What Is Open Banking and How Does It Fit With Embedded Finance?

open banking vs embedded finance

Open banking, embedded finance, and banking as a service (BaaS) are amongst the many new fintech-related buzzwords you’ve probably been hearing with increasing frequency over recent years. 

But why is all this new language emerging, you ask? Before 2018, the banking sector was relatively stagnant, so you can be forgiven for feeling somewhat baffled in the face of all the new emerging terminology.

This article clears up some of the fundamentals, specifically what open banking is and where it sits with Orenda Finance’s primary offering: embedded finance.


What is Open Banking?

In January 2018, new legislation, called PSD2 (​​Payment Services Directive 2), was entered into force. 

PSD2 was part of the EU’s efforts to better align payment regulation with the market and technology’s current state. It was established to enhance consumer protection, increase the rate of innovation and improve the security of payments. 

The new regulations coming into play sparked the emergence of a new and exciting innovation in the banking sector: open banking. 

Despite the gravity of this shift, many are still unaware of what it is, what it means for our own customer experience, or how businesses can harness the change.

Open banking is essentially the sharing of data and services between banks and third parties. It’s a movement that aims to bring transparency and accountability into the financial services industry. 

This is achieved through open APIs.


How do open APIs enable open banking?

Open APIs are the technical framework that allows for the sharing of data and services between banks and third parties. In order for a bank to be compliant with PSD2, they must provide access to their customer data to any Accredited Third Party Provider (ATP).

(An ATP can include fintechs, retailers, or any other type of organisation that provides financial services. This means that with open banking, you’re no longer limited to the products and services offered by your bank. You can now compare and switch to different providers that better suit your needs.)

This means that open APIs open up the opportunity for software companies to create innovative apps on top of your bank’s data; this includes both public (like what you see online) and private information held within an account holder’s files at partner institutions.

This sharing of this previously private data has provided businesses with information to create more tailored solutions that benefit from a number of things, including:  

  • More opportunities for innovation
  • More transparency
  • Better financial products and services for consumers
  • More investment in fintech
  • An overhaul of incumbent banking infrastructure
  • More opportunities for startups


Overall, open banking marked a fundamental change within the banking sector, as it gave third parties access to the data they required to create and implement new fintech solutions. 


What is embedded finance?

Open banking acted as the springboard for the emergence of embedded finance – if open banking represents the opportunity to innovate the banking sector, embedded finance can be summarised as the consumer-orientated execution of that opportunity that is no longer restricted to the banking sector alone.

As the open APIs provided by banks are typically embedded, there’s certainly some crossover between Open Banking and Embedded Finance. However, with embedded finance, it’s not only fintechs who can benefit, as embedded finance describes financial capabilities that are integrated into the offering of a non-financial provider

Open Banking gave consumers access to more features on their favourite bank’s product, but there is even greater potential for innovation with banking services. Whereas Open Banking provides the embeddable features of a bigger product, Embedded finance models allow companies in all industries to access banking products as a whole, introducing an easier way to create digital offerings that seamlessly integrate financial products.

In the past, this could only be achieved through a brand hiring coders to build their own API. However, the no code revolution has already begun, with providers like Orenda leading the way in making embedded finance more affordable, accessible and scalable than ever before.    

The benefits of no code embedded finance include: 

  • It allows brands to focus on convenient, customised experiences
  • You don’t need to be in the banking sector to benefit
  • Increases revenue streams
  • Personalised to brand and consumer
  • Creates end-to-end user journeys
  • Brands can choose from various widgets to add to their ecosystem
  • Insights into customer needs and spending habits


Ultimately, embedded finance is a strong contender in the future of digital payments. 



As the rate of evolution of fintech picks up pace, embedded finance, supported by the regulatory driver in payments that is open banking, is not going anywhere.

Whether you’re a fast-growth startup or a well-established organisation, you can innovate, stand out from competitors and maximise growth with the power of embedded finance. 

If you’d like to find out more or start building your own fintech ecosystem, get in touch

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