In law, a payment initiation service starts a payment from the customer’s account at another provider, at the customer’s request. The customer confirms the payment using their own bank’s security checks, and the money is sent from their account. The provider needs the customer’s explicit consent and must be authorised. Small payment institutions cannot offer the service.

UK open banking grew out of a 2017 Competition and Markets Authority order that required the nine largest current account providers to set it up. The Payment Systems Regulator reports that open banking payments grew by 53% in 2025 and that more than 16 million users now benefit from open banking. Variable recurring payments to businesses, which give customers more control over the amount and timing of repeat payments, began under a new industry scheme in 2026.

What changes compared with cards

• There is no card chargeback. Section 75 does not apply to bank transfers either.

• If a customer is tricked into paying a fraudster by Faster Payments, including through a payment initiation service, their bank must normally reimburse them up to £85,000, if they are an individual, a micro-enterprise or a charity. Paying a genuine business that then fails to deliver is a civil dispute and is not covered.

• Each bank sets its own Faster Payments limit, which can be lower than the scheme maximum of £1 million.

Worth knowing

The government has committed to laying regulations under the Data (Use and Access) Act 2025 before Parliament by the end of 2026 to put open banking on a long-term footing. The FCA expects to receive powers to set open banking rules.