Open Banking: The Legal Groundwork Before You Connect to the Banks

Open banking is one of those phrases that promises a great deal and hides a lot of detail. At its simplest, it lets a product connect to bank systems so that, with a customer’s permission, it can access account information or initiate payments. The opportunity is large, but the groundwork is unglamorous, and skipping it is how promising products run into trouble.

The first question is what you are actually doing. Reading account data and initiating payments are different activities with different implications, and a product that does both carries more obligations than one that does either alone. Mapping precisely which functions you offer is the foundation for everything that follows, because it determines which rules and which authorisations apply.

Consent and data protection sit at the centre. Open banking lives or dies on customer permission, and that permission has to be informed, specific and properly recorded. How you obtain it, how you store the data you receive, and how you let customers withdraw it are not afterthoughts. They are the core of a model that depends on trust, and regulators and banks will both look closely at them.

Then there is the relationship with the banks themselves. Connecting to a bank’s systems means meeting its technical and contractual requirements, and a bank will want comfort about your security, your controls and your standing before it lets you near its customers’ accounts. Presenting as a credible, well-governed counterparty is what turns a connection from aspiration into reality.

Underpinning all of it is the question of whether your activity is regulated. Depending on what you do, you may need authorisation in your own right, and assuming otherwise is a risk no founder should take casually. Confirming your status early lets you build the right structure once, rather than discovering a gap when you are already live and integrated.

Two areas reward extra attention before you go live. The first is what happens when something goes wrong, because a security incident or a data breach in an open banking product is not just a technical problem, it is a legal and reputational one, and you need a plan for it before you need to use it. The second is the contract with the bank itself, which will set out responsibilities, liabilities and standards in detail. Reading those terms carefully, and negotiating where you can, decides who carries the risk when a problem occurs. Founders sometimes treat the bank agreement as a formality and discover too late that it placed more on them than they realised. Getting both the incident plan and the contract right is part of building a product that lasts rather than one that unravels at the first serious test.

We help fintechs lay the legal foundations for open banking, from classifying the activity and handling consent and data to meeting what the banks expect of a partner. If connecting to the banks is on your roadmap, let us get the groundwork right before you build on top of it.