The Complete Guide to Open Banking for European Businesses

Introduction: The End of the Card Monopoly?

For over fifty years, the global payments infrastructure has been effectively owned by a duopoly. Visa and Mastercard have operated as the unavoidable tollbooths of commerce, levying a tax of 1.5% to 3.5% on every digital transaction. For the C-Suite, these Interchange and Scheme fees were accepted as the immutable cost of doing business. However, the Revised Payment Services Directive (PSD2) was not merely a regulatory update; it was a structural disruption designed to break this lock. As we approach 2026, the data confirms that the monopoly is cracking.

Open banking for business has evolved far beyond its initial scope of data aggregation (Account Information Services). The real revolution is in Payment Initiation Services (PIS)—specifically, direct Account-to-Account (A2A payments) that bypass the card networks entirely. This is no longer a theoretical alternative. It is a replacement rail.

The market trajectory is undeniable. Current forecasting projects the global Open Banking market to exceed $43 billion by 2026, expanding at a compound annual growth rate (CAGR) of over 24%. In mature markets like the UK, payment initiation volume grew by 69% year-over-year in 2024, with payment usage officially overtaking data connections. In Spain, instant transfers now account for over 55% of total volume. The strategic implication is clear: A2A payments are projected to offset 15-25% of future card transaction volume growth, signaling a massive migration of capital away from the “rent-seeking” models of legacy schemes.

For high-risk operators in iGaming and Forex, this shift is existential. PSD2 payments offer a trifecta of advantages that cards cannot match mathematically:

1. Cost: A flat fee or nominal percentage that slashes acceptance costs by up to 80% compared to commercial card interchange.
2. Speed: The upcoming EU Instant Payments Regulation (IPR) mandates that by October 2025, all PSPs must support instant euro payments, effectively making T+0 settlement the legal standard.
3. Finality: Unlike card payments, SEPA Credit Transfers are irrevocable, eliminating the “friendly fraud” chargeback mechanism that plagues regulated industries.

This guide is not a technical manual; it is a strategic playbook for decoupling your revenue from the card networks. We will explore how to integrate these rails to protect your margin and secure your liquidity.

The Strategic Business Case: Why CEOs Are Switching

For the Chief Executive, the adoption of open banking for business is not a technical upgrade; it is a fundamental restructuring of unit economics. The decision to integrate Account-to-Account (A2A) rails is driven by three undeniable pillars of ROI: structural cost arbitrage, capital velocity, and risk elimination.

1. Cost Architecture: Escaping the Scheme Tax

The traditional card processing model is burdened by a cascading fee structure designed in the 1970s. A single credit card transaction triggers a complex stack of costs: Interchange (paid to the issuer), Scheme Fees (paid to Visa/Mastercard), and the Acquirer Markup. For high-risk merchants, this stack is further inflated by cross-border assessment fees and risk premiums, frequently pushing the effective Cost of Acceptance above 3% or 4%.

Open Banking dismantles this hierarchy. By initiating a direct credit transfer, you bypass the card networks entirely. There is no interchange and no scheme fee. The cost model typically shifts to a nominal flat fee per transaction or a significantly lower percentage cap. For a merchant processing €10 million monthly, the ability to reduce payment fees from a blended 3.5% to a capped 0.5% (or lower) does not just improve the P&L; it can double the EBITDA margin. For a deeper financial analysis, consult The ROI of Open Banking: A CFO’s Perspective.

2. Capital Velocity: The Liquidity Advantage

In the high-risk sector, liquidity is oxygen. Traditional card acquirers manage risk by delaying settlement—often holding funds for T+3 to T+7 days, alongside a rolling reserve that locks up 10% of gross revenue. This creates a permanent drag on working capital.

Open Banking operates on a “Push” model utilizing rails like SEPA Instant. Instant settlement is the default standard. Funds are cleared and available in the merchant’s beneficiary account within seconds, 24/7/365. This eliminates the “receivables gap,” allowing operators to reinvest capital immediately into user acquisition or liquidity pools rather than financing a float for their processor.

3. The Risk Vacuum: Eliminating Friendly Fraud

The most strategic advantage is the neutralization of the chargeback mechanism. Card payments are “Pull” transactions—the merchant asks to take money—which empowers the cardholder to dispute the charge months later (Friendly Fraud). Open Banking transactions are “Push” payments: the user must log in to their bank environment and biometrically authorize the transfer.

Because the payer explicitly authenticates the transfer with their bank, the payment is legally considered irrevocable under PSD2 frameworks. There is no “chargeback” button for buyer’s remorse. For verticals like iGaming and Forex, where friendly fraud accounts for the majority of dispute volume, this structural shift effectively zeroes out the cost of refunds and dispute administration. As detailed in How Open Banking Reduces Fraud & Chargebacks for High-Risk Transactions, this is the only payment method that offers mathematical immunity to the chargeback ratio volatility that threatens traditional MIDs.

The Mechanics: How “Pay by Bank” Actually Works

To operationalize open banking for business, executives must first decouple the terminology. The framework is built on two distinct API functionalities: the “Read” capability and the “Write” capability.

