Open Banking Explained: Essential Terms and Definitions

As the digital revolution transforms the financial industry, open banking is at the forefront, introducing a wealth of new terminology that might be unfamiliar. To help you navigate this complex landscape, we have prepared this guide, providing clear definitions and explanations of key concepts in open banking.

What Is Open Banking?

Open banking is a system where banks and other financial institutions share user information securely and electronically with third-party providers (TPPs) with the user’s consent. This data sharing is facilitated by application programming interfaces (APIs), which act as conduits for information transfer.

Application Programming Interface (API)

APIs act as a bridge between different software applications, enabling them to communicate and share information securely. In the context of open banking, APIs allow third-party providers to access customer data from financial institutions, provided the customer has consented.

Third-Party Provider (TPP)

TPPs are entities that offer services using the data shared by banks through open banking APIs. They can provide various services like account aggregation, payment initiation, or financial management tools.

Account Information Service Provider (AISP)

AISPs are a type of TPP that provide account information services. They aggregate and display information from various bank accounts that a user holds, providing a consolidated view of their financial situation.

Payment Initiation Service Provider (PISP)

PISPs are another type of TPP, but their role is to initiate payments directly from the user’s bank account on their behalf, creating a seamless and direct payment experience.

Funds Confirmation Service Provider (FCSP)

FCSPs are TPPs that confirm whether a user has sufficient funds in their account for a transaction, providing real-time financial assurance for transactions.

Payment Service User (PSU)

PSUs are individuals or businesses that use payment services. In the open banking context, a PSU is a person or entity that uses services provided by TPPs.

Strong Customer Authentication (SCA)

SCA is a requirement under the Payment Services Directive 2 (PSD2) that mandates additional identity verification steps for electronic transactions. It is designed to enhance the security of digital payments and protect users’ data.

Payment Services Directive 2 (PSD2)

PSD2 is an EU directive that has facilitated open banking by requiring banks to share customer data with authorised TPPs. It aims to promote competition and innovation in the financial services industry.


Understanding these terms is key to unlocking the language and potential of open banking. As open banking continues to evolve, it will become an increasingly integral part of the global financial ecosystem.

To learn more about how open banking can revolutionise your financial services, contact DSGPay, your trusted partner in navigating the digital transformation of finance.

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