Open Banking

Open banking is a way for people and businesses to share their bank-account data with another company through a secure connection they approve. For a lender, it means a borrower can grant read access to their accounts instead of uploading PDF statements. The lender then receives balances and transaction history directly from the bank, usually through a data aggregator, a company that connects to many banks at once.

There are two main ways the data moves. The preferred way is an application programming interface (API), a direct, structured link between the bank and the aggregator. The older way is screen scraping, where the borrower hands over their login details and software reads the bank's website. Scraping still exists but carries more security and privacy risk.

In the US, Section 1033 of the Dodd-Frank Act gives consumers a right to access their own financial data. The Consumer Financial Protection Bureau (CFPB) finalized a rule under it in October 2024. As of October 2026, a federal court has barred the CFPB from enforcing that rule until the agency finishes rewriting it, and the appeal of that order is paused. The CFPB sent a new proposal for White House review in August 2026, but it has not yet been published for public comment. The rule covers consumer accounts, so business borrowers share data mainly through private agreements with aggregators and banks.

Why it matters for lenders

Bank data is the raw material for cash flow underwriting. With a live connection, a lender sees real deposits, balances and bounced payments, not a statement the borrower could have edited. That supports faster decisions and helps catch fraud.

It also saves time. Staff don't have to chase statements or retype numbers for bank statement analysis. The same connection can verify the account a borrower wants to use for automatic payments.

Lenders still need guardrails. Get clear consent, collect only what the decision needs, keep the data secure, and record what was pulled and when.

How it works in practice

A small business lender adds a "connect your bank" step to its online application. A food truck owner picks her bank, logs in on the bank's own screen and approves sharing for her business checking account. Within a minute, the lender receives twelve months of transactions.

The underwriter reviews average daily balances, monthly deposits and any returned payments. He notices large transfers from a personal account every month and asks the owner about them before he writes his memo. When the loan closes, the same verified account is set up for payments.

Without the connection, the owner would have emailed statements, the underwriter would have keyed in totals, and the transfers might have gone unnoticed.