From Infrastructure to Applications: Open Banking Enters Its Second Act
When the Payment Services Directive 2 (PSD2) came into force across the European Union in 2018, the financial services industry braced for disruption. Banks were required to open their APIs to licensed third parties. Incumbents — cautiously and often begrudgingly — built the technical interfaces regulators demanded. Startups raced to build on top of them. And then, for several years, the revolution stalled.
The API layer existed. The regulatory framework existed. But adoption among consumers and businesses was frustratingly slow. Open banking-powered products struggled to achieve the mainstream penetration that optimists had forecast. The plumbing was installed, but few people were turning on the taps.
2025 is different. We are now seeing the compounding effects of six years of ecosystem maturation play out in real time. Consumer familiarity with account linking, consent management, and data sharing has crossed a critical threshold. The quality and reliability of API connections across European markets has improved dramatically. And a new generation of application-layer companies — built by founders who grew up inside the first wave of open banking infrastructure businesses — is now deploying those APIs in ways that create genuine, tangible value for end users.
This is the moment we have been waiting for. And at Elinuse AI Capital, it is why our highest concentration of new investments in 2025 is in open banking application-layer companies.
The PSD3 Tailwind: Regulatory Momentum Is Accelerating
The European Commission's proposal for PSD3 — the successor directive to PSD2 — adds significant momentum to an already compelling investment thesis. PSD3 addresses many of the weaknesses that limited open banking adoption under PSD2: inconsistent API quality across member states, lack of standardization in consent flows, inadequate compensation frameworks for third-party providers, and limited access to payment initiation for non-bank fintechs.
Perhaps most significantly, PSD3 introduces the concept of "premium APIs" — allowing banks to charge for enhanced-quality data access while simultaneously raising the floor of basic API quality to a level that is genuinely useful for application developers. This dual approach resolves a structural tension that has plagued the open banking market: banks had little incentive to invest in API quality because they could not monetize it, while third parties had limited ability to build reliable products on unreliable infrastructure.
The Open Finance Regulation (OFR), which is being developed in parallel with PSD3, extends open banking principles beyond payment accounts to include savings, investments, pensions, mortgages, and insurance products. The implications for the fintech and insurtech sectors are profound. When consumers can share their complete financial picture — not just their current account data — the personalization, underwriting, and advice use cases become dramatically more powerful.
Where the Investment Opportunity Is Concentrated
Within the open banking application layer, we see the most compelling seed-stage investment opportunities in four areas.
Personal Financial Management 2.0. The first generation of PFM apps used account aggregation to show users where their money was going. The second generation is using that same data — enriched with machine learning-based transaction categorization, predictive modeling, and behavioral nudging — to actively help users optimize their financial lives. The distinction is between tools that describe the past and tools that shape the future. Companies building in this space have access to data depth and consumer trust that were simply not available five years ago.
SME Cash Flow Intelligence. Small and medium-sized enterprises are chronically underserved by the financial products available to them. Open banking enables a new category of cash flow management, working capital optimization, and financial planning tools built specifically for businesses with 5 to 200 employees. The market is enormous — there are approximately 25 million SMEs in the European Union — and the incumbent solutions (primarily online banking portals that have barely evolved since the 1990s) are spectacularly inadequate.
Payment Initiation Services. Account-to-account payment initiation has historically been the "killer app" narrative of open banking that has most consistently underdelivered. That is changing. The cost structure of A2A payments — which bypass card network fees entirely — is 60 to 80 percent lower than card-based alternatives for merchants. As consumer familiarity with bank-linked payments grows and the user experience improves, we expect A2A to take meaningful share from cards in e-commerce, subscriptions, and utility payments over the next three to five years. The companies building next-generation payment initiation rails are among the most interesting seed-stage opportunities in European fintech today.
Financial Data Infrastructure for Regulated Industries. Open banking data is extraordinarily useful to regulated entities outside traditional banking: insurers assessing risk, mortgage lenders verifying income, employers running financial wellness programs, and debt collection agencies pursuing more humane collection processes. Building the data infrastructure and consent management layer that enables these use cases, while maintaining regulatory compliance across 27 EU member states plus the UK, is a genuinely hard technical and operational problem. The companies solving it have durable competitive advantages and high switching costs.
The UK-EU Divergence: Complexity as Opportunity
Brexit introduced a significant complication for European open banking: the UK, which was an early leader in open banking development (the CMA Order predates PSD2 and is in some respects more advanced), is now developing its regulatory framework independently. The UK's Smart Data Council is pursuing an open finance agenda that parallels the EU's OFR but with different implementation timelines and technical specifications.
For founders, this divergence creates additional complexity. Building a product that operates across both the UK and EU open banking ecosystems requires navigating two regulatory frameworks, two sets of API standards, and two regulatory bodies. The operational overhead is real and should not be underestimated.
For investors, however, this complexity creates opportunity. The founders who successfully navigate this dual-market complexity — who build abstraction layers that work across both ecosystems, or who make deliberate strategic choices about which market to prioritize and when — will have built defensible infrastructure that competitors find extremely difficult to replicate. We are specifically looking for founding teams with the technical sophistication and regulatory fluency to operate effectively in this environment.
Consumer Trust: The Last Remaining Barrier
The single remaining structural barrier to open banking adoption at scale in Europe is consumer trust. Survey after survey shows that while European consumers are generally aware of open banking, a significant minority — in some markets, a majority — remain uncomfortable sharing their banking credentials or granting account access to third-party applications. This hesitation is not irrational. High-profile data breaches, privacy scandals, and the general erosion of trust in technology platforms have made consumers appropriately cautious.
The companies that will win in open banking are those that take this trust deficit seriously — not by simply asserting that they are trustworthy, but by building the user experience, consent management interfaces, and data governance practices that actually earn trust. The winners will be transparent about what data they access, why they access it, and what they do with it. They will make revocation of consent as easy as granting it. They will build audit trails that give users real visibility into their data's journey.
This is not just good ethics. It is good business. Consumer trust is the most durable competitive advantage in financial services, and the companies that earn it early will accumulate switching costs that make them extraordinarily difficult to displace.
Portfolio Context and Forward Outlook
At Elinuse AI Capital, open banking represents one of the three structural investment themes that we expect to drive the majority of our portfolio value creation over the next decade. The others are AI-driven financial risk assessment and embedded insurance distribution. These themes are increasingly converging: the most interesting companies we are seeing combine open banking data access with machine learning-based risk models and embedded distribution in a single coherent product architecture.
Our conviction on open banking is not speculative. It is grounded in the portfolio companies we have backed, the founders we have spoken with, and the market data we track on a weekly basis. Adoption curves in account aggregation, payment initiation, and financial data sharing are all accelerating. The regulatory trajectory is clearly supportive. And the quality of the founding teams entering the market has never been higher.
2025 is the year when European open banking transitions from a promising infrastructure story to a proven application-layer investment theme. We intend to be among the most active seed-stage investors in the companies that will define this transition.
Key Takeaways
- Open banking is transitioning from infrastructure to application-layer value creation in 2025.
- PSD3 and the Open Finance Regulation will extend open banking principles to savings, pensions, mortgages, and insurance.
- The strongest seed opportunities are in SME cash flow intelligence, PFM 2.0, A2A payments, and regulated industry data infrastructure.
- The UK-EU regulatory divergence creates complexity — and for the right founders, durable competitive advantage.
- Consumer trust remains the final barrier; companies that earn it structurally will have the most defensible positions.