Open banking for business: Benefits, security & implementation

Published 10 March 2026

Table of contents

• What is open banking?
• How open banking works in the UK
• Open banking’s benefits for small businesses
• Is open banking safe?
• Rules governing open banking in the UK
• Get started with open banking in Xero
• FAQs on open banking

Key takeaways

• Open banking lets you securely share bank data with trusted apps and websites that help you manage your finances.
• In the UK, regulation and strong customer checks help keep open banking secure. Only use FCA-registered firms, which are listed in the open banking directory.
• You can use open banking in your business to get more insights on your cash flow, speed up bank reconciliation, and enable faster payments.

What is open banking?

Open banking is a secure system for sharing bank data with approved, authorised, and regulated apps and financial service providers in the UK. Launched in the UK in 2017, open banking is part of a government-banked initiative to give banking customers more control and oversight of their finances. It combines Application Programming Interfaces (APIs), which is a technology that allows software programmes to share information with each other, with specific standards and systems set out by Open Banking Limited in the UK. Open banking is regulated by the Financial Conduct Authority (FCA), and only apps and institutions authorised by the FCA can be listed on the official open banking directory.

Open banking apps and services can help you with things like budgeting, payments, savings, loans, and investments. Using open banking can be as simple as connecting your business bank account to your accounting software, so that transactions flow into the system automatically. It’s also used on a larger scale, by HMRC. For example, the option to pay your tax bill via bank account is powered by open banking technology.

User consent plays a vital role in the UK’s open banking system, and it’s up to you to give permission to the apps and financial service providers, often referred to as third-party providers, to access your data. When you give consent to these third-party providers, you can then access their tools for budgeting, payments, savings, and more. You can remove access if you decide to stop using opening banking tools for any reason.

How open banking works in the UK

Open banking lets you share your banking data with certain apps and websites, giving you access to tools for budgeting, payments, savings, and other financial management.

Many UK banks participate in open banking, and you can check if yours is listed in the opening bank provider directory.

Open banking’s benefits for small businesses

Here’s how open banking benefits small businesses like yours.

• Clearer cash flow: Open banking allows cloud-accounting software providers to gather live data from your business bank accounts and present it together in one place. You can use this data for financial forecasting and reports, which helps inform your business decisions.
• Easier financial management: By sharing banking data such as your account balance and transactions, you can use Open Banking apps to get tailored recommendations for reducing spending, or reminders about upcoming payments.
• Faster account-to-account payments: Open banking gives you speedy ways to pay, like Pay Now buttons embedded in online or e-invoices, and ‘pay by bank’ options where customers initiate payments to businesses from their bank accounts without having to type in card details.
• Simpler bank reconciliation: You can easily match and reconcile transactions that flow into your accounting software through an open banking connection. There’s often no need to manually upload bank statements, which means fewer, faster admin processes for your business.
• Smoother lending decisions: With open banking, you can give potential lender access to your business’s financial information so they can make faster decisions. In some cases, you can apply for business loans directly from your accounting software.

You can access open banking tools through modern accounting software which gives you new, better ways to manage your finances.

Is open banking safe?

Yes, providing you stick to FCA-regulated providers. Only FCA-regulated firms can enroll on the open banking directory, so check there before sharing any data with a new open banking app or website.

You can also control what information you share with providers, and for how long. You can revoke permission if you decide not to stop using an app or platform, too. FCA-regulated firms will never ask you to share confidential details like your banking app log in details, either. If unauthorised payments are made, and you’re using an FCA-regulated open banking service, your bank should refund you the amount.

Open banking apps and services follow modern, established security protocols.

• They use encrypted, finance-grade application programming interfaces (APIs) to share data. An API allows separate programs to talk to each other, and encryption encodes the information so that it’s only readable by the intended recipient.
• Open banking transactions require multi-factor authentication.

Rules governing open banking in the UK

Open banking service providers are required to comply with the UK’s Payment Services Regulation (PSR) 2017. This regulation demands providers are registered with the FCA, and have strict security measures and customer authentication procedures to protect users.

Here are the general guidelines for open banking.

• You decide what data to share with a third-party provider and how long you share the data for.
• It’s up to you to give consent. Open banking is optional, not mandatory, and it’s your choice.
• Providers must be FCA-regulated, and use strict security protocols as set out in PSR 2017.

Get started with open banking in Xero

Xero helps you access the benefits of open banking to smooth your financial admin. Clarify your cash flow by connecting your business bank accounts to Xero. You’ll bring all your bank transactions into your Xero organisation, where you can use Xero’s automated bank reconciliation tools to get accurate, up-to-date numbers in no time.

And Xero also lets you integrate payment options including open banking providers into your online invoices, so customers have more ways to settle the bill.

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FAQs on open banking

Here are some common questions and answers to help you get to grips with open banking:

What is a simple example of open banking?

One example of open banking is a connection between your business bank account and your accounting software. Instead of manually uploading bank statements to your software, and reconciling transactions one by one, open banking allows your bank transactions to flow into the accounting software automatically. This makes reconciliation of your transactions faster and easier, so you can see your business's financial situation sooner and without having to check your bank account.

Which UK banks support open banking?

Many major banks in the UK, and a growing number of smaller ones, provide open banking services. You can check if your bank supports open banking on the open banking directory.

Do I need to renew my open banking consent?

No, your third-party provider is required by the FCA to renew consent every 90 days. You may be prompted by the app to reconfirm your permission, but you don’t need to track this yourself.

Is open banking free for my business?

Yes – open banking is free, in the sense that you can opt to share your banking data with third-party providers. Those third-party providers might charge you for specific services or apps, though.

What is the difference between PSD2 and open banking?

The payment services directive 2 (PSD2) is a European regulation that sets out the requirements for third-party providers who offer payment services. It’s legislation that made the adoption of open banking services possible. PSD2 was converted into UK law through the UK’s Payment Services Regulation (PSR) 2017.

Does open banking support variable recurring payments?

Yes, open banking enables variable recurring payments (VRPs), which allow customers to connect payment providers to their bank accounts and submit payments on their behalf. Find out more about VRPs on the opening banking website.