16 June 2025
by Payments Intelligence
What is this article about?
A survey of 500 UK SMEs exploring their awareness, attitudes, and adoption barriers around open banking as a payment method.
Why is it important?
It reveals a fragmented landscape where no single benefit or barrier dominates, highlighting the need for education, clarity, and trust to drive adoption.
What’s next?
Providers must address sector-specific concerns, improve communication, and support merchants to unlock open banking’s full potential.
The Payments Association has conducted a new survey on open banking, querying senior decision-makers from 500 small and medium-sized merchant businesses located across the UK.
The data reveal a complex picture of awareness, perceived benefits, and adoption barriers. While general familiarity with the concept is relatively strong, over a third of businesses remain unclear about what open banking entails, a gap that spans industries, regions, and company sizes.
Retailers, healthcare operators, and utilities stand out in different ways: whether in terms of enthusiasm for customer experience gains, security concerns, or regulatory uncertainty. Yet across the board, no single advantage or barrier dominates. Businesses cite a broad mix of motivations, from lower transaction fees and faster settlements to a lack of consumer demand.
Currently, open banking is not a widely available payment method among merchant businesses. It is ranked as a lower priority than more established acceptance options, such as cards, direct debits, and digital wallets. Adoption timelines vary significantly, with a notable number of businesses lacking a clear roadmap. These findings underscore that the open banking journey is not a straight line. Still, a sector-specific evolution is shaped by education, infrastructure, and market demand, with adoption predicted to increase gradually over the next three years.
While general awareness of open banking is relatively strong, knowledge gaps remain. Over a third of businesses surveyed had either not heard of it at all or recognised the term without understanding its meaning, highlighting a continued need for education and clarity. The geographic region doesn’t make a significant difference, with awareness being consistent across the UK.
The survey also assessed familiarity with alternate terminology, finding that ‘Pay by Bank App’ was significantly better known than the broader term ‘open banking’ or when ‘App’ is omitted. This suggests that using more descriptive and consistent consumer-facing language, along with a brand mark, may help improve recognition and engagement. The term account-to-account payment recorded even lower levels of awareness and understanding.
Awareness levels do vary by industry. Transportation and utilities businesses reported the highest familiarity, marginally higher than legal services and retail. However, when it came to not just awareness but genuine understanding of what open banking entails, retailers led the pack.
Larger businesses, whether measured by employee count or annual turnover, tended to report slightly higher levels of awareness. Even so, the differences were marginal, reinforcing that knowledge gaps are widespread across sectors and company sizes.
SMEs recognise a wide range of benefits associated with adopting Open banking for payment acceptance, though no single advantage stands out as universally compelling. The most widely cited benefit was the potential to enhance customer experience, mentioned by 49% of all respondents. Faster funds settlement (47%) and lower transaction fees compared to cards (46%) are similarly valued. This suggests that businesses increasingly view open banking not just as a cost-saving tool, but also as a means to offer improved payment journeys and reduce friction.
Other frequently identified benefits—highlighted by around four in ten businesses—include improved security and fraud protection, as well as simpler refund and payout processes. While these practical advantages resonate with many, the lack of consensus on a single benefit indicates that open banking’s appeal is multifaceted rather than anchored in a single keystone feature.
Companies with revenue over £25 million per year have particular interest in faster funds settlement as a benefit of open banking, with 69% selecting this option compared to the group average of 47%.
The data also reveal significant variation by sector. Retailers, for instance, were more likely than other industries to value improved customer service and lower fees, with 58% and 51% of respondents selecting each, respectively. Meanwhile, two-thirds of respondents from the healthcare sector cited customer experience improvements as their primary motivation for adopting open banking, more than any other sector surveyed.
However, some benefits remain underappreciated. Only a quarter of respondents recognised the advantage of gaining consent-based access to customer data. With user consent, firms can securely retrieve transaction histories and financial profiles, enabling them to tailor services to individual needs. This supports innovation, enhances customer experience, and can lead to better pricing and faster credit decisions, all while maintaining transparency and control for the consumer.
Similarly, just a third mentioned the reduced risk of chargebacks, indicating that some of open banking’s most tangible operational benefits may require better communication and education.
Despite a growing interest in open banking, businesses remain cautious. The survey found that this is born out of a host of concerns: no individual barrier was cited by more than one-third of respondents, suggesting a fragmented set of concerns rather than a clear, universal blocker to adoption.
The three most commonly identified barriers are fraud and security concerns (selected by 32% of respondents), a perceived lack of consumer awareness and demand (31%), and technical challenges, including integration with existing systems (27%). These challenges vary depending on business size and sector, in particular.
