Open Finance vs. Open Banking: How the Scope Is Expanding
Open banking lets you share bank account data with apps. Open finance expands that to include investments, loans, and crypto. Here’s how the scope is growing-and what it means for your money.
When you hear open banking, a system that lets you share your financial data with third-party apps through secure APIs. Also known as connected banking, it’s not about giving away your password—it’s about giving apps permission to read your account info, with banks acting as secure gatekeepers. Think of it like letting a budgeting app pull your spending history directly from your bank, so you don’t have to log in, download statements, or manually enter transactions.
This isn’t science fiction. In Europe, NextGenPSD2, the updated rulebook that forces banks to open their data systems made this mandatory. And to keep it safe, FAPI, a security standard that uses military-grade encryption and identity checks locks down every data request. Together, they power apps that help you track cash flow, get instant loans, or even pay friends without switching apps. You might not realize it, but if you’ve used a tool like Mint, Revolut, or a Buy Now Pay Later option at checkout, you’ve already used open banking.
It’s not just about convenience. Open banking turns your financial data into something you control, not something banks hoard. That’s why it’s fueling embedded finance, when payments, credit, or insurance pop up inside apps like Uber, Shopify, or even your grocery app. A small business owner can get a loan while checking sales on their POS system. A freelancer can split a bill with a client without leaving their invoicing tool. This is the future—and it’s already here.
What you’ll find below are real, no-fluff breakdowns of how these systems actually work. From how banks enforce security with FAPI, to why NextGenPSD2 changed the game in Europe, to how these tools connect to things like virtual cards and cash flow dashboards for small businesses. No jargon. No hype. Just clear explanations of what’s happening, who it helps, and why it matters to your money.
Open banking lets you share bank account data with apps. Open finance expands that to include investments, loans, and crypto. Here’s how the scope is growing-and what it means for your money.