Open Banking Payments: How Account-to-Account Transfers Are Replacing Cards

Open banking payments are the most commercially significant fintech development for merchants since contactless cards. Zero interchange, instant settlement, no chargebacks, and biometric authentication built into the bank app — the merchant cost savings are material. For CFOs managing high-volume payment operations, understanding open banking payment economics and where they are viable is now essential. This guide covers how payment initiation works, who the major providers are, and how the business case stacks up against cards.

How Does a PSD2 Payment Initiation Work?

The open banking payment flow under PSD2 has five steps. First, the consumer selects ‘Pay by Bank’ at merchant checkout and chooses their bank. Second, the PISP (e.g., TrueLayer) sends an authorization request to the bank’s open banking API. Third, the consumer is redirected to their bank app or web portal for biometric or OTP authentication — this is the Strong Customer Authentication (SCA) step, which is legally required for PSD2 payment initiation. Fourth, the bank confirms authorization to the PISP and initiates the payment — typically through SEPA Instant for instant settlement or standard SEPA Credit Transfer for next-day. Fifth, the merchant receives confirmation and can release goods or services immediately.

The entire flow takes 15–30 seconds for the consumer. The key UX challenge is the bank redirect — consumers unfamiliar with open banking may be confused or distrustful of leaving the merchant’s checkout. Conversion rates improve significantly when merchants brand the experience clearly (e.g., ‘Pay directly with your [Bank Name] account’) rather than using generic ‘Pay by Bank’ labels. First-time open banking payment conversion is typically 70–80%; repeat-use conversion with saved bank preferences reaches 90%+.

What Is the Business Case for Merchants Accepting Open Banking Payments?

The merchant business case is strongest for high-value, B2B, and recurring payment use cases. For a business invoicing corporate customers for €5,000–50,000, open banking payment initiation costs €0.20–0.30 per transaction (PISP fee) versus €15–150 for a card payment at 0.3% interchange. The annual saving on 1,000 such invoices is €15,000–150,000. For recurring B2C payments (subscriptions, utility bills), open banking request-to-pay combines instant settlement with built-in SCA, eliminating card-on-file PCI obligations.

For standard e-commerce, the case is more nuanced. Consumer adoption of ‘Pay by Bank’ varies significantly — it is high in the Netherlands (via iDEAL, which processed over 1 billion transactions in 2023), growing in the UK and Germany, and nascent in Southern Europe. Merchants should offer open banking as a payment option alongside cards rather than replacing them, and track open banking adoption rates by customer segment.

How Does Open Banking Work in Turkey?

Turkey introduced open banking rules through the Payment Services Law (Law No. 6493) and subsequent BDDK regulations. The Central Bank of Turkey (CBRT) mandated that banks provide open banking APIs to licensed payment service providers from 2020 onward. Turkey’s FAST instant payment system (launched 2020, similar to SEPA Instant) provides the settlement rail for open banking payment initiation in TRY.

Turkish banks including Garanti BBVA, İş Bankası, Yapı Kredi, and Akbank have implemented PSD2-equivalent open banking APIs. Licensed Turkish PSPs (fintech companies holding BDDK payment service licenses) can act as PISPs and initiate payments from customer bank accounts. The ecosystem is growing but less mature than the EU — consumer awareness of ‘open banking payment’ as a concept remains low, though bank app-based QR payments (using similar infrastructure) have achieved strong adoption via FAST.

What Are the Limitations of Open Banking Payments?

Open banking payments have three structural limitations that prevent them from immediately replacing cards. First, coverage: open banking APIs exist only for banks in PSD2-regulated markets. Non-EU, non-UK markets have no equivalent regulatory mandate — payments in North America, Asia, and Africa cannot use open banking initiation without analogous local frameworks. Second, no consumer protection equivalent to chargebacks: open banking payments are push payments with finality. Consumers who are defrauded or who pay for goods that are not delivered have no chargeback mechanism — only civil recourse. Third, user experience fragmentation: the bank redirect experience varies widely across banks. Some banks have excellent, fast mobile app authentication; others have slow or unreliable API connections that cause payment failures.

These limitations explain why open banking payments complement rather than replace cards for most use cases. The combination of open banking for B2B and high-value B2C plus cards for lower-value consumer payments and international customers is currently the optimal hybrid strategy for most multi-channel businesses. For the full picture of how payment methods fit together, see our payment infrastructure overview and the Digital Payments hub.

What Are the Major Open Banking Payment Providers in Europe?

The European open banking payment infrastructure layer has consolidated around a handful of specialist providers. TrueLayer (UK/EU) is the largest independent open banking payment provider, covering 12+ European markets with high API reliability SLAs. Banked specializes in UK open banking with a focus on e-commerce checkout. Token.io provides enterprise-grade open banking connectivity to banks in 20+ European markets. Yapily offers API coverage across 2,000+ EU and UK banks. Major payment platforms have also integrated open banking: Stripe Link can use open banking for bank account verification and payment in supported markets; Adyen’s open banking payment method covers EU and UK.

Selection criteria for merchants: API coverage in your target markets, reliability and uptime SLAs (critical — a payment failure at checkout is a lost sale), settlement speed (SEPA Instant vs next-day SEPA CT), refund initiation capability, and integration complexity. For enterprise merchants, evaluate whether open banking payment data can feed into existing ERP reconciliation workflows with the same level of automation as card payment data. Our payment infrastructure overview covers how open banking fits the broader payment stack.

