Open banking was pioneered in the UK with bold ambitions: to boost competition, lower costs, and create better payment experiences for consumers and businesses. Seven years on, it’s gained significant ground, with over 31 million monthly payments, 13.3 million users and £4.1bn to the UK economy.
This progress shows that open banking is starting to reshape the financial sector—but its full potential is still ahead.
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According to the Department for Business and Trade, open banking and smart data schemes could be worth up to £28bn per year to the UK economy in the near future. But for open banking to provide a real boost to the City, it needs to become mainstream.
A payments system lacking genuine choice
Our recent report based on data collected by YouGov highlights that there’s a knowledge gap of open banking’s core benefits among consumers. Despite more than half (58%) saying a lower fraud risk would encourage them to try a new payment method, only 39% feel protected using it, even though fraud rates are significantly lower than other payment methods.
The report details consumer priorities in specific purchase scenarios, highlighting that for low-value purchases, 49% value convenience, yet for purchases above £100, security becomes the priority, especially with unfamiliar brands. With single open banking payments, superior security and a reduced risk of fraud exist at all purchase values, but for low-value purchases, the authentication process can add friction — especially when digital wallets have made card payments feel so simple.
This is where Commercial Variable Recurring Payments (cVRP) will be a game changer. It allows consumers to benefit from recurring payments and one-click checkout, but on their own terms. They can set payment limits, payment dates, and cancel or amend at any time, providing much more control and flexibility than card-on-file or direct debit. cVRP bridges the convenience gap, particularly for sub-£100 purchases.
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By GlobalDataElsewhere, nearly all merchants surveyed (98%) said low fees are a priority when choosing a new payment method, 97% said the same about strong security.
Right now, many feel they’re trapped with the high costs of card schemes and are paying the price for a system that’s expensive, opaque and unjust.
The biggest flashpoint for merchants is the chargeback system. Designed to protect consumers from fraud, the system has become an administrative and financial burden. Friendly fraud — when a consumer mistakenly or knowingly falsely claims they didn’t receive goods or there was a payment problem — is a particular concern. Nearly half of all merchants surveyed want stronger protection against it. More than 40% of say chargebacks are unfair, and the same number are calling for them to be scrapped entirely.
The risk of inaction
If open banking doesn’t deliver as a mainstream payment method, the consequences will be felt across the economy. Businesses will continue to face rising costs, limited flexibility, and reduced visibility over how money moves.
Last year the Chancellor announced the National Payments Vision (NPV), which outlined the importance of securing open banking but four key reforms could make the Chancellor’s vision a reality.
Develop a bespoke consumer protection model: Don’t just replicate what we have for cards. This has to address critical issues like merchant insolvency.
Introduce a UK trustmark: Launch an instantly recognizable trustmark for open banking payments, like the one we have for contactless payments – it will build consumer confidence at checkout.
Accelerate cVRP rollout: Drive forward Commercial Variable Recurring Payments (cVRP) this year – with a consumer-friendly name – so that people understand what it is.
Preserve low cost and high security: Progress open banking while safeguarding its core advantages of low fees and strong security, as these are its foundational value propositions.
Forging a path to greater adoption
These reforms will help to educate consumers and merchants about the benefits that open banking can bring. For years, the UK has pioneered open banking – it would be a monumental waste to give up this chance to help businesses and consumers benefit from this pioneering technology.
Nicole Green is VP Product Strategy, Innovation and Policy at Yapily