Medium-sized businesses expressed greater concern than their smaller counterparts on several fronts. Over a third (35%) flagged fraud and security as a key barrier—compared to 29% of small businesses—while 24% pointed to competing payment acceptance priorities (vs. 18% of small businesses), and 23% cited the absence of variable recurring payment (VRP) functionality (vs. 12%).
Sector-specific differences are also pronounced. In real estate, over half of businesses cited fraud and security as a barrier, which is substantially higher than the 29% of retailers who reported the same. Instead, retailers were more concerned with the lack of consumer demand, with a third identifying it as their biggest obstacle. This perception undermines the investment case, as customer uptake remains critical to justifying new payment infrastructure.
For legal services firms, consumer demand was an even greater issue: six in ten flagged low awareness and demand as the top barrier. Meanwhile, utility providers were more likely to cite regulatory uncertainty and the slow rollout of open banking payment services. Over 40% raised this as a concern, almost double the average across all sectors. Additionally, one in three in this sector cited the lack of VRP capability as a significant issue, compared to 17% of businesses more broadly.
Among enterprises with annual turnovers exceeding £25 million, customer dispute processes emerged as the most pressing concern, identified by nearly half of the respondents. One in three also said they had more urgent priorities when it comes to payment acceptance, further delaying potential adoption.
The key takeaway is that there is no one issue preventing a greater adoption of open banking. Tailored education, sector-specific solutions, and clear communication about functionality and regulatory clarity will be crucial to accelerating open banking’s progress.
The two most widely adopted payment methods among the UK businesses surveyed are international card payments and direct debits, each used by eight in ten businesses. These are closely followed by cash (accepted by 74% of respondents), PayPal (70%), and digital wallets such as Apple Pay and Google Pay (66%).
Open banking currently ranks only sixth out of nine payment methods surveyed in terms of perceived suitability. This position reflects both its emerging status and the persistence of operational and consumer adoption barriers discussed earlier. Retail leads in open banking adoption across the 12 vertical sectors surveyed.
Over half of retailers offer buy now pay later (BNPL) options, but half of those also report that BNPL causes operational difficulties.
The utilities sector has flagged notable issues with open banking itself, with over 40% of businesses in this category using open banking identifying difficulties. Meanwhile, healthcare providers stand out for their potential future adoption, with 43% of them not currently using open banking but believing it would be suitable, highlighting a significant opportunity for growth if barriers to adoption can be addressed.
Business size and location also play a role in shaping sentiment—two-thirds of companies with annual turnovers above £10 million rate open banking as an appealing option. Geographic differences are equally stark: 70% of London-based businesses express interest in open banking, compared to just half of those in the Midlands and the South.
At the other end of the spectrum, cryptocurrencies were seen as the least suitable payment method overall, with 42% of respondents explicitly stating they were not suitable for their business. Adoption rates for crypto remain the lowest of any method surveyed, reinforcing its niche status in the current payments landscape.
These insights reveal a payments ecosystem in flux: traditional methods still dominate, but emerging technologies, such as open banking, have the potential to gain a significant market share.
While interest in open banking is growing, adoption timelines remain varied. One in five businesses surveyed said they had no plans to adopt open banking at all, a reminder that enthusiasm is far from universal.
A company’s annual turnover does not appear to influence whether or when it intends to adopt open banking. This suggests that factors beyond size, such as sector, strategy, or customer demand, may be more influential in shaping uptake.
Regionally, London stands out as the most forward-looking, with three-quarters of businesses based in the capital reporting having some timeline in place for adopting open banking as a payment method, the highest proportion of any region surveyed. Businesses in the South (excluding London) are the least likely to have a timeline for implementing open banking as a payment method.
While open banking holds strong appeal across various sectors, uptake and adoption timelines are uneven, and understanding of the concept remains limited. A third of businesses still do not understand what open banking is, and one in five have no plans to adopt it. Yet, others, particularly in retail and healthcare, want to harness its potential to improve customer experience and reduce costs.
No single benefit or obstacle stands out as decisive. Instead, businesses weigh a combination of factors: some are drawn to faster settlements and lower fees, while others remain cautious due to concerns about fraud or unclear consumer demand. Adoption is influenced more by sectoral dynamics and regional confidence, with London leading the way in forward-looking implementation plans.
Ultimately, the future of open banking depends on closing the merchant knowledge gap, addressing system integration challenges, and effectively communicating its real-world advantages. The opportunity for merchants is significant, but to realise it, payment providers must:
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