has promoted greater competition and faster development within the banking industry, including the creation of personalised financial products.

Open banking is built on the concept that customers own their financial data and can choose to share it with third-party providers (TPPs) so these providers can create new apps and services. Regulations such as the second Payment Services Directive (PSD2) in the EU and the Open Banking Standard in the UK have mandated that banks open their systems to authorised providers, enabling the creation of a wide range of financial services and tools for businesses and customers.

How does open banking work?

Open banking connects customers, financial institutions, and TPPs through a secure, consent-based data-sharing process:

• Consent: A customer grants permission for a financial institution or app to access their financial data.

• Secure data transfer: The financial institution shares that data with the authorised TPP via a secure API.

• Service delivery: The TPP uses the data to deliver a service, such as a budgeting app, loan application, or payment initiation.

• Revocation: The customer retains the right to revoke access at any time.

The type of data shared depends on the service being used and generally falls into three categories:

• Account information: Balances, transaction history, and other account details, which are often used by budgeting or financial management apps.

• Payment initiation data: Authorisation for a third party to initiate payments directly from a customer's bank account, without routing through a card network.

• Identity verification data: Name, address, and other identity details used for Know Your Customer (KYC) checks, such as during account opening or loan applications.

Open banking regulations in the US

The regulatory environment of open banking in the US is fragmented and lacks the cohesive, formal regulatory framework of the EU or the UK. Instead of a centralised mandate, US open banking regulation is shaped by a variety of existing financial regulations, sector-specific guidelines, and some emerging industry standards.

Here’s how open banking is regulated in the US:

• Consumer protection and data privacy: Section 1033 of the Dodd-Frank Act is considered the legal basis for open banking in the US. It requires that customers have access to their financial data and can securely share this data with third parties. The Consumer Financial Protection Bureau (CFPB) is the primary US regulatory body that oversees open banking development.

• Data security standards: Regulations such as the Gramm-Leach-Bliley Act set standards for how financial institutions must safeguard customer data and ensure privacy. When they share customer data with third parties, financial institutions must follow the strict protocols set by this act.

• Voluntary industry standards: Industry groups and consortiums have begun to create voluntary standards to facilitate data sharing. For instance, the Financial Data Exchange (FDX) is a nonprofit group that has developed and promoted an API standard for secure, convenient access to and sharing of financial data.

• Interagency guidance and collaboration: Different regulatory bodies including the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC) have issued guidance on how banks should manage risks associated with the kinds of third-party relationships involved in open banking (i.e., sharing data with fintechs or data aggregators).

Open banking regulations in the US are still developing. The goal of the CFPB’s phased implementation is to balance customer benefits with necessary safeguards and gradually expand the scope of open banking.

In October 2024, the CFPB proposed a Personal Financial Data Rights rule (the “final rule”) to accelerate the shift towards open banking. The rule addresses these key areas:

• Customer control: The final rule empowers customers to access their financial data and authorise the secure sharing of this data with TPPs.

• Standardised data access: The final rule requires data providers to make covered data available to customers and authorised third parties in an electronic form. This makes information consistent and accessible for all parties.

• Data privacy and security: The final rule sets forth criteria a third party must satisfy to become an “authorised third party,” including certification that it’ll meet the obligations that govern the collection, use, and retention of covered data to protect customer information.

However, the rule is under reconsideration. In August 2025, the CFPB opened a comment period on issues including third-party access, fees, and data security. Separately, the rule has been challenged in federal court, which has enjoined enforcement while the CFPB rewrites it. So the original compliance deadlines aren’t currently in effect and a revised rule is expected in the coming months.

How US open banking compares with that of the EU and UK

While the US is still in the early stages of open banking development, it’s following a similar path to the EU and UK with a focus on customer consent, data standardisation, and increasing financial competition. The CFPB finalised its Section 1033 rule in October 2024. But as of mid-2026, a federal court has enjoined the rule and the CFPB is rewriting it. So it exists on paper but isn’t currently being enforced.

Here’s how the US model compares with those of the EU and the UK, two leaders in open banking regulation.

