PSD2 & Open Banking: How AISP/PISP Infrastructure Enables Fintech Innovation

The revised Payment Services Directive (PSD2) marked a turning point for Europe's financial sector when it came into effect in 2018. Often described as the catalyst for Open Banking, PSD2 introduced rules that require banks to securely share customer account data (with permission) via application programming interfaces (APIs). By breaking the banks' monopoly on customer financial data, PSD2 opened the open banking floodgates - empowering customers to control who can access their finances and enabling a wave of fintech innovation. This new era promised more competition, better digital services, and improved consumer choice in banking.

What is PSD2?

PSD2 is a European Union directive that sets common standards for electronic payments and account data access across member states. It required every bank in the EU to implement secure open APIs so that Third-Party Providers (TPPs) - such as fintech companies or other banks - can, with customer consent, retrieve account information or initiate payments on the customer's behalf. Crucially, PSD2 established two new types of licensed TPPs:

By mandating common rules and technical standards, PSD2 aimed to create a unified, fair financial marketplace across Europe. Every bank had to comply, meaning a customer's data portability and digital banking experience would be similar whether they bank in France, Poland, or any other EU country.

AISP. Account Information Service Providers

Aggregate and analyze account data from multiple sources

PISP. Payment Initiation Service Providers

Initiate payments from a user's bank account

How PSD2 Enabled Open Banking

Open Banking refers to the practice of securely sharing financial data and services through APIs to foster new apps and services. PSD2 directly enabled open banking by granting customers a legal right to share their bank account data with authorized third parties. In the past, banks were sole gatekeepers of account information; now, under PSD2, customers are in control - they can give a trusted app "read" access to their transactions or authorize a fintech service to initiate a payment without using their debit card. This access is always predicated on explicit customer consent and strong security. The forthcoming PSD3 + PSR package extends this further by mandating verification of payee, opening up the mobile payment layer, and shifting fraud liability toward PSPs and platforms; for the full breakdown see our PSD3 and PSR analysis.

PSD2 provided the legal and technical framework for open banking to flourish. It handed consumers the keys to their financial data and established standards for how that data is accessed and protected.

Access to Account (XS2A)

Banks must allow TPPs access to account data (balances, transactions) when customers request it. For example, a fintech budgeting app can retrieve account balances and transaction history from multiple banks to show a user all their finances in one dashboard.

Third-Party Payments

PSD2 lets licensed providers initiate payments on behalf of users from their bank accounts. This means at an online checkout, you could pay directly via your bank (through a PISP service) instead of using a card, offering a seamless and often lower-cost alternative.

Strong Customer Authentication (SCA)

To make data sharing safe, PSD2 introduced SCA. Banks must verify the user's identity with at least two factors (e.g. something you know, have, or are) for sensitive operations. This significantly reduces fraud risk and builds trust in open banking.

Opportunities Created by PSD2 for Fintech and Banks

By leveling the playing field, PSD2 unlocked numerous opportunities for both upstart fintech companies and established financial institutions:

Innovation and Competition

Banks no longer hold an exclusive monopoly on financial data, which encourages new entrants. Fintech startups can create innovative solutions on top of banking data, from smart budgeting tools to alternative lending platforms. Traditional banks, faced with new competition, are also spurred to innovate their own digital offerings.

New Services and Business Models

Open banking APIs enable aggregator services that were previously difficult. Personal finance management apps now aggregate data from all your accounts to give real-time spending insights. Lenders use transaction data to perform instant affordability checks for loans.

Customer Empowerment

Consumers benefit from more choice and control. They can manage money across many banks in one place, find products better tailored to their behavior, and switch providers more easily.

Collaboration and Partnerships

Banks and fintechs are finding win-win collaborations. Banks can partner with fintech companies to offer value-added services rather than building from scratch. This collaborative ecosystem was largely made possible by the standardization PSD2 brought.

