The new US administration continues to demonstrate its willingness to use economic levers to drive countries to conform with its policies, even with close allies. Historically, one of those levers has been the provision of payment services. As part of an international sanctions package in 2014, Visa and Mastercard were required to withdraw their services from Russia, prompting the creation of the Mir domestic payment system. At the time it seemed inconceivable that something similar could happen to European countries however such an outcome looks more possible as Elon Musk begins tampering with the US payment system. Here in the UK, the only credible alternative (since the sale of the domestic Switch scheme to the US) is Open Banking. However, would it be able to fill the gap if the major US schemes were weaponised and required to suspend services to the UK? In order to provide a credible alternative three elements need to exist: 

1. Consumer Trust and Usage 

To provide a credible alternative, consumers have to trust the service on offer and be willing to use it. Certainly Open Banking payments have grown steadily and reached almost 200 million payments made in 2024.  

However, OB volumes are still a rounding error compared to cards. The 2024 figure of 197 million Open Banking payments is still <1% of the estimated 31.1 billion card payments in the same year. The difference in user numbers is also large though less dramatic, with 11.2 million Open Banking users and over 50 million contactless card users. 

To build trust Open Banking Limited is looking to introduce consumer protection like Section 75 of the Consumer Credit Act. In the meantime, the PSR has mandated reimbursement to victims of authorised push payment fraud in Open Banking, but the liability framework is still very young (it went live in October 2024) 

2. Supplier Resilience*  

Now let’s look at the resilience of the supplier sector to step in to become core national infrastructure providers. Despite this volume growth, Fintechs in this space continue to turn a profit, the most recent casualty being Vyne. Other Open Banking players are still in business but struggling to make money.  Geoffrey Barraclough recently pointed out that Trustly, the largest A2A player in Europe, reported net revenue down 5% at €100m despite strong volume growth. Similarly, Yapily saw revenues double but still posted an £11.4m operating loss.  

There are two strategic issues facing these suppliers as they grow their volumes which will continue to depress profitability: 

1. There are relatively low barriers to entry in OB. This has led to too many suppliers chasing too little volume, and margins being competed away. If margins grow, more players will enter the market. There is relatively little commercial risk inherent in OB transactions which can be used to maintain profit margins as it does in card payments 
2. Merchants tend to see OB as a feature of wider payment acceptance, alongside Apple/Googlepay, Klarna, PayPal etc. not a standalone product. This will tend to push OB infrastructure providers to be suppliers to acquirers who own the wider merchant relationship 

3. Product Ubiquity  

Finally let’s look at whether OB can cover the range of use cases covered by cards. As well as the fact that card payments have a more mature consumer protection process, there are a number of other significant gaps such as: 

1. F2F: Currently consumers could not pay in their local supermarket using OB 
2. Cross Border: OB can’t be used to buy goods overseas, or pay for travel or accommodation in advance. This includes the use of pre-auths or auth top-ups which are commonly used in the travel sector 
3. Recurring: Commercial Variable Recurring Payments are being promoted but require a complex set of bilateral arrangements with multiple banks while direct debits are cheap and well understood.  

So we have some way to go before OB can provide a credible alternative to cards. What can we do in the UK to address these issues: 

1. There needs to be a commercial incentive similar to interchange to encourage issuers to promote OB along side card payments 
2. A more credible liability framework for fraud and exceptions aligns liability with responsibility (such as card’s liability shift) to build trust 
3. Support for a much wider range of use cases, especially a convenient tap-to-pay in-store experience; Apple’s recent opening of its NFC infrastructure could be a good starting point.  
4. We will also need to work closely with our European cousins to build interoperability with European schemes such as Vipps, Swish and Wero.  

This is a long list, and one which will only be achieved by public and private partnership. However, perhaps we should start seeing payments as part of our domestic strategic infrastructure alongside issues such as energy and food resilience just in case the worst were to happen.  

*I recognise that Mastercard owns Vocalink upon which Open Banking runs, but I will focus on the Third Party Processors as their position is more perilous. The fact that VocaLink transactions are still on-soil in the UK should also provide some resilience against political interference.