How Open Banking Payments Work
Open Banking payments safely allow businesses to request and receive bank-to-bank payments directly from customers, without relying on card details or manual bank transfers.
The customer approves the payment in their own banking app, and funds are typically transferred in real time.
How an Open Banking Payment Works
At a basic level, Open Banking payments follow a simple process:
- The business creates a payment request
- The customer receives a secure payment link
- The customer selects their bank
- They log in through their own banking app or online banking
- The payment details are already populated
- The customer approves the payment
- Funds are transferred directly to the business
This removes the need for customers to manually enter sort codes, account numbers, references or card details.
What the Customer Sees
From the customer’s point of view, Open Banking is designed to feel fast and familiar.
They typically:
- click a payment link
- choose their bank
- authenticate using Face ID, fingerprint or passcode
- confirm the payment
Because the process happens within their trusted banking environment, it feels secure and straightforward.
What the Business Sees
For the business, the process is equally efficient.
A payment request can include:
- the transaction amount
- invoice or order reference
- payment description
- destination account details
Once approved, the business receives confirmation quickly, making it easier to:
- release goods or services
- update order status
- reconcile payments accurately
How Open Banking Payments Are Sent
Open Banking payments can be initiated across multiple channels, including:
- SMS
- web checkout
- live chat
- payment links during phone conversations
This makes Open Banking particularly useful for businesses that collect payments remotely or across multiple customer touchpoints.
Why Open Banking Feels Different to Traditional Bank Transfers
Traditional bank transfers rely on the customer doing the work.
They need to:
- log into banking manually
- enter account details
- type the correct reference
- approve the transfer
Open Banking simplifies this by letting the business initiate the payment request with all key information already included.
That means:
- fewer errors
- faster payments
- less drop-off
- better customer experience
How Settlement Works
One of the biggest advantages of Open Banking is settlement speed.
Because payments typically use Faster Payments rails in the UK:
- funds often arrive instantly
- settlement is much quicker than many card transactions
- businesses gain faster access to cash
This can make a meaningful difference to cash flow, particularly for invoice-driven or high-value transactions.
How Security Fits Into the Process
Open Banking payments are secured through:
- bank-level authentication
- Strong Customer Authentication
- regulated payment initiation
- secure APIs
Customers never need to share card details with the business, which reduces fraud risk and lowers exposure to sensitive payment data.
Explore the benefits of Open Banking in greater detail.
Where Open Banking Works Best
Open Banking works particularly well for:
- invoice payments
- holiday deposits
- high-value transactions
- remote sales
- professional services
- utilities and bill payments
- charity donations
- retail payment links
It can also be used alongside card payments, giving customers more flexibility.
Open Banking as Part of a Modern Payment Strategy
For many businesses, Open Banking is not a total replacement for cards. It is an additional payment option that improves flexibility and reduces reliance on high-fee payment methods.
Used properly, it helps businesses:
- get paid faster
- reduce processing costs
- lower fraud exposure
- improve reconciliation
- create a smoother payment journey
Introduce Open Banking to Your Business
Open Banking payments give businesses a faster and more efficient way to get paid.
By simplifying the payment journey and reducing friction for customers, they help improve cash flow, reduce risk and modernise the way payments are collected.
Get a no-obligation demonstration from our team on how Open Banking can benefit your business.
