4 min read
It’s 2025, and if you’re still feeling unsure about the term “open banking,” you’re not alone. But for both businesses and consumers, now is the time to get in the loop on this innovative tech that’s sure to impact your financial future.
Around the world, open banking is offering businesses a host of new ways to serve customers, streamline operations, and innovate at speed. In fact, experts predict that the global open banking market will surpass $123 billion by 2031. With that kind of growth, sitting on the sidelines just isn’t an option.
In this piece, we’ll break down the essentials of open banking so you can understand what it is, how it works, and—most importantly—what it can do for you and your business. We’ll also share some real-world examples and discuss the benefits and challenges you should keep on your radar.
What is Open Banking?
At its core, open banking is about creating a more interconnected financial landscape—one where banks and financial institutions can securely share data with trusted third-party providers. Instead of keeping customer information locked away in siloed systems, open banking invites approved players like fintech startups, accounting platforms, and even non-financial brands into the fold.
For businesses, this shift unlocks a whole new realm of possibilities. With direct access to real-time financial data (think transaction histories, balance checks, and payment processing), you can customize your offerings, simplify payment flows, and deliver a more seamless experience to your customers. It’s not just for big banks or tech giants—open banking opens the door for all kinds of companies to tap into richer, more flexible financial services.
How Does Open Banking Work?
Open banking hinges on the secure exchange of data through standardized APIs (Application Programming Interfaces). Think of these APIs as digital “bridges” that connect banks, fintech providers, and other authorized businesses. Instead of waiting days for a bank to generate reports or manually inputting data into spreadsheets, companies can plug directly into these digital lanes to retrieve up-to-date financial information.
Security and compliance are top priorities throughout this process. Government regulations, like Europe’s PSD2 (Revised Payment Services Directive), spell out the rules around who can access data and how it must be protected. In Canada, where open banking (otherwise named consumer-driven banking) is still in development, the government has announced a phased approach to shape clear guidelines for secure and authorized data sharing. Similarly, financial institutions deploy strong authentication methods and encryption to ensure every data request and exchange is both legitimate and secure.
Real-Life Examples of Open Banking
Now that we’ve explained how open banking works behind the scenes, let’s look at practical ways it can be used in real-world scenarios.
- Seamless Payments: In open banking hot-spots like the U.K., customers can pay merchants directly from their bank accounts—no card networks or extra intermediaries needed. Instead of following the traditional debit card route, where a transaction bounces through various processors, open banking creates a direct link between buyer and seller. The result? Fewer fees, quicker checkouts, and a more transparent payment experience for everyone involved.
- Smarter Money Management: Personal budgeting apps like Mint tap directly into users’ bank data—no manual data entry required. Companies that weave these insights into their offerings can help customers make better decisions, and as a result, boost their own brand loyalty.
- Speedy Lending: With instant access to real-time financial data, lenders can offer on-the-spot approvals for loans, credit lines, or BNPL (Buy Now, Pay Later) options. It’s win-win: customers get faster results, while businesses move deals forward without delay.
- Automated Bookkeeping: Small businesses can link their bank accounts to financial services, like QuickBooks, cutting down on tedious manual entries for bookkeeping. That frees up time to focus on the business instead of data entry.
- Tailored Financial Products: Open banking lets businesses see what customers really need. From custom savings plans to flexible interest rates, it’s easier than ever to fine-tune offerings and stand out from the competition.
Open banking isn’t just a tech trend—it’s a real opportunity to improve the financial experience on all sides. For businesses, it can cut costs, simplify payment flows, and unlock new revenue streams by offering personalized services. For consumers, open banking means more control, better insights into their finances, and easier access to tailored products. In short, everyone gains from a more flexible, transparent, and innovative financial ecosystem.
Challenges of Open Banking
Open banking may be full of promise, but it isn’t without its stumbling blocks—especially as Canada works toward establishing its own framework.
One of the biggest hurdles to open banking is data security and privacy. While open banking relies on secure, regulated APIs, businesses must still invest heavily in cybersecurity measures to protect against data breaches and fraud. This is critical to earning consumer trust, which can be harder to come by in a market that’s still getting used to the idea of sharing financial data with third parties.
Another challenge is regulatory compliance. In Canada, the federal government is charting a phased approach to open banking, but the rules are still being shaped. This uncertainty can slow adoption as businesses wait for clearer guidelines. As these standards evolve, companies must remain agile and ready to update their systems and processes at a moment’s notice.
On the technical front, integrating legacy banking systems with cutting-edge APIs can get complicated, especially when working with multiple financial institutions. Smaller businesses and fintech startups might find these integration costs and resource requirements daunting. Even once the infrastructure is in place, there’s the question of consumer awareness and trust. Many Canadians are still unfamiliar with open banking, making it essential for businesses to invest time and effort into explaining the benefits—transparency, control, and better financial products—before users are ready to jump on board.
Addressing these challenges will take cooperation across the industry. As Canada’s open banking environment continues to take shape, businesses that commit to strong security, proactive compliance, transparent communication, and user-friendly integrations will be best positioned to succeed.
Next Steps and How to Get Started
If your business hasn’t explored open banking yet, now’s the time. Start by assessing your current financial workflows and customer touchpoints—where can seamless payments, personalized services, or data-driven insights make the biggest impact? Keep an eye on emerging regulations and industry standards, especially as Canada’s open banking framework evolves. By staying informed and proactive, you’ll be in a prime position when the time comes.
Interested in learning more? Reach out to an account executive at Digital Commerce Payments. We’re here to help you navigate the latest in banking and payments technology, ensuring you’re well-prepared to embrace the opportunities that open banking has to offer.