Open banking
How it works
Open banking uses regulated APIs. When you connect a bank to a third-party app (like a budgeting tool), you authenticate directly with your bank, then grant the app read access to specific accounts. The app never sees your bank login. Consent is revocable at any time.
PSD2 and the UK Open Banking Standard
The EU's Payment Services Directive 2 (PSD2) mandated open banking across all EU banks in 2018. The UK followed with its Open Banking Standard. Together they cover most banks in Europe and the UK. In the US there is no equivalent mandate; Plaid uses a mix of formal API agreements and screen-scraping.
Why it is safer than screen-scraping
Screen-scraping requires giving a third party your bank password. Open banking does not. Open banking access is also explicitly time-limited and scoped — you grant read access to specific accounts for a specific period (typically 90 days, renewable).