PIS vs AIS: The “Read” and “Write” Engines

The first component is the Account Information Service (AIS). This is the “Read” function. It allows a Third-Party Provider (TPP) to access a user’s bank data—balance, transaction history, and identity details—without moving funds. For high-risk merchants, AIS is a powerful tool for background affordability checks and instant KYC verification, but it does not generate revenue directly.

The second component, and the engine of “Pay by Bank,” is the Payment Initiation Service (PIS). This is the “Write” function. PIS empowers a licensed TPP to instruct the customer’s bank to execute a credit transfer directly to the merchant. It bypasses the need for the user to manually log in to their banking portal and type in an IBAN.

The User Journey: Biometrics Over Data Entry

The superiority of the PIS vs AIS distinction lies in the user experience (UX). The traditional card checkout is a high-friction exercise in data entry: locating a physical card, typing a 16-digit PAN, entering an expiry date and CVV, and then waiting for a disconnected 3D Secure SMS code.

The Open Banking flow eliminates this friction by leveraging the infrastructure the user already trusts: their mobile banking app.

1. Bank Selection: On the checkout page, the user selects their bank from a searchable list.
2. Deep Link Redirection: On mobile devices, the flow automatically “deep links” (switches apps) directly to the user’s installed banking application.
3. Biometric Authorization: Instead of passwords, the user authenticates using the method they use dozens of times a day—FaceID or fingerprint.
4. Instant Execution: The bank confirms the transfer immediately, and the user is redirected back to the merchant with a success message.

Why This Converts Better

This workflow fundamentally solves the “fat finger” error rate of mobile commerce. There is no data to mistype. Furthermore, because Strong Customer Authentication (SCA) is native to the banking app login, the security step feels like a natural part of the process rather than an intrusive hurdle. The result is a seamless authorization flow that statistically outperforms manual card entry, particularly for high-frequency depositors in the iGaming and trading sectors.

The European Landscape: A Fragmented Market

While the European Union offers a unified currency, it does not offer a unified banking habit. For a merchant, treating “Europe” as a single payment market is a strategic error. The reality is a fragmented ecosystem of twenty-seven distinct banking cultures, each at a different stage of Open Banking maturity. This divergence creates a massive integration challenge that cannot be solved by a single API connection to a local bank.

The UK: The Global Benchmark

The United Kingdom remains the undisputed leader in open banking for business maturity. Driven by the Competition and Markets Authority (CMA9) mandate, the UK enforced a single, standardized API framework early on. The result is a highly liquid market where over 14 million active users regularly initiate payments via Open Banking. For merchants targeting the UK, consumer trust is high, and the infrastructure is robust enough to serve as a primary payment rail alongside cards.

Germany: The Transition from Legacy

Germany presents a unique paradox. It is historically the world’s most successful market for bank transfers, dominated by iDEAL vs Sofort. However, the landscape is shifting rapidly due to German fintech regulations and market consolidation. The legacy “screen scraping” models of Sofort are being deprecated in favor of compliant PSD2 APIs. Simultaneously, the domestic “Giropay” scheme is set to be sunset by the end of 2024, pushing the market toward the new European Payments Initiative (EPI) and pure Open Banking rails. For a deeper analysis of this pivot, read The State of Open Banking in Germany: A 2025 Report.

The Netherlands: The iDEAL Blueprint

The Netherlands offers the blueprint for what Open Banking can become. The dominance of iDEAL—which effectively trained a generation to pay via bank login—has created a market where card usage is secondary. As detailed in our iDEAL vs. Sofort: A Comparison of Europe’s Top Bank Transfer Methods, the transition here is seamless because the consumer behavior is already ingrained.

The Growth Frontiers: Southern Europe

In contrast, markets like Spain and Italy are experiencing a surge in adoption from a lower base. Historically cash and card-heavy, these regions are leapfrogging legacy systems directly to instant mobile transfers, driven by the superior UX of modern banking apps. Merchants expanding here must prioritize local bank coverage, as detailed in The Top 3 Payment Methods Your Spanish Customers Expect.

The Aggregation Imperative

This fragmentation is the primary technical barrier. A UK bank uses a different API standard than a German Sparkasse or a French BNPP. Integrating them individually is technically impossible for a merchant. The strategic solution is a robust gateway that acts as an aggregation layer, normalizing these disparate standards into a single, cohesive settlement flow.

High-Risk Use Cases: The Killer App for iGaming & Forex

While retail e-commerce adopts open banking for business primarily for cost savings, high-risk verticals like iGaming and Forex view it as an operational necessity. For these industries, the technology solves three existential challenges—fraud, liquidity, and identity—that legacy card rails simply cannot address.

The End of Friendly Fraud: Irrevocability

The single greatest operational drain on a high-risk P&L is “friendly fraud”—where a user deposits, losses, and then disputes the transaction as unauthorized. The card schemes’ zero-liability policies effectively weaponize this behavior against the merchant.

