Open Banking took a massive step forward in 2018, when the Second Payment Services Directive (PSD2) began to apply across the European Union. Since then, it’s changed how merchants operate. Providing greater access to payment data and APIs, Open Banking enables consumers with more ways to pay and merchants with more ways to accept payments.
More recently, changes in market appetite and sentiment have driven a broader shift towards Open Finance. Open Finance takes the core ideas of Open Banking (consent-based data sharing and API-driven access) and extends them across the consumer’s wider financial lifecycle, including savings, insurance, pensions, investments, credit, and more. For merchants, this evolution moves the market beyond payments alone, enabling more data-driven decision-making and more personalised customer journeys.
Let’s see how the market has changed over the years.
What is Open Banking?
Open Banking enables regulated third-party providers to access payment account data and initiate account-to-account payments, with a customer’s explicit consent, via secure APIs. Alongside this, it has made payment initiation from current accounts faster and more seamless for consumers.
Today, Open Banking is used primarily for account‑to‑account payments and real‑time authorisation checks, giving consumers greater choice and more ways to pay. Europe remains the most mature Open Banking market globally, supported by a strong regulatory foundation and widespread adoption of bank-to-bank payment infrastructure. In the second half of 2024 alone, there were 11.4 billion direct debits worth €5.4 trillion processed in the euro area, underlining the scale and importance of bank-based payments across the region.
Pan-European initiatives such as Wero illustrate the growing momentum behind account-to-account payments in Europe, using instant bank transfers to give consumers and merchants an alternative to traditional card-based flows.
What is Open Finance?
Open Finance uses the same consent-based API model as Open Banking, but applies it to a much broader range of financial products. This can include savings, investments, pensions, credit, and insurance, allowing businesses to work with a more complete view of a customer’s financial position rather than a single account or data source.
By building on the regulatory and technical foundations laid by Open Banking, Open Finance has the potential to further modernise payments and financial services infrastructure. It enables the development of more integrated experiences, such as embedded lending and credit options, all-in-one financial hubs, and richer loyalty and rewards programmes.
Regulators in the UK and EU have framed Open Finance as the “next phase” or the natural evolution of Open Banking, as it strives to improve competition, transparency, and access to financial services for consumers and businesses. A report on Global Open Finance Adoption projects that Open Finance will reach around one billion users worldwide by 2030, up from the low hundreds of millions in 2024, implying sustained high double‑digit annual growth in global adoption.
How Open Finance helps merchants
For merchants, Open Finance represents an opportunity to rethink how they engage with customers and manage their operations. Firstly, Open Finance provides merchants with a greater understanding of consumers and their markets as a whole. The access to broader data sets means merchants can target their ideal consumers more directly, with segmented, personalised offers that help nurture consumers throughout their lifecycle.
At checkout, Open Finance enables merchants to embed a wider range of payment and financial options directly into the purchasing journey. This can include bank-to-bank payments, credit products, and buy now, pay later (BNPL) options, helping to improve conversion rates and reduce cart abandonment.
From an operational perspective, Open Finance can also drive efficiency. Reconciliation can be increasingly automated, while enriched data supports more effective customer service, marketing, and risk management. With better insight into customer behaviour and financial profiles, merchants can refine acquisition and retention strategies and respond more quickly to emerging risks.
Customer acquisition and retention are also improved, as merchants can access the newly-gathered data available from open financing models and adjust their strategies to better target and nurture consumers with the services and products they want from modern providers.
Risk assessment is becoming an especially important use case. Businesses can use Open Finance to develop sophisticated risk strategies based on permissioned customer data, helping them adapt to new fraud patterns and regulatory expectations as the payments landscape evolves.
What’s next for Open Finance?
As Open Banking continues to evolve, the focus has shifted from simply meeting regulatory requirements to unlocking innovation and delivering real economic and customer benefit. In the UK, this evolution is explicit: industry leaders describe the journey from a compliance mandate to an era of co-creation, shared standards and partnership-led innovation. This mindset, building innovation on a solid regulatory foundation, is now shaping the broader Open Finance agenda.
UK leadership: from Open Banking to smart data
The UK’s Open Banking ecosystem has gone beyond the initial regulatory remedy and is increasingly seen as a platform for innovation, with growing adoption and new use cases emerging year on year. Efforts such as commercial schemes for variable recurring payments and the ongoing transition to a Future Entity, a permanent, industry-funded body to drive standards and performance, illustrate how the UK is structuring itself for the next phase of digital finance.
The UK’s Data Use and Access Act and related smart data initiatives further support this evolution, providing a legislative basis for safe data sharing that can extend beyond payments into wider financial services and other sectors. Together, these efforts aim to provide a scalable, secure foundation for Open Finance to grow, while maintaining high standards of trust, competition and innovation.
EU reform: PSD3, PSR and broader data access
In the EU, the regulatory focus is on refining and strengthening the Open Banking framework. The incoming PSD3 directive and the associated Payment Services Regulation (PSR) are designed to improve consistency across member states, enhance fraud prevention and strong customer authentication, and make third-party access to bank APIs more workable at scale. These reforms are significant because they help make account-to-account capabilities more reliable and commercially attractive for merchants and service providers.
Alongside PSD3/PSR, Europe’s proposed Financial Data Access (FiDA) regulation aims to expand consent-based data sharing to a wider range of financial products, a key building block for Open Finance to mature beyond payments into savings, credit, insurance and investments.
A global and outcome-led transition
Across both the UK and the EU, the emphasis is shifting from regulatory enablement to commercial outcomes: faster and more secure payments at checkout, better risk insights, personalised financial services, and more tailored customer journeys. This is part of a broader movement toward smart data economies, where interoperable standards and shared infrastructure reduce friction and open up new opportunities across financial services.
For merchants, the coming years will be defined less by theoretical definitions and more by how effectively Open Finance can reduce costs, improve conversion, strengthen risk controls and unlock new revenue streams. The groundwork laid by Open Banking, particularly the UK’s ecosystem-building and Europe’s regulatory reform, provides a stable launching pad for that next chapter.
payabl. is expanding our Open Banking solution across EU markets with an enhanced user experience designed to improve conversion rates. Our streamlined bank search and selection process creates a smoother payment journey, helping merchants capture the full potential of Open Banking as adoption continues to grow.
Check out Instant Bank Transfers (Open Banking) by payabl. here.