Open Banking Glossary: Key Terms Explained
Open Banking introduces a range of new terminology, from APIs and payment initiation to authentication and regulation.
This glossary explains the key terms in plain English, helping businesses understand how Open Banking works in practice and how it applies to real payment scenarios.
A
Account Information Service Provider (AISP)
A provider that allows users to view multiple bank accounts in one place. Often used for dashboards, reporting tools and financial insights.
Account-to-Account Payments (A2A)
A payment made directly from one bank account to another. Open Banking enables A2A payments to be initiated instantly, without the need for card processing.
API (Application Programming Interface)
Technology that allows different systems to communicate securely. In Open Banking, APIs enable banks to connect with authorised providers to share data and initiate payments.
C
Chargebacks
A process where a cardholder disputes a payment and the funds are returned by the bank. Open Banking payments do not rely on the chargeback system, reducing this risk for businesses.
F
Faster Payments
The UK banking system that enables near-instant bank transfers. Open Banking payments typically use Faster Payments to move funds in real time.
K
Know Your Customer (KYC)
A process used by financial providers to verify the identity of customers. This helps prevent fraud, money laundering and other financial crime.
O
Open Banking
A regulated framework that allows businesses to request payments directly from a customer’s bank account or access financial data (with consent), using secure APIs.
Open Banking Ecosystem
The network of banks, providers, regulators and technology that enables Open Banking to function securely and consistently.
P
Payment Initiation Service Provider (PISP)
A provider that enables businesses to initiate payments directly from a customer’s bank account via Open Banking.
Payment Link
A secure link sent to a customer (via email, SMS, WhatsApp or other channels) allowing them to complete a payment quickly using Open Banking or card methods.
PSD2 (Payment Services Directive 2)
A European regulation that requires banks to open access to customer data (with permission), enabling Open Banking and improving payment security.
Payment Service User (PSU)
The individual or business making or receiving a payment.
R
Reconciliation
The process of matching incoming payments to invoices or transactions. Open Banking simplifies reconciliation by including references and real-time confirmation.
S
Settlement
The process of funds being transferred and received into a business bank account. With Open Banking, settlement is typically immediate or same-day.
Strong Customer Authentication (SCA)
T
Third Party Provider (TPP)
An authorised company that uses Open Banking APIs to access account data or initiate payments on behalf of a customer (with their consent).
Understanding Open Banking in Practice
Understanding these terms helps businesses make informed decisions about how they accept payments, reduce costs and improve security.
Open Banking is not just a technical framework. It’s a practical way to streamline payments, reduce fraud exposure and improve cash flow.
