In a world where geopolitical tensions increasingly threaten financial flows, the integrity of national payment infrastructure has taken on new strategic urgency.
Is Open Banking ready
The recent US sanctions on Russia’s Banks and its removal from Swift offer compelling examples.
These measures prompted regional banks in countries such as Armenia, Georgia and Kazakhstan to suspend cross-border services, fearing exposure to secondary sanctions.
The fallout? Disrupted remittance channels and constrained financial access – highlighting how political leverage can fracture payment ecosystems with little notice.
For the UK, a country heavily reliant on US-dominated card schemes, this scenario is not purely speculative.
Visa and Mastercard, both headquartered in the US, underpin the vast majority of domestic transactions.
With the UK’s former Switch scheme and Vocalink now under American ownership, the UK’s dependency is near total. This has prompted a timely question: Could Open Banking stand as a viable, sovereign alternative?
The short answer is: not yet. But it might – if critical challenges are addressed.
Cultivating Consumer Confidence and Adoption
While Open Banking usage has grown steadily – surpassing 200 million transactions in 2024 – this still pales in comparison to the entrenched dominance of card payments, which saw 383 million credit card transactions in September alone.
To reach critical mass, Open Banking must win over consumers with compelling functionality and credible safeguards.
Efforts are underway.
Open Banking Limited is developing consumer protection schemes akin to Section 75 of the Consumer Credit Act, while the Payment Systems Regulator’s new liability framework for APP (Authorised Push Payment) fraud, introduced in October 2024, offers a legal architecture for redress.
Yet these initiatives are nascent and remain untested at scale.
Fortifying the Supplier Ecosystem
Robust infrastructure requires resilient providers. However, the financial viability of Open Banking service providers remains uncertain.
The collapse of Vyne – a notable name in the space – serves as a stark warning.
Two structural weaknesses hinder market sustainability.
First, low entry barriers have resulted in fierce price competition and wafer-thin margins.
Second, Open Banking providers lack direct merchant relationships, often operating as adjuncts to larger acquirers. This relegates Open Banking to a supporting role in merchants’ payment stacks, rather than a primary channel.
Closing the Product Gaps
Without parity in functionality, Open Banking cannot displace incumbent networks.
Three major hurdles persist:
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In-store payments: A lack of frictionless tap-to-pay capability limits usability in physical retail.
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Cross-border transactions: Poor interoperability makes Open Banking unsuitable for international commerce or travel.
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Recurring payments: The absence of widely deployed Variable Recurring Payment (VRP) solutions leaves a gap in subscription and billing use cases.
Building a Future-Proof Framework
To credibly rival card networks, Open Banking needs a multifaceted strategy.
Introducing modest commercial incentives, akin to interchange fees, could make it more attractive for banks and merchants alike.
Enhanced consumer protections and clear liability allocation would foster trust. Product innovation – especially around tap-to-pay and cross-border acceptance – must accelerate.
Most importantly, Open Banking must be recognised as part of the UK’s critical infrastructure. Just as energy and food security receive coordinated government attention, so too must payment systems.
With the right reforms, Open Banking could offer the UK a resilient, domestically anchored payment system – safeguarding national financial sovereignty in an increasingly volatile global landscape.
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