Open Banking payment processing for merchants.
Merchants seeking to bypass card interchange fees and eliminate liability for friendly fraud require account-to-account initiation at the point of sale. Cardflo configures a pay by bank checkout that settles funds instantly while operating outside traditional card network rules.
- Industry
- Open banking
- Category
- High-risk
- Cardflo support
- Yes
High-value transactions and frequent deposit flows expose merchants to prohibitive card interchange fees and persistent friendly fraud liabilities. Accepting payments through traditional card rails means accepting percentage-based processing costs and relying on complex network dispute processes that frequently resolve in favour of the consumer.
Cardflo provides an open banking payment gateway that replaces card network dependency with direct account-to-account initiation. The orchestration layer authenticates the consumer directly with their financial institution, resulting in an irrevocable push payment that arrives instantly and carries absolutely no mechanism for traditional chargeback disputes.
Payment processing for businesses needing open banking
Merchants shifting transaction volume away from card networks require specialised infrastructure to initiate irrevocable bank transfers directly from the consumer interface. Cardflo orchestrates account to account payment orchestration via regulated open banking APIs, allowing finance teams to bypass interchange fees and secure instant settlement.
This architecture focuses exclusively on direct bank initiation, rather than managing chargeback dispute tools as seen in businesses with high chargebacks, integrating regional options like businesses needing local payment methods, or handling global APM integration for businesses-needing-APMs.
The orchestration layer communicates with the consumer's banking application using native biometric authentication, ensuring that the final payment is pushed directly to the merchant account. Operating entirely outside card scheme rules means operators face zero chargeback liability and eliminate the percentage-based costs normally associated with high-ticket purchases or frequent deposit activity.
Merchant account setup for businesses needing open banking
Customer banking interface selection
The checkout interface displays a bank transfer option, prompting the consumer to select their financial institution from an integrated list. Cardflo redirects the user to their bank's native mobile application or web portal, carrying the exact transaction amount and merchant reference data. The merchant does not handle or store any sensitive financial credentials during this initial routing phase.
Biometric transaction authentication
The consumer authenticates the payment directly within their own banking environment using fingerprint recognition, facial scanning or secure PIN entry. This step authorises an immediate push payment from the consumer account directly to the merchant account. Because the bank handles all security checks, the transaction bypasses traditional card scheme authentication and avoids the associated processing delays.
Instant settlement and reconciliation
Funds move immediately via faster payment rails, arriving in the merchant account within seconds rather than the days required for card settlement. Cardflo updates the payment status to approved in real time, releasing the order or depositing the funds instantly. The orchestration layer automatically matches the unique transaction reference, allowing finance teams to reconcile deposits without manual intervention.
Why approval rates matter for businesses needing open banking
Eliminating merchant chargeback liability
Traditional card payments carry an inherent risk of friendly fraud and delayed dispute claims that drain merchant revenue. Open banking transfers operate as irrevocable push payments initiated by the consumer. Once the user authenticates and authorises the transfer through their banking application, the funds cannot be forcibly reversed through a standard scheme network dispute process.
Reducing overall processing costs
Percentage-based interchange fees rapidly consume profit margins on high-value transactions or frequent deposit activity. Direct bank transfers bypass the card networks entirely, replacing variable interchange rates with fixed, predictable per-transaction costs. Operators handling significant volume can substantially decrease their cost of acceptance while simultaneously improving cash flow through instant fund availability.
Compliance and risk notes for businesses needing open banking
Bank-led authentication under PSD2
The revised Payment Services Directive mandates strict authentication protocols for electronic transactions within the European Economic Area. Open banking directly satisfies these stringent requirements by forcing the consumer to authenticate within their own banking environment using two-factor or biometric methods, ensuring complete regulatory compliance.
By delegating the authentication burden entirely to the issuing bank, merchants eliminate their own compliance liability regarding credential interception at the checkout.
The banking APIs used by Cardflo operate under regulated Payment Initiation Service Provider frameworks, guaranteeing that all financial data transmission meets strict European security standards.
Handling payment initiation service provider licensing
Initiating payments directly from a consumer bank account requires explicit authorisation from regional financial regulators. Merchants attempting to build direct connections must normally acquire their own regulatory permissions, a process involving extensive security audits, significant capital requirements and ongoing compliance reporting to national banking authorities.
Cardflo routes transactions through established, fully licensed initiation partners, removing the need for merchants to hold these specific regulatory permissions themselves. This architecture allows operators to deploy compliant account-to-account checkout flows immediately across multiple jurisdictions without undertaking the massive administrative burden of direct regulatory registration.
Payment use cases for businesses needing open banking
Luxury goods bank checkout
Luxury retailers taking payment before dispatch face percentage-based card fees and chargeback exposure on watches, jewellery and designer goods with large ticket sizes. Cardflo integrates pay by bank checkout, enabling account-to-account payment confirmation before fulfilment and settlement directly through participating banks without card interchange.
Investment account funding
Wealth platforms need clients to fund investment accounts quickly, while card issuer limits and cash-advance treatment can interrupt deposits before an order is placed. Cardflo supports regulated open banking payment initiation, passing confirmed account-to-account payments into the platform’s reconciliation workflow and reducing reliance on card acceptance.
Stored value wallet funding
Stored value operators receiving frequent wallet top-ups incur card network fees before customers spend balances within the service, while card-funded deposits can later be disputed. Cardflo enables bank-authenticated account-to-account funding, provides payment status through API callbacks and supports reconciliation against each customer wallet ledger.
