Open banking payments for UK merchants: your guide to seamless transactions

Open banking is changing how merchants accept payments. Instead of just card machines, you can now let customers pay directly from their bank account. It's faster, cheaper, and more secure. And it works alongside your existing card payment setup.

This guide shows you what open banking payments are, why they're a game changer for your business, and how to get started. You'll learn how to cut costs, speed up cash flow, and offer your customers more choice at checkout. Whether you run an online shop, invoice clients, or take payments in person, open banking has something for you.

Demystifying open banking payments: the foundations

Open banking isn't magic. It's a shift in how payments flow. Instead of routing everything through card networks, open banking lets customers pay directly from their bank account. Simpler. Cheaper. Faster.

Understanding open banking

Open banking is a UK regulatory requirement. Banks must give customers and businesses secure ways to share financial data and initiate payments directly from their bank account. This happens via secure APIs — digital bridges that connect different systems. The result? A trustworthy, growing ecosystem. In 2025, the UK open banking system handled 24 billion successful API calls [Open Banking Limited].

How open banking payments (PIS) work

The customer clicks "Pay by Bank" at checkout. They log into their own bank securely. They approve the payment. Done. Funds go straight from their account to yours, usually via the UK's Faster Payments system. No card network in the middle. No delays. The Faster Payments System processed 5.09 billion transactions worth £4.2 trillion in 2024 [Pay.UK].

Unlocking merchant value: why open banking payments are a game changer

Open banking payments aren't just an alternative option. They're a way to cut costs, speed up cash flow, and give your customers what they want: choice at checkout.

Significant cost savings for UK merchants

Card networks charge. A lot. Interchange fees. Scheme fees. Processor markups. They add up fast, especially if you process high volumes. Open banking cuts them out. You get direct account-to-account transfers. Lower costs. Better margins.

Accelerated cash flow and financial control

Card payments can take days to settle. Open banking? Your money arrives instantly or within hours. This is huge for small businesses. Better cash flow. Less need for overdrafts. More predictability. More control.

Enhanced security and trust

Your customers log into their own bank to approve payment. They're not handing over card details. No card details means much lower fraud risk. Open banking fraud is just 0.013% of transactions [Open Banking Limited]. That's trust you can rely on.

Superior customer experience and conversion

Typing in card details is tedious, especially on mobile. Open banking lets customers authenticate in their own bank app in seconds. Less friction. Fewer abandoned carts. Better conversion rates.

The customer journey: how "pay by bank" works in practice

For merchants, understanding how customers interact with open banking payments is key to successful integration and adoption.

Online purchases (e-commerce payments)

For online retailers, integrating "Pay by Bank" means offering customers a new, prominent payment option at the checkout. When a customer selects this option, they are presented with a list of supported banks. Upon choosing their bank, they are redirected to their secure online banking environment to review and authorise the payment. This process is typically quick, often taking only a few seconds.

In-store and in-person payments

The application of open banking payments extends beyond the digital realm. Merchants can facilitate in-store "Pay by Bank" transactions through various methods. A common approach is via QR codes displayed at the point of sale. Customers scan the QR code with their smartphone, which links them directly to their banking app to authorise the payment.

Invoice payments and beyond

Open banking payments also revolutionise invoice management for businesses. Merchants can embed a "Pay by Bank" option directly into their invoices. When a customer receives an invoice, they can click a link that initiates the payment process, guiding them through their online banking to approve the transfer. This speeds up invoice settlement, improves cash flow, and reduces administrative overheads associated with chasing payments. Furthermore, this technology can be applied to refunds, bulk payments, and even direct debit mandates.

Integrating open banking payments into your business

Implementing open banking payments might seem technically challenging, but a range of integration pathways and supportive solutions make it accessible for businesses of all sizes.

Understanding your integration pathways

Merchants typically have two primary routes to integrate open banking payments. Direct integration involves building direct connections with TPPs or leveraging bank APIs, offering maximum control but requiring significant technical expertise. The alternative is via a Payment Service Provider (PSP), where fintech companies specialise in providing open banking payment solutions, acting as intermediaries that handle the technical complexities.

Key integration steps

Regardless of the pathway chosen, the integration process generally involves selecting a reputable open banking payment provider, understanding their technical requirements, obtaining necessary API keys, and configuring the integration within your existing payment gateway or e-commerce platform. Most providers offer sandbox environments for testing.

Merchant acceptance and optimisation

Once integrated, merchants should actively promote their new "Pay by Bank" option. Clear calls to action at checkout, informational signage in-store, and educational content for customers can drive adoption. 75% of UK businesses surveyed reported using open banking solutions in 2024 [Mastercard], indicating its growing mainstream adoption.

The evolution of payments: variable recurring payments (VRPs)

While open banking payments have revolutionised single transactions, their potential extends to the realm of recurring billing.

