Open banking payments vs card payments UK: fees, speed, and fraud compared

For most of the last decade, card payments have been the default answer to “how do we get paid?” Visa, Mastercard, a payment gateway, a merchant account – the infrastructure was familiar, well-understood, and almost universal.  

Open banking is changing that. In 2026, it’s no longer an emerging technology being piloted by a handful of fintechs. Amazon and eBay have both launched Pay by Bank options in the UK at the beginning of the year. The Payment Systems Regulator has been actively pushing for greater adoption. And a growing number of UK SMEs are quietly discovering that bypassing the card networks entirely, for at least some of their transactions, makes meaningful financial sense.  

This article breaks down open banking (Pay by Bank) vs traditional card payments across the dimensions that matter most for SMEs: how they work, what they cost, how quickly funds settle, how secure they are, and where each still has limitations. Whether you’re weighing up open banking vs card payments for the first time or reviewing your present setup, the goal is to help you decide where each belongs in your payment strategy.  

Highlights  

• Open banking payments cost as little as 0.25% per transaction (max £4). Compared to the average 1.5%–3.5% on cards, the savings on a £5,000 invoice alone are over £70.  
• Open banking payments settle instantly via Faster Payments. Card payments typically take one to two business days.  
• Open banking payments are irrevocable and lack a chargeback mechanism, removing a significant fraud and cash-flow risk for merchants.  
• Cards still have the edge for in-person payments, international transactions, and recurring billing.  
• For most UK SMEs, the right answer is to offer both and route transactions to the method that makes the most economic sense.  

What is open banking, and how does it work?  

Open banking is a framework that allows regulated third-party providers to initiate payments directly from a customer’s bank account, with the customer’s explicit authorisation. In the UK, it operates under the Open Banking Standard, overseen by the FCA, and sits on top of the Faster Payments infrastructure, which already processes most UK bank transfers.  

So how does open banking work in practice? A Pay by Bank transaction works like this:  

1. The customer selects “Pay by bank” at checkout  
2. They choose their bank from a list  
3. They are redirected to their banking app  
4. They authenticate the payment using Face ID, fingerprint, or passcode  
5. The payment is initiated instantly and settles via Faster Payments, typically within seconds  

There are no card details entered, no card networks involved, and no intermediary processing the payment on behalf of the card scheme. The money moves directly from the customer’s bank account to yours.  

How card payments work

Card payments, whether in person, online, or over the phone, pass through a multi-party chain before funds reach your account. The customer’s card details are encrypted, captured, and sent to a payment gateway. The gateway passes the transaction to your acquirer, who requests authorisation from the card network (Visa or Mastercard), which in turn checks with the customer’s issuing bank.  

Authorisation happens in seconds, but settlement – the actual movement of funds into your account – typically takes one to two business days. Throughout that chain, each party takes a slice: interchange to the issuing bank, scheme fees to Visa or Mastercard, and an acquiring margin to your processor.  

Open banking payments vs card payments: cost comparison  

This is where the difference between open banking and card payments is most stark for SMEs.  

Card payment fees  

Every card transaction carries a Merchant Service Charge (MSC) made up of three layers:  

• Interchange: paid to the customer’s card-issuing bank. Capped at 0.2% for UK consumer debit and 0.3% for consumer credit under UK IFR, but commercial and corporate cards are uncapped and typically run at 1.30% to 2.50%. International cards (including EEA-issued cards post-Brexit) can attract an interchange of around 1.5%.  
• Scheme fees: paid to Visa or Mastercard for use of their network. These are not regulated, and the Payment Systems Regulator found they rose by over 25% in real terms between 2017 and 2023.  
• Acquiring margin: paid to your payment processor. This is the only layer that’s negotiable.  

A typical blended rate for a UK SME processing mostly domestic consumer cards runs from 1.2% to 1.8% per transaction. Businesses with higher proportions of corporate or international cards can see effective rates of 2.5% to 3.5%.  

Open banking fees with Blink Payment  

Open banking payments bypass the card networks entirely – no interchange, no scheme fees. With Blink Payment, open banking transactions are priced at 0.25% per transaction, with a minimum charge of 20p and a maximum charge of £4.  

That cap is significant: a £5,000 invoice processed via open banking costs £4 in fees, versus potentially £75–£175 on a blended card rate of 1.5%–3.5%.  

