Open Banking Payments

What Is Open Banking?

Open Banking is a regulatory framework that gives consumers and businesses control over their financial data through secure APIs. Mandated in the UK and European Union under PSD2 and the Competition and Markets Authority (CMA) order, Open Banking requires banks to provide third-party providers with standardized access to account information and payment initiation services, subject to customer consent. As of 2025, over 7 million consumers and businesses in the UK actively use Open Banking services, according to the Open Banking Implementation Entity (OBIE), with transaction volumes growing at over 200 percent year on year.

For merchants, the most impactful Open Banking application is payment initiation. Instead of entering card details or typing bank account numbers, customers authenticate directly through their online banking environment to authorise payments. The funds move from the customer's account to the merchant's account through the existing interbank payment infrastructure, such as Faster Payments in the UK or SEPA Instant in Europe.

Advantages Over Traditional Card Processing

Open Banking payments address several structural limitations of the card payment model. Card networks charge interchange fees that typically range from 1.5 to 3.5 percent of transaction value, while Open Banking payments cost a fraction of that, often a flat fee of 0.10 to 0.50 dollars per transaction. Settlement is near-instantaneous rather than T+1 or T+2, and there is no chargeback mechanism because the payment is authenticated and authorised directly by the customer's bank.

• Lower processing costs: Fees are 70 to 90 percent less than credit card interchange rates
• Instant settlement: Funds arrive in seconds through real-time payment rails
• No chargebacks: Bank-authorised payments eliminate dispute-based reversals
• Higher conversion: Strong customer authentication (SCA) is handled by the customer's own bank
• No card data storage: Reduces PCI DSS compliance scope and data breach risk

How Payment Initiation Works

The Open Banking payment flow is straightforward. The customer selects "Pay by Bank" or "Open Banking" at the merchant's checkout. They are redirected to a payment initiation service provider (PISP) interface, where they select their bank from a list of supported institutions. The customer is then redirected to their bank's online or mobile banking environment to authenticate and approve the payment using their existing banking credentials and any additional authentication factors required by the bank.

Once approved, the bank sends a confirmation to the PISP, which relays it to the merchant. The funds settle in the merchant's designated account through the underlying payment rail, typically within seconds for real-time-enabled schemes. The entire flow is completed without the merchant or the PISP ever handling the customer's banking credentials, eliminating a major vector for credential theft and fraud.

Regulatory Landscape and Geographic Coverage

Open Banking is most advanced in the UK and Europe, where PSD2 and the CMA order provide the regulatory foundation. However, the model is expanding globally. Australia's Consumer Data Right, Brazil's Open Finance initiative, Canada's proposed open banking framework, and similar developments in Singapore, India, and the United States are driving international adoption. The global open banking market was valued at over 25 billion dollars in 2024 and is projected to exceed 50 billion dollars by 2028.

Despite regional variations, the core value proposition remains consistent: secure, customer-authorized account-to-account payments that reduce costs and settlement time for merchants. WebPayMe partners with payment providers who support Open Banking across multiple jurisdictions, enabling cross-border merchants to accept bank payments from customers in different regulatory regions.

Getting Started with Open Banking through WebPayMe

WebPayMe connects legitimate merchants with Open Banking-enabled payment partners from our curated network. Our intake process evaluates your business model, target markets, and transaction profile to identify the most suitable Open Banking solutions for your needs. Submit your application through our secure form, and our team will work to connect you with partners who can implement Open Banking acceptance for your business.