What Are Open Banking Payments?

Open banking payments, often referred to as “pay-by-bank”, are a way for customers to pay directly from their bank accounts—without using cards, apps, or third-party wallets. These payments are made possible by open banking technology, which requires licensed providers to connect to banks’ data through secure APIs.

With pay-by-bank, instead of entering card details, customers choose their bank, authenticate using their app or biometrics, and confirm the payment. The money moves directly from their account to the business’s account. Open banking is simple, direct, secure.

But the real value goes further. As more businesses integrate open banking, the benefits are becoming clear—not just for consumers, but for merchants too. Let’s have a look.

Lower Transaction Costs

Let’s start with the bottom line.

Traditional payment methods –cards – come with hefty fees. Every sale includes a cut for interchange and scheme fees, and chargeback fees, set by card networks. These fees are non-negotiable, and costs add up—especially for high-volume or high-value transactions.

Open banking removes these fees. Because the money moves directly from one account to another, there are no card networks involved. That means fewer fees. Some transactions even cost a flat rate or come with no additional charges beyond the standard bank transfer.

For businesses, that can mean saving thousands every year.

And it’s more than just hoarding more money. Lower transaction fees can make room for better pricing, higher margins, or reinvestment in growth.

Faster Settlement and Better Cash Flow

Waiting days to receive payments? That’s the norm with many traditional methods. BACS payments, for example, can take up to three days.

With open banking, that delay shrinks—sometimes to just seconds, especially with the new Instant Payment Regulation (IPR), enforced in 2025,  which requires bank transfers to be much quicker.

Real-time or near-instant settlements mean the money lands in your account faster. No batching. No middlemen. No waiting for card processors to settle funds.

This is especially helpful for:

• Businesses with tight cash flow
• Sellers dealing with high-value transactions
• Companies that need to release goods or services as soon as the payment clears

Better cash flow means better planning, faster delivery, and more flexibility in daily operations. It reduces the need for credit and lowers financial risk. For growing businesses, speed matters—and open banking delivers.

Improved Payment Security

Online fraud is a real concern. Card payments are often targeted, and chargebacks can be costly and time-consuming.

Open banking payments come with built-in security advantages:

• Strong customer authentication (SCA) is more than required, actually it’s legally mandated under PSD2 regulation. Customers approve payments through their banking app, often using biometrics–authentication method least susceptible to fraud.
• No sensitive data is shared with the merchant—no card numbers, no CVV codes.
• No stored credentials, which reduces the risk of data breaches and account takeover fraud.

This system makes it harder for fraudsters to succeed and gives customers peace of mind.

From the business side, there’s another win: fewer chargebacks. Since open banking payments are direct and authorised through the customer’s bank, there’s less room for disputes.

One of the biggest open banking benefits for businesses is this reduced fraud risk—combined with strong protection for both sides of the transaction.

Better Checkout Experience = Higher Conversion

A clunky checkout kills sales. Long forms, redirects, and loading delays can frustrate users and lead to cart abandonment. In fact, 70% of all carts are abandoned, mostly because of UX or bad checkout, numerous studies find (Baymard Institute).

Open banking simplifies the payment journey. Here’s how it usually works:

1. Customer chooses to pay by bank
2. Selects their bank from a list
3. Authenticates using their bank’s app or login
4. Confirms the payment in a few taps

That’s it.

There’s no need to enter card details. No registration. No third-party apps to download. It’s smooth, fast, and familiar—especially for mobile users. Digital natives, GenZs and millennials, are especially fond of open banking as a payment method.

The result? Higher conversion rates.

Customers complete their purchase quickly, and they feel more confident doing it. That’s especially helpful for first-time buyers or larger purchases, where trust plays a bigger role.

One of the less talked-about open banking benefits for businesses is how much it helps reduce friction at checkout—and that directly impacts revenue.

Final Thoughts: Why You Should Switch to Open Banking

Open banking is still evolving, but it’s already proving to be more than just another way to pay. It’s a way to improve how you get paid—and how you serve your customers.

Here’s a quick recap of open banking benefits for businesses:

• Lower payment processing costs
• Faster access to funds
• Stronger security and fewer chargebacks
• Smoother checkout and better user experience = more revenues

For businesses that want to reduce overheads, improve cash flow, and stay ahead of the curve, open banking is worth exploring. It’s secure, customer-friendly, and built for the digital-first world we’re operating in.

If you’re still relying on the same old payment methods such as costly card networks, now might be the time to rethink your setup. Open banking is opening new doors—and the businesses that walk through them first stand to benefit the most.