Wholesale invoice collection
Wholesale suppliers collecting large B2B invoices face percentage-based commercial card costs and delays between approved orders, cleared funds and stock release. Cardflo embeds pay by bank links into invoice journeys, returns payment confirmation to finance teams and supports direct account-to-account settlement before goods enter fulfilment.
Processing benchmarks for businesses needing open banking
Typical savings observed when shifting volume from card-base merchant service charges to account-to-account rails, depending on the merchant's existing interchange-plus terms.
Average time for funds to reach a merchant account via Faster Payments, contrasted with the standard 2-3 day cycle for card Clearing.
The effective elimination of scheme-based disputes, as Open Banking relies on push-transfer mechanics rather than pull-based card authorisations.
Methodology: these figures are illustrative ranges drawn from published industry data and observed merchant cohorts, not guarantees. Actual results depend on your risk profile, card mix, geography and acquiring setup, and are confirmed only in your own pricing and approval terms.
Related payment terms
Book a scoping call to see how Cardflo would set you up.
What's included in businesses needing open banking payment processing.
- Bypassing standard interchange fees by initiating direct account-to-account transfers through secure banking APIs.
- Eliminating friendly fraud completely because push payments contain no built-in dispute or chargeback mechanisms.
- Securing instant settlement to merchant accounts without the standard delays imposed by card acquirers.
- Authenticating transactions using consumer banking applications with native biometric security to prevent unauthorised access.
- Displaying a secure bank transfer option alongside standard card inputs within the existing cashier interface.
- Reducing involuntary churn on subscriptions by relying on persistent bank accounts instead of expiring cards.
Underwriting for Businesses needing open banking
Acquirer partners assess whether regulated payment initiation responsibilities are clearly allocated, how pay by bank checkout captures consent and bank authentication, and how API callbacks, idempotency and payment status are controlled across PSD2 jurisdictions. Clear evidence can prevent delays caused by unsupported trading models or ambiguous account to account payment orchestration.
Documents requested from businesses needing open banking applicants
- Open banking provider agreement identifying payment initiation, account information access, settlement arrangements and supported customer markets
- FCA or relevant EEA regulator registration evidence for operators providing regulated payment initiation services directly
- Pay by bank checkout journey showing consent capture, bank authentication, payment status messaging and refund handling
- Existing operators should supply recent processing statements split by payment initiation and account information services, markets, currencies, refunds and fraud ratios; new ventures without history need a business plan and forecasts
- API specifications covering payment initiation, callback authentication, idempotency, tokenisation, reconciliation and failed or abandoned payment states
- Three months of processing forecasts segmented by trading activity, average transaction value, deposit frequency, market and settlement currency
Why businesses needing open banking applications get declined
Acquirer partners decline where the merchant, open banking provider and account servicing bank responsibilities are unclear, particularly for consent, payment initiation and customer complaints. Signed provider agreements, regulatory permissions and a responsibility matrix should be supplied before resubmission.
Open banking does not make prohibited, unlicensed or materially misrepresented trading activity acceptable, even when card chargebacks are removed. The applicant should disclose the underlying products, customer markets, licences, refund terms and complete settlement flow before resubmission.
Acquirer partners decline when checkout systems treat initiated payments as final before bank confirmation, creating duplicate fulfilment, reconciliation breaks and refund disputes. API documentation and test evidence should demonstrate authenticated callbacks, idempotency, pending-state handling and controlled fulfilment before resubmission.
Talk to an acquiring specialist about your MID setup.
Merchant account questions.
How does psd2 bank transfer processing affect checkout conversion rates?
Introducing direct bank transfers can improve conversion for customers who frequently face card limit declines on large purchases. Because the consumer authenticates the transaction inside their native banking application using familiar biometric tools, trust remains high.
The merchant avoids the friction of manual data entry, as the API automatically populates the exact payment amount and payee details.
However, conversion success relies heavily on the quality of the banking API connection, which is why Cardflo routes requests through reliable, regulated open banking providers.
Can a consumer file a chargeback on an open banking payment?
Open banking transactions are irrevocable push payments, meaning they do not flow through card scheme networks and are not subject to traditional chargeback rules. The consumer's bank cannot unilaterally pull funds back from the merchant account to resolve a standard friendly fraud dispute.
While consumers can raise fraud claims directly with their institution if their device was stolen, the inherent biometric authentication makes these claims extremely difficult to prove, offering merchants near-absolute protection against everyday transaction reversals.
How fast do account-to-account payments settle to the merchant?
Settlement speed depends on the underlying banking rails used to execute the transfer. In markets supporting faster payment networks, such as the UK and parts of Europe, funds typically arrive in the merchant account within seconds of the consumer completing authentication.
Cardflo monitors these incoming transfers and instantly updates the transaction status via API or webhooks, allowing the operator to release digital goods, update wallet balances or ship physical products immediately without waiting for traditional batch settlement.
What happens if the customer has insufficient funds during an open banking transfer?
The open banking API communicates directly with the consumer's financial institution in real time. If the account lacks sufficient funds to cover the requested amount, the bank declines the initiation request before any money moves.
The consumer receives an immediate notification within their banking application, and Cardflo simultaneously updates the cashier interface to prompt for a different payment source. This prevents failed downstream deposits and eliminates the fees associated with bounced direct debits or delayed settlement rejections.
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