Beyond one-off payments: the need for flexible recurring payments

Many businesses rely on recurring payments. Traditional methods like Direct Debit, while established, can be cumbersome and lack the real-time flexibility that consumers increasingly expect. Open banking offers a powerful evolution through Variable Recurring Payments (VRPs).

What are variable recurring payments (VRPs)?

VRPs are a type of account-to-account payment facilitated by open banking, designed for recurring transactions. Unlike traditional Direct Debit, VRPs offer greater flexibility and customer control. A customer grants a merchant permission (a mandate) to make payments, but they retain oversight and can set limits, schedule payments, and easily revoke access via their online banking.

Merchant benefits of VRPs

For merchants, VRPs present a significant opportunity to enhance their recurring revenue models. They can lead to reduced payment failures due to real-time updates and direct access to funds, thereby improving cash flow predictability. The customer-centric nature of VRPs also fosters greater trust and transparency in recurring billing relationships.

Addressing merchant concerns and building consumer trust

Is it secure?

Open banking payments are built on a foundation of robust security protocols. The entire process is regulated by authorities like the Financial Conduct Authority (FCA) in the UK. Authentication is handled directly by the customer's bank, utilising the same secure login credentials used for their online banking. The low fraud rates associated with open banking transactions underscore its inherent security [Open Banking Limited].

Perceived complexity vs. real simplicity

Some merchants may perceive open banking payments as technically complex to integrate. However, the availability of solutions from experienced Payment Service Providers dramatically simplifies this. These providers offer ready-made APIs and integration tools that can be plugged into existing e-commerce platforms, often with minimal development effort.

Driving customer adoption

Encouraging customer adoption requires education and clear communication. Merchants should clearly highlight "Pay by Bank" as a payment option at checkout, explaining its benefits. 67% of UK consumers are willing to share financial data if it leads to tangible rewards or improved services [PwC Strategy& / UK Finance], indicating a receptive audience.

Choosing the right open banking payment partner

Key selection criteria

When evaluating potential partners, consider bank coverage, security and compliance, integration capabilities, customer support, feature set (including VRP support), and pricing structure.

Your roadmap to seamless transactions: getting started

Step 1: research and education

Begin by thoroughly understanding how open banking payments work and how they can specifically benefit your business model. Assess your current payment challenges, such as high fees or slow cash flow.

Step 2: partner selection

Evaluate potential open banking payment providers based on the key criteria discussed previously. Consider their track record, technical support, and alignment with your business's current and future payment needs.

Step 3: integration and testing

Work with your chosen partner to integrate their open banking payment solution into your checkout process. Utilise sandbox environments for rigorous testing.

Step 4: launch and promotion

Once integrated and tested, launch "Pay by Bank" as a prominent payment option. Clearly communicate its benefits through your website, marketing materials, and at the point of sale.

Step 5: future-proofing with VRPs

As your business evolves, explore the capabilities of Variable Recurring Payments to streamline subscription billing and offer more flexible payment plans.

Stored: making open banking accessible for SMEs

Open banking is powerful, but it's not the only payment option you need. Most SMEs still need card machines, invoicing, and e-commerce alongside open banking.

That's where Stored comes in. It's a unified payments platform built specifically for UK SMEs. You get open banking alongside card machines, pay by link, digital invoicing, QR payments, and hosted e-commerce — all in one place, one dashboard, one billing.

Why Stored simplifies open banking adoption:

• Open banking + card payments together: Offer "Pay by Bank" alongside card payments. One platform. One integration.
• Next-day settlement: Whether it's open banking or card payments, your money arrives the next day. No delays.
• Transparent pricing: No hidden fees. You know exactly what you're paying. Flex pricing that scales with your business.
• Made for SMEs: Not a developer tool. Hands-on support from a team that understands your business. Trustpilot rated 4.8/5.
• Proven infrastructure: Built by ex-Fiserv and WorldFirst payments experts. Powered by Worldpay, Fiserv, and Cashflows partnerships.

Open banking works best when you can offer it alongside other payment methods. Stored gives you all of them. Sign up to explore how open banking can work for your business, alongside your existing payment setup.

Related articles

Explore more guides for UK small businesses:

• How late payments hurt UK small businesses
• All-in-one payment platforms for UK small businesses
• How to switch payment provider
• Recurring payment solutions for steady cash flow
• How trackable links supercharge affiliate sales

Conclusion

Open banking is real. It's mainstream. And it works. You get lower costs. Faster cash flow. Better security. Happier customers. The UK open banking market is worth USD 14.08 billion and growing fast [Straits Research]. 16 million people already use it. Transaction volumes grew 53% year-on-year in 2025 [FCA / Open Banking Limited].

But open banking isn't the only payment method you need. Most SMEs need card machines, invoicing, and e-commerce too. The question isn't "open banking or card payments?" It's "how do I offer both seamlessly?"

If you're ready to explore how open banking can work for your business alongside all your other payment needs, visit joinstored.com to sign up or book a demo. Let's make your payment setup simpler, cheaper, and faster.

See how open banking compares to card fees using our free calculator.