How Does Open Banking Payment Initiation Interact with Accounting and Reconciliation?

Open banking payments generate a different data model than card payments for accounts receivable reconciliation. Card payments arrive as net settlements (gross minus interchange/fees) batched by acquirer. Open banking payments arrive as gross amounts directly from the payer’s bank, with PISP fees charged separately (often as a monthly invoice rather than per-transaction deduction). This means bank statement reconciliation must handle both gross-amount open banking credits and PISP monthly fee invoices, rather than the standard net settlement model from card acquirers.

For ERP integration, open banking payment confirmations include structured reference data (the payment reference you pass to the PISP appears in the bank statement credit). With ISO 20022 SEPA Instant transactions carrying full structured remittance data, automated AR matching rates for open banking payments should be higher than for traditional bank transfers and competitive with card payment reconciliation. Build your AR automation workflow to ingest PISP confirmation webhooks alongside bank statement data for same-day automated matching. This eliminates the manual reconciliation gap that some businesses encounter when first adding open banking payments to their payment mix.

What Is the Outlook for Open Banking Payments in the EU Under PSD3?

PSD3 (the third Payment Services Directive, currently in legislative process as of 2025) proposes several enhancements to the PSD2 open banking framework that will directly benefit payment initiation. Key proposals: mandatory dedicated open banking API infrastructure (banks can no longer rely on screen-scraping fallbacks as contingency), improved API availability SLAs with enforcement mechanisms, standardized consent frameworks to reduce consumer friction, and explicit provisions for Variable Recurring Payment (VRP) mandates for commercial use cases.

PSD3 also proposes a new Financial Data Access (FIDA) framework extending data sharing beyond payment accounts to investment accounts, insurance, and mortgages — creating the foundation for open finance. For businesses building payment operations strategy for 2025–2028, PSD3 will make open banking payment initiation more reliable, more consistent across EU markets, and more viable for recurring billing use cases. The trajectory is clear: open banking payments will capture an increasing share of online transactions in EU markets over this period, making now the right time to test and build merchant capability. Follow developments on the Digital Payments hub.

What Are the Major Open Banking Payment Providers in Europe?

The European open banking payment infrastructure layer has consolidated around a handful of specialist providers. TrueLayer (UK/EU) is the largest independent open banking payment provider, covering 12+ European markets with high API reliability SLAs. Banked specializes in UK open banking with a focus on e-commerce checkout. Token.io provides enterprise-grade open banking connectivity to banks in 20+ European markets. Yapily offers API coverage across 2,000+ EU and UK banks. Major payment platforms have also integrated open banking: Stripe Link can use open banking for bank account verification and payment in supported markets; Adyen’s open banking payment method covers EU and UK.

Selection criteria for merchants: API coverage in your target markets, reliability and uptime SLAs (critical — a payment failure at checkout is a lost sale), settlement speed (SEPA Instant vs next-day SEPA CT), refund initiation capability, and integration complexity. For enterprise merchants, evaluate whether open banking payment data can feed into existing ERP reconciliation workflows with the same level of automation as card payment data. Our payment infrastructure overview covers how open banking fits the broader payment stack.

How Does Open Banking Payment Initiation Interact with Accounting and Reconciliation?

Open banking payments generate a different data model than card payments for accounts receivable reconciliation. Card payments arrive as net settlements (gross minus interchange/fees) batched by acquirer. Open banking payments arrive as gross amounts directly from the payer’s bank, with PISP fees charged separately (often as a monthly invoice rather than per-transaction deduction). This means bank statement reconciliation must handle both gross-amount open banking credits and PISP monthly fee invoices, rather than the standard net settlement model from card acquirers.

For ERP integration, open banking payment confirmations include structured reference data (the payment reference you pass to the PISP appears in the bank statement credit). With ISO 20022 SEPA Instant transactions carrying full structured remittance data, automated AR matching rates for open banking payments should be higher than for traditional bank transfers and competitive with card payment reconciliation. Build your AR automation workflow to ingest PISP confirmation webhooks alongside bank statement data for same-day automated matching. This eliminates the manual reconciliation gap that some businesses encounter when first adding open banking payments to their payment mix.

What Is the Outlook for Open Banking Payments in the EU Under PSD3?

PSD3 (the third Payment Services Directive, currently in legislative process as of 2025) proposes several enhancements to the PSD2 open banking framework that will directly benefit payment initiation. Key proposals: mandatory dedicated open banking API infrastructure (banks can no longer rely on screen-scraping fallbacks as contingency), improved API availability SLAs with enforcement mechanisms, standardized consent frameworks to reduce consumer friction, and explicit provisions for Variable Recurring Payment (VRP) mandates for commercial use cases.

PSD3 also proposes a new Financial Data Access (FIDA) framework extending data sharing beyond payment accounts to investment accounts, insurance, and mortgages — creating the foundation for open finance. For businesses building payment operations strategy for 2025–2028, PSD3 will make open banking payment initiation more reliable, more consistent across EU markets, and more viable for recurring billing use cases. The trajectory is clear: open banking payments will capture an increasing share of online transactions in EU markets over this period, making now the right time to test and build merchant capability. Follow developments on the Digital Payments hub.

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