Open banking and open finance are often grouped together, but they solve different problems and provide different kinds of value. If you’re building financial products, embedding payments, assessing risk, or making infrastructure decisions, understanding the difference between open banking and open finance affects what data you can access, how reliable it is, and what you can build.

Below, you’ll learn how open finance and open banking work, how they differ, and how businesses use them to move faster and make better decisions.

What’s in this article?

• What is open finance vs. open banking?
  
• What are the main differences between open finance and open banking?
  
• How do open banking and open finance improve businesses?
  
• What technologies and standards enable open banking and open finance?
  
• What considerations do businesses face with open data sharing?
  
• How should financial institutions and platforms decide between open banking and open finance?
  
• How Stripe Payments can help
  

What is open finance vs. open banking?

Open banking and open finance are built on the same principle: customers should be able to securely share their financial data with the services they trust. The difference lies in the number and types of financial products each covers.

What is open banking?

Open banking allows people and businesses to securely share their bank account data with third-party services they choose. Instead of relying on screen scraping or manual uploads, banks expose standardized, secure interfaces—usually application programming interfaces (APIs)—that let data move with the customer’s permission.

Customers decide who can access their data, what data is shared, and for how long. Access can be revoked at any time, and credentials are never shared. Open banking is most commonly used for payments, account verification, balance checks, and transaction history. It’s growing fast, with open banking usage expected to grow by 470% from 2023–2027.

What is open finance?

Open finance extends the same model based on permissions and sharing data beyond bank accounts to the rest of a person’s or a business’s financial portfolio. This includes investments, pensions, insurance, credit cards, mortgages, loans, and other financial products outside of traditional checking and savings accounts.

What are the main differences between open finance and open banking?

The differences between open banking and open finance are in scope, maturity, and the type of data they enable. Understanding the differences is the first step to making better financial decisions.

Here’s what each one offers:

• Scope of data: Open banking is limited to bank accounts and payments. It covers balances, transactions, account verification, and payment initiation. Open finance expands access to include investments, pensions, insurance, mortgages, credit products, and other nonbank financial data.

• Depth of insight: Open banking shows how money moves on a daily basis. Open finance adds context by showing how assets, liabilities, risk exposure, and long-term obligations fit together.

• Regulatory maturity: Open banking is well established in many markets with clear rules, technical standards, and enforcement. Open finance is earlier in its lifecycle, with some regions actively building frameworks and others relying on voluntary or market-led approaches.

• Data consistency: Because open banking draws from a relatively narrow set of regulated institutions, its data is more standardized. Open finance spans many product types and providers, which increases complexity even as it permits more robust use cases.

• Financial experience: Open banking acts as the foundation for secure financial data sharing. Open finance builds on that foundation to support more comprehensive financial experiences across products.

How do open banking and open finance improve businesses?

By making financial data accessible in real time, with permission, open banking and open finance turn information into action. This enables better decisions, smoother operations, and new ways to serve customers.

Here’s how they improve businesses:

• Faster onboarding and verification: Businesses can instantly verify account ownership, balances, and cash flow instead of relying on manual documents and slow approval processes.

• Better decision-making: Live financial data provides a clearer view of customer behavior and financial health, which leads to more accurate credit decisions, risk assessments, and pricing.

• Lower payment costs and faster settlement: Open banking supports direct account-to-account payments, which helps reduce reliance on card networks. This can mean lower fees, quicker settlement, and fewer payment failures.

• Operational efficiency: Automated data access replaces manual uploads, reconciliations, and follow-ups. Teams can spend less time looking for information and more time acting on it.

• More personalized products: Understanding how customers earn, spend, save, and invest means companies can design more specific products. Open finance deepens this personalization by adding investment, loan, and insurance products.

• New revenue opportunities: Open data makes it easier to bundle services, embed financial features, and launch adjacent offerings without rebuilding infrastructure.

• Stronger fraud prevention: Secure, permissioned access reduces reliance on weak authentication methods and improves visibility into suspicious activity, which strengthens fraud prevention.

What technologies and standards enable open banking and open finance?

Open banking and open finance work because the industry has agreed on a shared set of technical building blocks that allow safe, flexible, and repeatable data sharing.

These are the standards that replace fragile processes:

• APIs: Standardized APIs let one integration work across many institutions, which replaces brittle, individual connections.

• OAuth-based authorization: OAuth allows customers to grant access without sharing usernames or passwords. Access is based on tokens, limited in scope, time-bound, and revocable.

• Strong Customer Authentication: Multistep verification ensures the person who grants access is the legitimate account holder. It provides more security than traditional login-based models.

• Standardized data formats: Common schemata create consistent data regardless of the source, which allows businesses to build once and expand across institutions and regions.

• Encryption and secure transport: Data is encrypted both in transit and at rest, which protects it from interception or misuse.

• Regulatory and industry frameworks: In regulated markets, such as the US, technical standards are reinforced by compliance requirements, certifications, and oversight. As open finance expands, these frameworks are increasingly extending outside of banking.

What considerations do businesses face with open data sharing?

Open data sharing raises expectations regarding confidence, security, and responsibility. Businesses need to get the following right:

• Customer consent and control: Consent flows must clearly explain what data is shared, why it’s needed, and for how long access will last.

• Data security: Encryption, secure API design, monitoring, and regular security reviews are necessary.

• Privacy and regulatory compliance: Systems must respect data minimization, purpose limitation, and user rights across jurisdictions.

• Third-party risk: Partners should be vetted carefully, with clear security standards and defined data responsibilities.

• Reliability and performance: Downtime, failed connections, or incomplete data quickly erode confidence and sour user experiences.

• Transparency and communication: Plain language and visible controls reinforce that data sharing is in the customer’s interest.

How should financial institutions and platforms decide between open banking and open finance?

The choice here should be practical. The right decision depends on how much data is needed to solve the problem.

Here’s how to make your choice:

• Start with the user’s needs: If bank account data is sufficient, open banking is often the fastest, most reliable path. Payments, identity verification, cash flow analysis, and basic credit decisions usually fit here.

• Expand when broader context matters: If your product depends on understanding assets, liabilities, or long-term commitments, open finance becomes more relevant. Wealth, investment, or insurance use cases benefit from a wider dataset.

• Account for market readiness: Open banking infrastructure is common in many regions. Open finance capabilities vary widely so availability and consistency should shape expectations.

• Design for expansion: Even if you start with open banking, systems should be built to support additional data sources later. Open finance works best as an extension, not a rebuild.

• Balance ambition with execution: Broader data access adds complications. The value of additional insight should outweigh the technical and operational overhead.

How Stripe Payments can help

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Learn more about how Stripe Payments can power your online and in-person payments, or get started today.