Everything you need to know about Open Banking: A complete guide for consumers and businesses
What is Open Banking, how does it work, and is it secure? In this guide, we explain Open Banking in the UK for consumers, businesses and professional firms.
Open Banking is a system that enables customers to share their financial data securely and simply with authorised third parties through Application Programming Interfaces (APIs). By opening the door to more personalised, efficient, and innovative financial services. Open Banking is transforming the way we manage our money in the UK.
Many consumers still misunderstand Open Banking or feel unsure about connecting their accounts, which can be a challenge for firms that depend on timely financial information, such as law firms.
What is Open Banking?
While banks have traditionally controlled and guarded customer data, Open Banking reverses that by giving customers ownership of their financial data. This includes the right to share this data with regulated third parties, such as banks and other financial services.
Open Banking originated from the EU’s Second Payment Services Directive (PSD2) and was rolled out in the UK under the regulation of the Financial Conduct Authority (FCA). It legally requires the UK’s major banks to allow access to customer data, with explicit consent, through secure APIs.
For professional services, Open Banking also helps firms meet strict regulatory obligations by giving them verified, tamper-proof financial data directly from the bank, removing the risks associated with PDFs, scans, and manually submitted statements.
How does Open Banking work?
- Customers permit a third-party provider (such as a budgeting app) to access their account data via your bank
- Banks provide access through secure API connections, rather than by sharing login credentials or using screen-scraping
- Third-party providers can then use this data to deliver financial services or initiate payments
In a legal context, this means firms can quickly complete Source of Funds and Affordability checks using verified transaction data, reducing delays caused by clients gathering paperwork or sending incomplete statements.
Common uses of Open Banking in the UK include:
- Budgeting apps that help customers track and categorise their spending
- Account aggregation that lets users see multiple bank accounts in one place
- Alternative credit scoring that allows lenders to assess real-time financial behaviour
- Faster SOF, SOW, AML, and affordability checks for legal and accounting firms
How Armalytix uses Open Banking
At Armalytix, we use Open Banking to provide the best Investigation, AML, and Affordability services to professional firms within the legal and accounting industries. Rather than wasting hours chasing back and forth for bank statements, Open Banking lets us provide instant access to critical client financial data.
“Using Armalytix means we can speed up case progression. With Armalytix, instead of waiting weeks or months for the banks to send statements, we can access the data instantly. The analysis is great and saves hours of manual review and easily identifies ‘interesting’ transactions for our attention.” – Toyah Poole – Insolvency Practitioner, Clarke Bell
For lawyers and accountants, the biggest advantage is accuracy. Open Banking removes the risk of edited statements, missing pages, or unclear transaction histories, allowing firms to make quicker, more confident decisions in line with AML regulations.
Benefits of Open Banking?
Open Banking in the UK is reshaping how customers, businesses, and the wider financial sector manage money. Here’s how each group benefits:
For customers:
- Single view of all accounts and cards in one place
- Smarter budgeting and saving tools
- Access to better deals tailored to individual spending habits
For businesses:
- Streamlined payment processing due to fewer card fees
- Easier access to funding based on real transaction data
For legal and professional services:
- Faster and more accurate Source of Funds checks
- Reduced risk of human error and document tampering
- Clear transaction trails supporting AML compliance
- Fewer client delays and a smoother onboarding process
For the wider financial sector:
- Increased competition and digital banking innovation
- Lower costs and faster services
Open Banking and Anti-Money Laundering (AML)
Open Banking also has a key role to play in anti-money laundering (AML) efforts, which is increasingly vital as financial fraud becomes more prevalent and sophisticated.
“Open Banking gathers key information from a buyer or seller’s account to determine where the funds have come from. This technology, together with AI and machine learning, is key to unlocking effective AML checks as it provides transparency for all parties involved, and can help firms identify riskier customers.” – Mike Ward, Executive Chairman of Armalytix (quoted in The Negotiator, How to combat dirty money in the UK property market).
Open Banking in the UK
The UK is a global leader in Open Banking adoption. As of March 2025, there are 13.3 million active Open Banking users in the UK, including both individuals and small businesses – a 40% increase from 2024.
Major banks including Barclays, HSBC, Lloyds, and NatWest are part of the Open Banking ecosystem, regularly updating their APIs. Meanwhile, newer fintech companies like Monzo, Starling, and Revolut use Open Banking to provide innovative services to UK customers.
Is Open Banking safe?
Yes, and here’s why:
- Open Banking in the UK is regulated by the FCA, meaning only authorised providers are allowed access.
- Strong Customer Authentication (SCA) verifies identity through multi-factor authentication
- All APIs use bank-grade encryption protocols to protect customer data
- Customers can revoke access at any time
- Banks and providers never share customer login details
- If something goes wrong (e.g. fraud), UK FCA regulations ensure you’re protected
Why Open Banking adoption can be a challenge & how Armalytix solves it
For many law firms, one of the biggest barriers to using Open Banking is simply getting clients to agree to connect their account. This is usually because clients:
- May not understand what Open Banking means
- Think it gives complete control over their bank account
- Believe PDFs are safer
- See it as optional admin
Clients may lack understanding of how secure and regulated the process is, which can leave firms reverting to slow, manual bank statement collection.
Armalytix solves this problem through clear, client-friendly communication that explains the process in plain English and builds trust from the first touchpoint. As a result, 93% of our analytics reports are returned with a successful Open Banking connection, dramatically reducing manual admin and accelerating source-of-funds checks, affordability and AML processes.
FAQs about Open Banking
Q: Do I have to use Open Banking?
A: No, it’s optional. Your accounts work as normal without it.
Q: Can third parties take money from my account?
A: Only if you authorise a payment service; otherwise, they can only view data.
Q: What happens if something goes wrong?
A: FCA regulations ensure compensation in the case of fraud or mistakes.
Q: Is Open Banking free to use?
A: Most consumer services are free, but some premium tools may charge.
Q: What if my clients refuse to use Open Banking?
A: Clear, trusted communication makes a significant difference. When clients understand that Open Banking is secure, FCA-regulated, and only shares the data you request, they are much more likely to proceed. Armalytix supports this by guiding clients through a simple, transparent process that achieves a 93% connection rate.
Open Banking gives UK consumers and businesses more control, more choice, and better access to innovative financial tools. It’s a secure, regulated, and optional system, but those who use it can benefit from smarter budgeting, faster payments, and access to services tailored to their needs.
At Armalytix, Open Banking is a key part of our offering, helping accountants and lawyers understand their clients’ financial position quickly and easily.
To see how Armalytix uses Open Banking in practice, book a demo today and discover how to simplify your data collection and analysis.