Pay by bank fundamentally neutralizes this vector. Unlike card transactions, SEPA Credit Transfers are legally defined as irrevocable payments. Because the user must authenticate the transaction within their own banking environment using Strong Customer Authentication (SCA)—typically biometrics—the burden of proof for “unauthorized use” becomes insurmountable. Once the funds land in your account, they are final. There is no chargeback mechanism for buyer’s remorse. For operators accustomed to battling 1-2% dispute ratios, shifting volume to Open Banking rails immediately recovers substantial revenue previously lost to first-party fraud.

The Retention Engine: Instant Payouts

In the competitive landscape of sports betting and FX trading, the speed of withdrawal is the primary driver of user retention—ranking even higher than welcome bonuses. Players view their winnings as their property; delaying access via T+3 card refunds destroys trust.

Open Banking enables true instant payouts. By utilizing SEPA Instant rails, operators can disburse funds back to a player’s bank account in under ten seconds, 24/7/365. This creates a “trust loop” where players feel comfortable depositing larger amounts because they know liquidity is instant. This capability is a key differentiator in gateway selection; as analyzed in Sola vs. Noda: Which is the Best Gateway for High-Risk Businesses?, superior payout velocity is often the deciding factor for Tier 1 operators choosing a partner.

Compliance as a Feature: KYC Automation

Finally, the technology streamlines the onboarding bottleneck. Account Information Services (AIS) allow operators to access verified bank data—name, date of birth, and address—directly from the source. This enables KYC automation, allowing you to verify a player’s identity and age in the background during the first deposit, eliminating the need for manual document uploads that kill conversion rates. Furthermore, it provides visibility into Source of Funds (SoF), a critical requirement for AML compliance in regulated markets. For merchants seeking robust infrastructure to handle these complex data flows, reviewing the 5 Best Noda.live Alternatives for Regulated Industries is an essential step in upgrading your stack.

The Future: VRP, SPA, and the Path to PSD3

The evolution of open banking for business is moving from a phase of adoption to a phase of sophisticated functionality. While instant one-off payments have disrupted e-commerce, the impending arrival of Variable Recurring Payments (VRP) poses a direct existential threat to the “Card-on-File” subscription model that currently powers the SaaS and utility economies.

VRP: The Subscription Killer

Currently, recurring revenue relies on two imperfect rails: Direct Debit (which is slow and lacks transparency) or Card-on-File (which is expensive and prone to “involuntary churn” when cards expire). VRP solves both. It allows a customer to grant a single, long-lived consent for a merchant to “pull” funds from their account at varying intervals and amounts, up to a defined limit.

For a subscription business, this is revolutionary. It offers the instant settlement of a card payment with the low cost of a bank transfer, while eliminating the churn caused by lost or expired cards. In the UK, VRP for “sweeping” (moving money between own accounts) is already live, with commercial VRP for e-commerce rapidly following. For iGaming operators, this technology promises “one-click” deposits where players can fund their accounts instantly without repeated authentication steps, replicating the seamless friction of a saved credit card without the associated scheme fees or chargeback risks.

PSD3 and SPA: Fixing the Infrastructure

However, the commercial potential of VRP relies on the stability of the underlying bank connections. Currently, the European landscape suffers from API fragmentation and inconsistent performance from incumbent banks. The upcoming PSD3 and the Payment Services Regulation (PSR) are designed to act as the “Quality Assurance” update for the industry.

These regulations will enforce stricter performance standards, effectively mandating that banks provide dedicated interfaces that perform on par with their own customer-facing apps. This shift is supported by technical frameworks like the Berlin Group PSD2 Standards, which continue to harmonize the disparate API languages across the continent. Furthermore, the SEPA Payment Account (SPA) Access Scheme aims to commercialize these APIs, creating a standardized incentive model that encourages banks to maintain premium connectivity. The result will be a payment ecosystem where bank APIs are as robust, global, and reliable as the card networks they are destined to replace.

Conclusion: From “Alternative” to “Default”

To continue classifying Open Banking as an “Alternative Payment Method” (APM) is to misunderstand the trajectory of the European digital economy. The era of trial adoption is over. For the modern high-risk enterprise, open banking for business has graduated from a tactical option to a fundamental operational standard. The metrics are absolute: a payment rail that offers instant liquidity, zero chargeback liability, and a cost structure fractionally lower than legacy card schemes is not an alternative; it is the superior default.

We are witnessing the inevitable future of payments: a direct, account-to-account ecosystem where the merchant owns the relationship with the customer, unencumbered by the rent-seeking friction of 20th-century card networks. The question for the C-Suite is no longer whether to adopt these rails, but how quickly they can migrate their core volume to them to protect margins and secure cash flow.

However, the complexity of Europe’s fragmented banking landscape remains a formidable barrier to entry. Realizing this strategic advantage requires more than a single API; it demands a unified infrastructure capable of aggregating thousands of banks across twenty-seven jurisdictions. Do not attempt to piece together this puzzle with regional providers. Partner with Sola to deploy a complete, Pan-European Open Banking stack that turns regulatory disruption into your most powerful competitive asset.