The higher the transaction value and the more corporate or international cards in your mix, the more dramatic the savings. For B2B businesses regularly invoicing in the hundreds or thousands, the economics of open banking are hard to argue with.  

For SMEs processing significant card volumes, shifting even a portion of higher-value transactions to open banking can make a material difference. On £100,000 of monthly invoice turnover processed via open banking instead of cards, the saving at a 1.5% blended card rate is around £1,250 per month, or £15,000 per year, without any change to the customer experience.  

It’s also worth accounting for the full cost of card payments beyond the headline rate. Chargebacks entail administrative costs, dispute-management time, and potential liability. Card-not-present (CNP) fraud losses are direct. When these are included in the total cost of accepting cards, the case for routing higher-risk or higher-value transactions via open banking becomes even stronger.  

Settlement speed  

Card payments, even with next-day settlement (now standard among modern UK processors), mean waiting until the following business day for funds. Some older processors still operate on a T+2 or T+3 basis.  

Open banking payments settle via Faster Payments – in some cases instantly, and always the same day for domestic UK transactions. For businesses where the timing of cash flow matters, this is a meaningful operational advantage. You know the money is there. No waiting, no reconciling against expected settlements.  

Open banking payments vs card payments: security  

Card payments  

Card payments are vulnerable to several fraud vectors:  

• Stolen card details used for card-not-present (CNP) fraud  
• Account takeover  
• Chargebacks, where a customer disputes a transaction, and funds are reversed pending investigation  

CNP fraud has grown as more payments move online. Strong Customer Authentication (SCA) has significantly improved the security profile of online card payments. 3D Secure 2 (3DS2) adds a real-time authentication step to higher-risk transactions, but it also adds friction to the checkout experience.  

Chargebacks, even when ultimately found in the merchant’s favour, create cash-flow uncertainty and an administrative burden. Some sectors (travel, high-value retail) carry meaningfully elevated chargeback rates.  

Open banking payments  

Open banking payments are authenticated using bank-level security – the same Face ID, fingerprint, or passcode the customer uses to access their banking app. There are no card details to intercept or card numbers to steal.  

Critically, open banking payments are irrevocable bank transfers. There is no chargeback mechanism. Once a payment is authorised and settled, it cannot be reversed through a dispute process. For businesses that have experienced chargeback fraud, this is a significant practical advantage.  

Every open banking payment requires Strong Customer Authentication by design, without the added checkout friction of layering SCA onto a card payment flow.  

Where card payments still have the edge  

Open banking is a strong option in many scenarios, but it doesn’t entirely replace cards. Areas where cards still have clear advantages:  

• Consumer familiarity. Most UK consumers are accustomed to paying by card. Open banking adoption is growing but uneven. Younger, digitally comfortable customers take to it quickly; older demographics may be less confident with the bank redirect flow.  
• International payments. Open banking works best for domestic UK transactions via Faster Payments. Cross-border open banking payments are in development but not yet widely available. If a meaningful proportion of your customers pay from non-UK bank accounts, cards remain the more practical option.  
• Recurring billing. While me-to-me sweeping VRPs have been standard in the UK for years, commercial VRPs are live for low-risk use cases but not yet mature. For subscription businesses or operations that rely on recurring collections, card-based repeat payments or Direct Debit remain the more established options.  
• Refunds. Card payments have an established refund mechanism. Open banking refunds require initiating a separate outbound payment, as there is no native “reverse this payment” function.  

Where open banking has the edge  

• High-value transactions. The cost saving on a £5,000 invoice paid via open banking versus card is substantial. For B2B payments, professional services invoices, or any transaction in the hundreds or thousands, open banking’s lower fee and instant settlement make it the economically rational choice.  
• Invoice and debt collection. Sending a paylink with a Pay by Bank option means the customer can pay in seconds from their banking app. Settlement is same day, no card details are required, and there’s no chargeback risk. For businesses that regularly chase outstanding invoices, this is a practical improvement.  

Real-world example: Ciret  

Ciret, a leading distributor of specialist craft and art supplies whose business was historically BACS-focused, introduced open banking through Blink Payment to make it easier and faster for customers to pay invoices. The impact was direct:  

• Late payments reduced  
• Cash flow improved  
• Customers welcomed the ability to pay via a simple paylink rather than manually setting up a bank transfer  

The Ciret team also noted the fraud-prevention benefit, as open banking’s irrevocability removed a category of payment risk they’d previously had to manage. Read the full Ciret case study.  

