Comprehensive Guide to Consent Flow in Open Banking

Introduction

Open Banking has revolutionized how financial data is shared and accessed, providing users with greater control and security. At the heart of this system lies the consent flow, which ensures that users explicitly approve third-party access to their financial information.

In this document, we will explore:

1. What is Consent in Open Banking?
2. Understanding Strong Customer Authentication (SCA)
3. Types of Consent Flow in Open Banking
4. How Consent Flow Complies with OpenID Connect (OIDC) Security Standards
5. Step-by-Step Breakdown of Consent Flow
6. Real-World Examples & Benefits

1. What is Consent in Open Banking?

Consent is a fundamental principle in Open Banking that allows users to authorize third-party providers (TPPs) to access their banking data or initiate payments on their behalf.

Key Characteristics of Consent:

• Explicit: The user must actively grant permission.
• Granular: Users can choose which data to share (e.g., account balance, transaction history).
• Time-Limited: Consent typically expires after a set period.
• Revocable: Users must have the ability to withdraw consent at any time.

Why is Consent Important?

• Ensures user privacy and control over financial data.
• Prevents unauthorized access by requiring explicit user approval.
• Aligns with regulatory requirements such as PSD2 (Payment Services Directive 2) and GDPR.

2. Understanding Strong Customer Authentication (SCA)

Strong Customer Authentication (SCA) is a security requirement under PSD2 that enhances user identity verification during online transactions and consent authorization.

How SCA Works:

SCA requires at least two out of three authentication factors:

1. Something the user knows (e.g., password, PIN).
2. Something the user has (e.g., phone, hardware token).
3. Something the user is (e.g., fingerprint, facial recognition).

When is SCA Required?

• During user authentication in Open Banking consent flow.
• For high-value transactions or sensitive data access.

3. Types of Consent Flow in Open Banking

Open Banking supports different types of consent flows to accommodate various user experiences and technical implementations.

A. Browser-Based Flow (Redirect Flow)

This is the most common consent flow where the user is redirected to their bank’s website or mobile app for authentication.

Steps in Browser-Based Flow:

1. User initiates a request via a third-party provider (TPP).
2. User is redirected to their bank’s authentication page.
3. User authenticates using SCA (password, OTP, biometrics).
4. User approves the consent request.
5. Bank redirects the user back to the TPP with an authorization code.
6. TPP exchanges the code for an access token to retrieve data or initiate payments.

?? Pros: Secure, simple, widely adopted. ? Cons: Requires redirection, disrupting user experience.

B. Decoupled Flow

The decoupled flow allows users to authenticate on a separate device (e.g., mobile banking app) without being redirected.

Steps in Decoupled Flow:

1. User initiates a request via a TPP.
2. Bank sends an authentication request to the user’s registered device.
3. User receives a push notification or opens their banking app.
4. User authenticates and approves the consent request.
5. Bank informs the TPP that authentication was successful.
6. TPP receives an access token to access data or initiate payments.

?? Pros: Seamless, better user experience, no browser redirection. ? Cons: Requires the bank’s mobile app and notification services.

4. How Consent Flow Complies with OpenID Connect (OIDC) Security Standards

OIDC (OpenID Connect) is a security standard that ensures secure identity verification in Open Banking.

OIDC in Open Banking:

• Uses OAuth 2.0 Authorization Code Flow to exchange tokens securely.
• Provides ID Tokens to verify user identity.
• Uses JWT (JSON Web Tokens) for cryptographic security.
• Ensures secure API access between banks and third-party providers.

How OIDC Enhances Open Banking Consent Flow:

• Prevents unauthorized access with secure authentication tokens.
• Supports Single Sign-On (SSO) for better user experience.
• Enables fine-grained access control with scope-based permissions.

5. Step-by-Step Breakdown of the Consent Flow

Step 1: User Initiates Consent Request

• The user selects a financial service (e.g., payment initiation, account aggregation) through a TPP.

Step 2: User Authentication via SCA

• The user is authenticated using browser-based or decoupled flow.

Step 3: Bank Grants an Authorization Code

• After successful authentication, the bank provides a one-time authorization code.

Step 4: TPP Exchanges the Authorization Code for an Access Token

• The TPP requests an access token using OAuth 2.0 Authorization Code Flow.

Step 5: Data Access or Payment Execution

• The TPP uses the access token to retrieve the user’s financial data or initiate payments.

Step 6: Consent Revocation (Optional)

• The user can revoke consent at any time via their bank’s portal.

6. Real-World Example & Benefits of Open Banking Consent Flow

Example:

• A user wants to connect their budgeting app (e.g., YNAB, Plaid, TrueLayer) to their bank account.
• They initiate the connection, get redirected to their bank for authentication, and approve the data-sharing request.
• The budgeting app now has secure access to transaction data, enabling better financial planning.

Key Benefits:

? Better Security: Ensures user authentication with strong security measures. ? User Control: Customers decide who accesses their data and for how long. ? Innovation: Enables fintech companies to create smarter financial solutions. ? Seamless Experience: Decoupled flow enhances convenience for mobile-first users.

Conclusion

Consent Flow is the core mechanism that makes Open Banking both secure and user-friendly. By leveraging SCA, OAuth 2.0, and OIDC standards, Open Banking ensures that customers can safely share their financial data while maintaining full control over their privacy. As the financial ecosystem continues to evolve, banks and fintech companies must embrace consent-driven models to enhance trust, security, and innovation.

Would you like to see more real-world use cases of Open Banking? Let’s discuss!