Understanding PSD2 and Open Banking

You may have heard the term Open Banking being bandied about over the last year or so, and you may even have heard people talking about the introduction of PSD2. 

The terms are complicated, but they refer to very exciting changes in the financial services industry. These changes will ultimately have a positive impact on small business owners and consumers, by making money management safer and easier. This opens up more options to help people find the best products to suit their needs, and allows connections between finance and admin tools. Saving SMEs time and effort is the reason that Tide exists, so we were always going to be enthusiastic promoters of Open Banking.

What’s PSD2?

PSD2 (Payment Services Directive) is an EU directive created to increase competition and participation in the payments industry. Certain institutions are required to be PSD2 compliant, and they have to provide more transparent access to their services.

We chose to go beyond the basic requirements and have implemented an Open Banking API, as we see this as industry best practice. This will allow consumers complete access and readability of their accounts, and smoother integrations with more softwares. 

Who does PSD2 apply to?

  • Banks and credit institutions 
  • Certain authorities including central banks and government bodies
  • Electronic Money Institutions (EMI)
  • Payment Institutions (PI) 

Other FCA regulated third party providers can also apply for authorisation for Open Banking. 

What does Open Banking mean for you?

It’s all about the benefits for you!

Open Banking creates a level playing field for competition and innovation across the industry, meaning more competitive options for you as a consumer.

A core concept behind Open Banking is Open data. Open data is focused on financial transparency, allowing you to access your details with ease and share your data with other companies as you please, all in a secure and safe environment. This freedom of data makes innovative integrations easier – and we’ve already taken the first step by integrating with QuickBooks! Other providers will be able to ‘plug in’ to our Open Banking API and, with your permission, access your data smoothly and efficiently. No need for duplicating data or tiresome admin. 

Ultimately Open Banking places the power in your hands. As this initiative progresses, you’ll be able to access all your accounts on a centralised platform. This holistic view of your finances will allow improved money management and clearer visibility, and ultimately a healthier financial position for your business.

The benefits aren’t limited to account integrations: keep your eyes peeled for our new Payroll feature. Powered by Open Banking technology, our members will be able to run and pay their payroll through our web app – the possibilities are endless.

What’s happening to Tide’s old API?

We’re really excited about the benefits of Open Banking, so we’re migrating away from our public API and replacing it with its Open Banking counterpart. 

If you’re using the old API there will be certain circumstances where connections can’t be migrated, for example if your connection isn’t using an approved Account Information Service Provider (AISP). We’ll do our best to advise you on how to get the most out of the new Open Banking API. 

If you have any queries about this or would like to know more, please contact us on hello@tide.co.

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