• Fraud-sensitive sectors. If your business has experienced card-not-present fraud or high chargeback rates, the irrevocability of open banking payments directly mitigates these risks.  
• Cost-sensitive, high-volume SMEs. Any business processing more than £50,000 per month in card payments should be evaluating how much of that volume could shift to open banking to reduce fees.  

Open banking payments vs card payments UK: the right approach for SMEs  

The most practical answer for most UK SMEs in 2026 is to offer both, and let transaction type, value, and customer preference guide which is used. When it comes to open banking vs card payments, it’s rarely an either/or decision.  

Card payments remain the right default for:  

• In-person transactions  
• Smaller-value purchases  
• International customers  
• Scenarios where consumer familiarity is the priority  

Open banking is increasingly the right choice for:  

• Larger invoices  
• B2B payments  
• Situations where lower fees, same-day settlement, or the elimination of chargeback risk is valuable  

A payment platform that handles both from a single dashboard makes this straightforward to manage. The split doesn’t need to be a planned decision for every transaction – it’s a menu you offer customers to choose from.  

Frequently asked questions  

Is open banking regulated in the UK?  

Yes. Open banking payment initiation services are regulated by the FCA under the Payment Services Regulations. Providers must be authorised or registered as Payment Initiation Service Providers (PISPs).  

How does open banking work for business payments? 

When a customer pays via open banking, they authenticate the payment directly in their banking app using Face ID, fingerprint, or passcode. The funds are then sent via Faster Payments. No card details required. For a full breakdown of open banking payments vs card payments, see the cost and security sections above.  

Can customers get a refund on an open banking payment?  

There is no automatic reversal mechanism for open banking payments – they are irrevocable bank transfers. Refunds must be processed as a separate outbound payment by the merchant. This is different from card payments, where chargebacks provide a consumer dispute mechanism.  

Are there limits on open banking payment amounts?  

Most UK banks set limits on Faster Payments, typically £25,000 to £250,000 per transaction, depending on the bank. For most SME transactions, these limits are not a practical constraint.  

What happens if a customer’s bank is unavailable?  

If a customer’s bank is temporarily unavailable during the open banking authentication flow, the payment will fail. In practice, major UK bank outages are rare and brief, but it’s worth offering card payment as a fallback option for this reason.  

How Blink Payment handles open banking and cards  

A common concern when evaluating open banking payments vs card payments in the UK is whether adding a new payment method means adding a new platform, a new contract, and a new reconciliation headache. With Blink Payment, it doesn’t.  

Open banking (Pay by Bank) is built into the same platform as card payments, paylinks, virtual terminal, Direct Debit, and batch payments – all managed from a single dashboard, with unified reporting and accounting integrations for Xero, QuickBooks, and Sage. Adding open banking as a payment option doesn’t require a separate merchant account, a separate settlement process, or a separate support relationship.  

On pricing, open banking through Blink Payment is 0.25% per transaction (min 20p, max £4) – transparent, simple, and significantly below typical card rates for most transaction values above a few hundred pounds. Card pricing is bespoke based on your volume and mix, using either blended or IC++ (interchange + scheme + acquiring) pricing. The pricing page gives a full breakdown.  

For businesses uncertain whether Blink Payment represents better value than a traditional card processor or established payment gateway, the honest answer is: it depends on your transaction mix. But for any SME with a meaningful proportion of higher-value invoices, B2B transactions, or corporate/international card exposure, the numbers tend to be clear. A short conversation with the sales team will show you precisely what the comparison looks like for your business.  

Conclusion  

Open banking isn’t a replacement for card payments – not yet, and possibly not ever for every use case. But when you look at open banking vs card payments across cost, settlement speed, and fraud risk, it is a genuinely appealing alternative for a growing range of SME payment scenarios, particularly where transaction values are higher, fraud risk is a concern, or the cost of card fees is a meaningful drag on margin.  

The businesses getting the most value from open banking in 2026 aren’t those who’ve replaced cards entirely. They’re the ones who’ve worked out which transactions belong where and built a payment setup that handles both cleanly.  

Blink Payment supports both card payments and open banking within a single platform, with open banking priced at 0.25% per transaction (max £4). See our pricing, explore our open banking product, or get in touch to get a quote based on your actual transaction mix.