This diagram explains the difference between the old traditional style banking versus the open banking.

If you dont know what open banking is then I will recommend you watch the youtube video on open banking on my channel. 

As you can see in this diagram, in the traditional way of dealing with customers in a bank , every bank had a branch or an application dedicated to its own customers. So if I am a customer and I had accounts in three different banks then those three different banks will give an application with a separate set of credentials to login.However,  open banking changes the game completely . What it says is that , given the security is not comprised there is no reason why the customer should bother about logging into different applications for banking needs. Rather , he should be able to see all his accounts with all banks in one application thereby streamlining the entire banking experience and stimulating the need to get th best deals from all the banks. This fosters healthy competion between the banks and the banks also have an option to view the transactions related to the other banks and understand the customer profile better thereby offering tailored banking products to the customers.

An example could be a bank offering a personal loan to the customer at a competitive interest rate depending upon the spending nature of the customer. This is where analytics and APIs play an important role. APIs help to communicate between the banks to get the transactional information and the analytics help to drive those insights  enabling the banks to specifically zoom in and identify the customer needs

You will also notice that the trandional banking has following players :

Customer , Merchant, Acquirer, Network, Issuer

However ,in open banking we introduce a new players called AIPSP and PISP. So what is this new entity called PISP? Payments Initiation Service Provider. AIPSP is Account Information Payment Service Provider. Whats the difference between the two . One can initiate payments on behalf of the customer while the other cannot . It can only read account information and hence its called as AIPSP. Simple right ?

For a detailed discussion on this topic subscribe to my youtube channel and watch the video in the cards and payments series dedicated to Open Banking.