Regulations

• US: Open banking regulation exists but isn’t currently enforced. A federal court in the Eastern District of Kentucky enjoined the rule and the CFPB has been reworking it since an Advance Notice of Proposed Rulemaking in August 2025. The original compliance deadlines (staggered from April 2026–April 2030) have essentially been paused while this plays out. Broader regulatory guidance has focused on data protection and customer rights under existing financial laws such as the Dodd-Frank Act and the Gramm-Leach-Bliley Act.

• EU: Open banking is mandated by PSD2, which requires banks to provide third-party access to customer banking, transactions, and other financial data through APIs, after obtaining customer consent. A PSD3 framework is currently in development.

• UK: The UK established its own specific set of open banking regulations, similar to PSD2, which is managed by the Open Banking Implementation Entity. This regulation is more structured and aims to standardise how banks and third parties interact.

Implementation

• US: Implementation is voluntary in practice and varies widely between institutions since the binding federal rule that would’ve mandated it isn’t being enforced. Some large banks have proactively developed APIs and collaborated with fintechs, while others have been slower to adopt open banking. Some large banks (e.g., JPMorgan Chase) have also signalled they might begin charging fintechs and data aggregators for data access—a fee question the CFPB is actively reconsidering as part of its rewrite.

• EU and UK: Banks are required to create and maintain APIs that TPPs can use to build financial services. This practice is subject to strict regulatory standards and oversight.

Customer data access

• US: Customer data access is guided by the principle of customer consent under existing privacy laws. There’s an emphasis on data security but less focus on enabling TPP environments.

• EU and UK: Customer data protection and access to data are emphasised equally.

Focus and outcomes

• US: The focus is on improving customer convenience and data security within existing financial services.

• EU and UK: The focus is on increasing competition and lowering costs in the financial services sector.

Industry participation

• US: Participation is optional and occurs through partnerships and collaborations, often dictated by market forces. Industry-led initiatives—notably FDX, which the CFPB formally recognised as a standard-setting body under Section 1033—continue to build common technical standards independent of the federal rule’s enforcement.

• EU and UK: Banks are obligated to participate and comply with regulatory standards, which are uniformly applied across all financial institutions.

Benefits of open banking for customers and businesses

Open banking has improved financial services, creating new opportunities and benefits for customers and businesses.

Customer benefits

• Personalised financial management: Open banking allows customers to aggregate their financial data from multiple accounts into a single platform, offering a holistic view of their finances that facilitates budgeting, expense tracking, financial goal setting, and investment recommendation services. Open banking adoption continues to grow in North America. FDX, which sets the industry standard, reported more than 130 million customer accounts are connected via its API as of early 2026.

• Smart financial products: Using open banking APIs, fintechs can offer financial products such as loans, insurance, and investment options that are customised to individual needs and risk profiles. This leads to better rates, faster approvals, and improved customer satisfaction.

• User experience: Open banking has facilitated convenient, user-friendly digital finance features such as one-click payments, automated savings, and financial insight.

• Robo-advisers and automated investing: Open banking enables robo-advisers to access a wider range of financial data, leading to more accurate investment recommendations and automated portfolio management for investors.

• Financial inclusion: Open banking enables individuals with limited credit histories or those underserved by traditional banks to access financial services. TPPs can extend credit and other financial products to a wider population by using alternative data sources and advanced algorithms to assess loan and credit applications.

Business benefits

• Payment solutions: Open banking facilitates faster, more efficient, and cost-effective payment methods. For example, TPPs can initiate payments directly from customer accounts, reducing reliance on traditional methods. In the UK, one of the first markets to adopt open banking, 351 million payments were processed in 2025 alone, a 57% increase year over year.

• Financial data analytics: Aggregating and analysing financial data from a variety of sources allows businesses to gain valuable insight into customer behaviour, spending patterns, and risk profiles. Businesses can use this data to develop targeted marketing campaigns and improve customer service.

• New business models: Open banking facilitates the emergence of new business models in the financial sector. Fintech startups are using open banking APIs to create platforms and services that challenge traditional banking institutions.

• Fraud prevention and security: By providing a more comprehensive view of financial activity, open banking can help businesses and individuals identify suspicious transactions and prevent fraud.

• Embedded finance: Open banking enables nonfinancial businesses to integrate financial services into their offerings. For instance, e-commerce platforms can offer instant loans or insurance at checkout, while ride-sharing apps can provide in-app payment solutions.

