PSD2 Compliance: A Developer’s Guide to Open Banking Integration

The financial landscape is transforming rapidly—and much of that change is driven by regulation. The Revised Payment Services Directive, or PSD2, is not just another EU policy. It’s a framework designed to reshape how financial services interact, mandating secure and standardized access to customer banking data by third-party providers. For software developers building banking and fintech applications, PSD2 compliance isn’t just a legal obligation—it’s a strategic opportunity. This blog post explores how developers can align with PSD2 while taking full advantage of open banking innovations to create secure, user-centric financial tools.

What Is PSD2 Compliance and What Does It Mean for Developers?

PSD2 (Payment Services Directive 2) is a European Union directive that enforces stricter security standards, mandates customer consent, and opens up banks’ APIs to licensed third-party providers (TPPs). It requires financial institutions to support Access to Account (XS2A) capabilities, enabling developers to build services that interact directly with user accounts—such as budgeting apps, loan scoring systems, or digital wallets.

But it’s more than just an API spec. PSD2 shifts control of data from banks to consumers and expects developers to build services that are not only functional but also secure, auditable, and privacy-aware.

PSD2 Compliance Checklist for Developers

Navigating PSD2 compliance can be complex, especially for teams unfamiliar with financial regulation. Here’s a breakdown of the most important considerations for developers:

Before the list, let’s make one thing clear: this isn’t just about following rules—it’s about building trust, both with regulators and with end users. A developer who understands PSD2 inside and out is better positioned to create robust, compliant, and innovative fintech solutions.

Your PSD2 development checklist should include:

  • Strong Customer Authentication (SCA): Ensure authentication involves at least two of the following: something the user knows (e.g. password), something the user has (e.g. mobile phone), and something the user is (e.g. fingerprint).
  • OAuth2/OpenID Connect Implementation: Secure access tokens must be used to handle user consent and API access safely.
  • Transaction Risk Analysis (TRA): Implement logic to assess risk levels in real-time and apply exemptions when applicable.
  • API Rate Limiting & Throttling: Prevent abuse and ensure stability of banking APIs under load.
  • Logging and Audit Trails: Record every consent, access request, and transaction event for compliance and security reviews.
  • Data Encryption (At Rest & In Transit): Sensitive data must be encrypted with modern algorithms to meet GDPR and PSD2 requirements.
  • API Documentation & Sandbox Access: If you’re a bank, offer well-documented APIs and sandbox environments for third-party developers.

 

When these elements are in place, your application is not only PSD2-compliant—it’s also engineered for reliability and scalability.

Open Banking APIs: Bridging Banks and Developers

Open banking isn’t just a byproduct of PSD2—it’s the architecture that turns compliance into innovation. Under PSD2, banks must expose APIs for third-party access. For developers, this means unlocking a rich ecosystem of financial data and services.

Common open banking APIs include:

  • Account Information Services (AIS): Access to account balances and transaction history
  • Payment Initiation Services (PIS): APIs that allow third parties to initiate payments from a customer’s bank account
  • Funds Confirmation Services (FCS): Verify if sufficient funds exist in the account prior to authorizing payments

 

To ensure PSD2 compliance, these APIs must follow strict technical standards—most notably the Berlin Group specifications or UK’s Open Banking Implementation Entity (OBIE) standards.

As a developer, you must understand not only how to integrate these APIs, but also how to handle errors, authentication flows, and time-sensitive consents properly.

Best Practices for Building PSD2 Compliance Applications

Creating compliant applications doesn’t mean sacrificing performance or UX. In fact, smart design choices can align PSD2 compliance with better usability. Here’s how:

  1. Integrate SCA Seamlessly: Use biometric logins and device-based auth where possible to minimize friction.
  2. Token Management: Handle token expiration and refresh logic securely and transparently.
  3. Granular Consent Scopes: Request only the permissions necessary—this builds user trust and satisfies regulators.
  4. Rate Monitoring & Alerting: Set alerts for unusual traffic patterns or API failures.
  5. Error Messaging: Ensure users receive clear, actionable feedback in case of consent failure or denied access.

 

By embedding these practices into your development cycle, compliance becomes an enabler—not a blocker—for product success.

Real-Life Scenario: PSD2 in a Budgeting App

Consider a fintech company building a personal finance app that aggregates user data from multiple banks. Under PSD2, the app must:

  • Redirect users to their bank for SCA
  • Use short-lived tokens to access account data
  • Limit access to only the accounts users have consented to
  • Offer a revoke-consent option at any time
  • Store audit logs for each API request and action

 

By aligning with PSD2 compliance, the app becomes a legitimate and trusted third-party provider. This not only satisfies regulators but also builds credibility with partner banks and end-users alike.

Common Developer Pitfalls to Avoid

While pursuing PSD2 compliance, some development teams fall into common traps that can delay deployment or lead to rejections during audits.

Avoid these mistakes:

  • Hardcoding credentials or API tokens
  • Ignoring error-handling scenarios like revoked consent or expired sessions
  • Over-requesting data scopes beyond what’s authorized
  • Skipping third-party penetration testing
  • Forgetting to encrypt logs or expose audit trails to security teams

Being proactive about these issues not only saves time but positions your application as secure, trustworthy, and production-ready.

Compliance as a Catalyst for Innovation

Too often, developers view regulations like PSD2 as hurdles. But with the right approach, PSD2 compliance becomes a competitive advantage. It offers a blueprint for building trustworthy, secure, and scalable financial applications that empower users and attract partnerships with banks.

By mastering open banking APIs and embedding compliance at the heart of your development lifecycle, you can go beyond simply “meeting the rules.” You can help define the future of digital finance.

©2025. All Rights Reserved.

©2025. All Rights Reserved.

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