Regulators have allowed commercial open banking payments to start. Secondary legislation under the Data (Use and Access) Act 2025 is now needed to let them reach scale.
Open banking is becoming payments infrastructure
Open banking began as a way to share bank account data. It is now also a way to pay. Commercial variable recurring payments are the first large-scale use. A customer gives one standing permission, within limits they set, and an authorised provider can then take account-to-account payments without further steps. This gives businesses faster and cheaper payments for things now handled by cards and direct debit, on shared infrastructure that any regulated firm can use. It is becoming part of the country’s payments infrastructure.
The regulators allowed the scheme to start
Earlier this year the FCA and the Payment Systems Regulator said they would not, for now, prioritise competition enforcement against the agreed commercial model for commercial variable recurring payments. The Competition and Markets Authority took the same view. That non-prioritisation allowed UK Payments Initiative to be set up, to agree the scheme rulebook and to bring the first live payments to market without waiting for new legislation.
The decision is conditional and time-limited. It was meant to let the scheme start, not to govern open banking for the long term, and it does not give banks, fintechs and the businesses that build on open banking the certainty they need to invest in adoption across the wider economy.
What scale needs
Firms invest when they know the rules, who sets them, and that they will last. The next phase of open banking covers more use cases, more participants and far higher volumes, and it needs that certainty in three places: the technical standards every participant builds to, the terms on which firms get access, and the commercial model that funds the shared infrastructure. Today these rest on private agreement and regulatory forbearance. Mass adoption needs them on a statutory footing.
What the Data (Use and Access) Act provides
The Data (Use and Access) Act 2025 creates that footing. Its smart data framework, modelled on open banking, lets government require firms that hold customer data to share it, at the customer’s request, with accredited providers, and to set the standards and interfaces for doing so. It also lets the Treasury give the FCA power to regulate the firms and the infrastructure involved. The Act changes nothing on the ground by itself. It is enabling legislation: it sets out what government and the FCA may do, and leaves the substance for each sector to a statutory instrument.
What the open banking instrument would do
For open banking, that instrument is the decisive step. In substance it would:
• require account providers to give accredited third parties access to customer data, and to payment initiation, through standardised interfaces;
• set the basis on which participants are accredited and supervised;
• require common technical standards, and an interface body to set and maintain them;
• give the FCA power to make and enforce interface rules, and to oversee the central operator that runs the shared infrastructure;
• put the funding of that infrastructure on a transparent, regulated basis; and
• allow the competition order that launched open banking, designed for a mandated phase, to be replaced by a regime built for a commercial market.
Together these would put open banking on a footing of regulated standards, supervised access and accountable governance, which is what mass adoption requires.
Getting it right
The detail is for government and the regulators. A few principles will decide whether the instrument lasts. It should be proportionate, and able to extend from open banking to open finance without further primary legislation. Access should be open, fair and non-discriminatory, with established firms and newcomers on the same terms. The FCA’s oversight of standards, participants and the central operator should be clear and enduring. And it should be laid in good time, so there is no gap between the current interim position and the lasting regime.
Alignment and next steps
This supports stated government policy. The National Payments Vision set out a trusted, world-leading payments ecosystem built on resilient infrastructure and clear regulation, and the FCA’s priorities of competition and innovation point the same way. The instrument is how that policy is delivered for open banking.
UK Payments Initiative supports the instrument and will help government and the regulators get it right. The interim position has a clock on it. Bringing the instrument forward in good time will let open banking move from a successful start to use across the everyday economy.