• Financial solutions for small and medium-sized enterprises (SMEs): SMEs can benefit from open banking-powered solutions such as cash flow forecasting, automated invoicing, and access to alternative financing options.

• Competitive advantage: Early adopters of open banking gain an edge by offering innovative, customer-centric financial services that attract new customers, increase market share, and drive long-term growth.

Challenges in adopting open banking in the US

The adoption of open banking in the US faces several challenges, including the following:

• Regulations: Unlike in the EU and the UK, where open banking regulations are well established, the US regulatory environment is still developing. This uncertainty can deter some financial institutions and fintechs from investing in open banking initiatives.

• Data privacy, security, and customer trust: Sharing sensitive financial data with TPPs raises concerns about privacy and security, and customers might be hesitant to share their financial data due to fears about misuse or breaches. Strong security measures, clear consent mechanisms, and transparent data-sharing practices are necessary to protect customer data and build the trust needed for widespread adoption.

• Standardisation and legacy systems: Interoperability between financial institutions and TPPs depends on standardised APIs and data formats, but the lack of a unified standard creates technical barriers. This challenge is compounded by the fact that many US financial institutions still rely on outdated legacy systems that are difficult and costly to upgrade, slowing the broader shift towards a cohesive open banking environment.

• Competition and market dynamics: Open banking can disrupt the traditional banking industry, creating increased competition from fintechs and other nonbank players. This can pose challenges for established financial institutions that might need to adapt their business models and invest in new technologies to remain relevant.

• Liability and risk management: The industry must determine who’s responsible in case of data breaches, fraud, or other issues that might occur in open banking. Liability must be clearly defined to protect customers and businesses.

• Balancing improvement and protection: Open banking standards and regulations must balance promoting improvement and protecting customers. Regulations should be flexible enough to enable experimentation and new business models while safeguarding customer interests.

Best practices for open banking

The following best practice will help you participate in open banking securely and effectively:

• Phased approach: Start with a pilot project that focuses on specific use cases or customer segments. Test, refine, and scale gradually to minimise risks and maximise learnings.

• API security and performance: Implement strong security measures such as OAuth 2.0 for authentication and authorisation, encryption for data transmission, and regular security audits to identify and address vulnerabilities. Design APIs to be resilient and flexible to handle growing traffic, and use monitoring and analytics tools to track performance, identify bottlenecks, and improve response times.

• Data governance and consent mechanisms: Define clear policies for data access, usage, and sharing. Obtain explicit and granular consent from customers before you share their data with TPPs. Develop transparent data-sharing practices and provide customers with control over their data.

• Developer experience and partnerships: Create comprehensive documentation, software development kits (SDKs), and sandbox environments to help developers build on your open banking APIs, and provide support channels to encourage improvement. Partnering with fintechs can also accelerate your build-out by tapping into their expertise in technology, customer experience, and regulatory compliance.

• Regulatory developments: Stay informed about the latest regulatory requirements and industry standards regarding open banking to ensure compliance and maintain a competitive edge.

• Customer engagement and experience: Educate customers about the benefits of open banking and how you'll use and protect their data, with clear communication about data-sharing practices, consent mechanisms, and security measures. Pair this with user-friendly, accessible interfaces that integrate smoothly into existing workflows to build trust and encourage adoption.

• Experimentation: Open banking is a developing practice. Embrace improvement to deliver superior financial services.

How Stripe Financial Connections can help

Stripe Financial Connections is a set of APIs that allows you to securely connect to your customers' bank accounts and retrieve their financial data, enabling you to build innovative financial products and services.

Financial Connections can help you:

• Simplify onboarding: Offer a seamless, instant bank account verification process that does not require manual identity and account verification.

• Access rich financial data: Retrieve comprehensive information about your customers' bank accounts, including balances, transactions and account details.

• Automate recurring payments: Enable your customers to securely link their bank accounts for recurring payments, improving payment success rates.

• Enhance risk management: Analyse customers' financial data to make more informed decisions about credit, lending and other financial products.

• Comply with regulations: Financial Connections helps you meet KYC and Anti-Money Laundering (AML) requirements.

• Innovate with confidence: Build new financial products and services on top of the secure, reliable Financial Connections infrastructure.

Learn more about Financial Connections or get started today.