Glossary · UK
What is Open Banking Payment?
A payment made directly from a customer's bank account to a merchant or biller, authorised through the customer's own banking app, without using a card network.
Full Definition
An Open Banking payment (also called a 'pay by bank' or account-to-account payment) lets a customer pay a business directly from their current account, authenticated through their own bank's app or online banking, rather than entering card details or going through card scheme rails like Visa or Mastercard. It relies on the UK's Open Banking infrastructure, built following the Competition and Markets Authority's 2017 retail banking market investigation, which requires the largest UK banks to provide secure, regulated data and payment-initiation access to authorised third-party providers via standardised APIs, with the customer's explicit consent for each connection. For merchants, Open Banking payments typically settle faster and cost less in transaction fees than card payments, since they avoid multiple layers of card-scheme and acquirer fees; for customers, they remove the need to share card numbers with a business and can offer real-time confirmation of funds availability. Open Banking also underpins budgeting and account-aggregation apps that securely pull read-only transaction data across a user's different bank accounts.