Real-World Use Cases of Open Banking

Notable examples of open banking in action include:

A Juniper Research report projected global open banking users will surge from 180+ million in 2025 to over 640 million by 2029, driven by expanding use cases like automated lending and digital identity verification.

1. Account Aggregation & Financial Planning

Apps like Mint, Yolt or Tink aggregate data from multiple banks so users can see all accounts, credit cards, and investments in one dashboard.

2. Faster Loan Approvals

Borrowers can consent to lenders pulling their bank transaction history digitally. Lenders analyze income and spending patterns instantly to make credit decisions.

3. Seamless Payments

Fintech payment providers offer "Pay by Bank" options at checkout. Klarna and Trustly leverage open banking to let customers pay merchants directly from their bank accounts.

4. Personalized Advice and Offers

Digital challenger banks aggregate outside accounts so they can suggest better savings rates or alert you about subscriptions.

5. Small Business Tools

Accounting platforms (Xero, QuickBooks) integrate bank feeds via open banking to automatically update financial records.

How Binar Can Help

Implementing open banking solutions requires not only creative ideas but also deep expertise in regulations and technology. Binar is a consultancy that has been at the forefront of fintech and open banking, helping banks and startups design, validate, and build compliant financial products - from vision to regulated production systems.

Regulatory Guidance

Binar's team understands PSD2 inside out - not just the letter of the law but the practical frameworks like the Berlin Group API standards and UK Open Banking specs. We guide clients through what it means to be compliant.

Technical Implementation

Beyond advice, Binar specializes in building the technology that powers open banking services. This includes developing PSD2-compliant APIs for banks or financial institutions, as well as integrating third-party bank APIs into fintech products.

Innovation and Product Strategy

With open banking expertise, Binar helps clients identify high-impact use cases and craft innovative product strategies. Our consultants facilitate brainstorming sessions on how to use open data in new ways.

End-to-End Delivery

Open banking projects often involve multiple moving parts - compliance, front-end app development, backend infrastructure, third-party integrations, testing with sandbox environments, security audits, and regulatory sandbox approvals. Binar provides end-to-end delivery.

Multi-market Expansion

Because open banking standards can differ slightly by region, companies expanding across borders face complexity. Binar's experience across Banking, Fintech, Payments, WealthTech, Insurance & RegTech domains means we can help tailor your open banking solution to multiple markets.

Strong Security and Customer Trust

PSD2's rules on SCA and data handling are strict for good reason: consumers will only embrace open banking if they feel their money and privacy are safe. This is another area Binar's expertise is invaluable. We help implement bank-grade security in every solution:

✓ Strong encryption for all data in transit and at rest, following industry best practices
✓ Secure user authentication flows leveraging OAuth 2.0 and OpenID Connect for seamless yet safe consent granting
✓ Building consent dashboards and notification systems so users always know which third parties have access
✓ Adherence to data protection regulations like GDPR, ensuring data is only used for the purposes agreed by the customer
✓ Rigorous testing, including penetration testing and compliance audits

All these measures ensure that open banking products not only comply with PSD2 but also earn the trust of users. This trust is foundational - as open banking matures, a positive customer experience with security and privacy will drive greater adoption.

Seizing the Open Banking Opportunity

PSD2 and the rise of open banking have fundamentally reshaped the European financial landscape. What began as a regulatory push for more competition and consumer choice has evolved into a vibrant ecosystem of interconnected banks and fintechs. The opportunities for innovation are vast - and they extend to any company that deals with financial transactions or data, not just banks. From enhanced digital banking services to entirely new fintech platforms, PSD2's legacy is a financial services industry that is more open, collaborative, and customer-centric than ever before.

The era of open banking is here and growing; now is the time to innovate on top of it. And as you do, remember that you don't have to navigate this new terrain alone - Binar is here to help chart the course toward compliant, cutting-edge solutions in the PSD2 open banking world.

PSD2 and Open Banking – Unlocking Innovation in Financial Services