The Evolution of Open Banking in Europe
TL;DR
Open banking is no longer just a regulation. It’s becoming the backbone of Europe’s next wave of financial innovation. Driven by growing adoption, evolving regulation, and advances in AI and machine learning, it’s unlocking new ways to deliver smarter, more personalised financial services. As PSD3 nears and embedded finance gains momentum, the shift toward open finance will transform how consumers interact with money. The businesses that move first will shape what comes next.
Open banking in Europe, pioneered under PSD2, is continuing its transition from a regulatory mandate to a data-driven marketplace. It is becoming the engine behind a new era of financial innovation. In 2024, the EU saw about 64 million open banking users (roughly 25% of the population). Throughout Europe, consumer and business demand is becoming mainstream as fintech services proliferate. The financial landscape is evolving, thanks to smarter APIs and AI-driven insights. The businesses that succeed will be those ready to innovate and adapt.
Open banking goes mainstream: why consumers are embracing it
When it was introduced, open banking felt like a back-end concept. But, its adoption is increasing steadily as consumers recognise its real-world benefits, including personalised financial services and better user experiences. Open banking is becoming something consumers actively benefit from and even expect because they’re starting to see the value: tools that help them budget better, get loans faster, and understand their money more clearly. As open banking becomes woven into everyday apps and online experiences, new possibilities emerge, from loyalty rewards to seamless subscription management and instant payments.
A useful analogy is Google Maps. Think back to the early 2010s and the debates around Google Maps. Was it safe to share our location? Could Big Tech be trusted? The concerns were valid. But over time, the benefits of real-time directions, location-based suggestions, and seamless navigation won us over. Today, sharing your location is second nature.
Open banking is on a similar journey. Initial caution is giving way to trust as users experience personalised budgeting tools, faster loan approvals, and smarter financial insights. Convenience and relevance are the keys that open consumer acceptance.
From PSD2 to PSD3: What’s Changing and Why It Matters
European policymakers are now deepening and expanding the open banking framework. While PSD2 laid the legal foundation for secure data sharing and access to transactional data, its successor, PSD3, is set to build on that foundation by enhancing transparency, strengthening data security, and improving consent management. In June 2023, the European Commission released a comprehensive “financial data access and payments” package, which includes the PSD3 Directive, a new Payment Services Regulation (PSR), and a proposed Financial Data Access (FiDA) Regulation. Together, these proposals aim to harmonise national regulatory approaches, address gaps in enforcement, and pave the way for a broader shift from open banking to open finance. This evolution deepens consumer protection and creates a more consistent and reliable framework that enables businesses to innovate with greater confidence.
AI and open banking: fuel for innovation
AI and machine learning are no longer just buzzwords, they’re transforming financial services. According to the EBA, most EU banks now apply AI in areas like fraud detection, AML, credit scoring, and customer service.
Open banking is a critical enabler. Real-time access to rich transactional data provides the fuel AI systems need to generate meaningful insights and decisions. By analysing behavioural patterns, AI can support smarter credit assessments. For example, identifying the creditworthiness of someone newly arrived in a country through their historical banking data.
But innovation demands responsibility. As AI becomes more embedded in financial services, firms must also ensure compliance with GDPR, AI regulation, and cybersecurity standards. Those who succeed will unlock faster, safer, and more personalised financial experiences, turning open banking data into a powerful competitive edge.
Embedded finance: financial services anywhere, anytime
Open finance, the blending of banking with other sectors, is already reshaping Europe’s market, with embedded finance at its core. In embedded finance, non-financial platforms (e.g. e‑commerce sites, ERPs or mobile apps) integrate financial services directly into their offerings. The most obvious example of this in our daily lives is ride-share services such as Uber. Recent studies show this trend growing explosively. McKinsey estimates the addressable embedded finance market in Europe at €20–30 billion in 2023 (~3% of banking revenues) and projects it could exceed €100 billion by 2030 (10–15% of banking revenue). Importantly, they expect embedded channels to initiate up to 20–25% of retail banking sales and 25% of lending by 2030, up from only 5–10% today.
Notably, Ernst & Young found that 96% of European businesses plan to implement embedded payment solutions, and 94% aim to adopt embedded banking services. In other words, almost every enterprise sees embedding finance (payments, lending, and banking features in their apps/portals) as essential to staying competitive.
The shift from open banking to open finance
Open finance is the natural evolution of open banking, expanding data sharing beyond bank accounts to include insurance, pensions, investments, and more. Essentially creating a European Financial Data Space. FIDA crystallises this: it will legally require data holders (like banks, insurers, and brokers) to share data (with customer consent) across sectors. Emphasising that open finance tools must place consumers’ interests, competition, and trust at the centre.
This holistic approach will improve credit assessments, enable cross-border financial services, and promote greater financial inclusion. It would enable new services. For example, a mortgage broker could, with permission, pull a customer’s insurance history and investment holdings via APIs, building a 360-degree profile to match financial products more accurately. By aggregating a wide array of APIs, platform providers can offer holistic financial dashboards or automated savings/insurance offerings exactly when customers need them.
Customers’ expectations of open banking financial innovation
As open banking and embedded services spread, customer expectations have shifted dramatically. Consumers now demand personalisation, convenience, and control. According to an EY analysis, European banking customers look forward to “hyper-personalised recommendations” tailored to their real-time financial situation, truly instant and round-the-clock payments with no fees, and full control over data sharing. In practice, this means customers demand a better digital experience and further embrace digital payment methods.
In parallel, consumer awareness around data privacy and value has never been higher. Thanks to regulations like GDPR and PSD2, people now control their personal data more than ever before. These two factors combined mean businesses must simplify interfaces, speed up transactions, and ensure transparency. Consumers are willing to share data in exchange for improved services and security, but they also require strong data protection and clear consent flows.
Business expectations of open banking
From a B2B perspective, business clients also expect open banking capabilities. Small and medium enterprises want real-time cash-flow dashboards, automated reconciliation, and faster payments. Enable Banking’s customers reflect this: it partners with lenders and ERPs to incorporate bank data into credit scoring or accounting. In this context, Enable Banking emphasises a non-intrusive approach. We don’t develop competing products or use intrusive data modelling tactics, our focus is simply to deliver customer data securely to the authorised party.
What does this mean for your business?
The future of open banking and open finance is full of promise. Rising adoption, regulatory clarity, and AI-driven innovation will continue to create new pathways for growth. Embedded finance will make financial services more accessible and relevant, while consumer-centric approaches will build lasting loyalty. Banks, fintechs, insurance companies, and numerous other industries that embrace this shift, by treating fintechs as partners, investing in those partners and focusing on the analytics and meeting customer demands for personalisation, will thrive.
Interested in exploring how open banking trends can drive your business forward? Schedule a meeting with our team to discover practical use cases and innovative solutions.