Open Banking Payments Move Closer to Mainstream Retail Adoption
This is seen as another significant step towards making Open Banking/A to A payments a mainstream alternative to cards for online retail transactions.
The proposal supports the ambitions set out in the UK Government's National Payments Vision to establish account-to-account payments as a widely adopted payment option for consumers and merchants. Unlike today's Open Banking Single Immediate Payments (SIPs), Wave 2 cVRPs would enable one-click and recurring payments without requiring customers to re-authenticate every transaction through their banking app, creating a checkout experience closer to card-on-file payments.
What is being proposed?
UK Finance is recommending a multilateral commercial framework under which Payment Initiation Service Providers (PISPs) would pay a centrally-set transaction fee to customers' banks (ASPSPs) for each successful payment. The proposed fee would be charged on an ad valorem basis (a percentage of transaction value) rather than as a fixed pence-per-transaction fee, reflecting how most existing e-commerce payment methods are priced.
The proposal also includes two potential approaches to consumer purchase protection:
- A "SIP+" model, which would largely mirror today's Open Banking protections while adding protection in cases of merchant failure.
- A "debit card efficient" model, which would provide protections more comparable to debit card chargebacks but at a lower cost than existing card schemes.
Potential impact for retailers
For retailers, the key attraction remains the prospect of increased payment competition and lower acceptance costs. The modelling undertaken for UK Finance suggests there are scenarios where Open Banking payments could apply competitive pressure to card fees and encourage adoption across a broad range of merchants.
The report highlights that merchant adoption will be heavily influenced by overall transaction costs, purchase protection requirements and customer experience. Larger merchants indicated that any new payment method would need to deliver meaningful savings compared with existing card acceptance costs before widespread adoption occurs.
For retailers, the debate over purchase protection will be particularly important. A lighter-touch protection model could support lower payment costs, while a more card-like protection model may increase consumer confidence and usage but at a higher cost to the ecosystem. The final balance struck will affect both merchant economics and customer uptake.
The proposal also notes that Open Banking payments could offer faster settlement than card transactions, improving cash flow and reducing working capital pressures for merchants.
What happens next?
The paper does not set a final transaction fee. Instead, UK Finance will provide its modelling outputs to UK Payments Initiative Ltd and other potential operators to help determine future pricing. Further work is required on legal certainty, cost validation, governance arrangements, purchase protection design and the eventual transaction fee structure.
Wave 1 cVRPs, covering lower-risk sectors such as utilities, regulated financial services and government payments, are expected to launch first. Wave 2 will extend the model into mainstream e-commerce and retail use cases.
Part of a wider payments transformation
The proposal sits alongside a number of wider UK payments initiatives, including delivery of the National Payments Vision, the Joint Regulatory Oversight Committee's Open Banking roadmap, the development of commercial variable recurring payments, and ongoing work to create a long-term Open Banking operating model. Together, these initiatives are intended to increase competition in payments, broaden consumer choice and create alternatives to traditional card-based payment systems.
For retailers, the coming 12-24 months are likely to be pivotal. Decisions on commercial pricing, consumer protections and industry governance will determine whether Open Banking payments become a genuine competitive alternative at online checkout or remain a niche payment option.
