The FCA is gaining sweeping new powers over open banking in 2026. Here is what the shift means for your costs, your customers, and your checkout.
You are probably not losing sleep over regulatory white papers. Fair enough. You have a business to run. But there is a change coming in 2026 that could directly affect how much you pay to accept payments, how quickly money lands in your account, and whether your customers can pay you directly from their bank without a card network in the middle. It deserves your attention.
The Financial Conduct Authority is about to become the permanent regulatory home of open banking in the United Kingdom. And that matters far more than it sounds.
Open banking is the system that allows regulated third parties to access a customer's bank account data, or initiate payments directly from it, with the customer's explicit consent. It launched in the UK in 2018 under a mandate from the Competition and Markets Authority, initially covering the nine largest banks.
Today, more than 11 million UK consumers and businesses use open banking-powered products every month, according to the Open Banking Implementation Entity (OBIE). That number has grown consistently for four consecutive years.
For merchants, the most immediately relevant application is account-to-account (A2A) payment. Instead of a customer paying by card, and that transaction travelling through Visa or Mastercard's network before settling in your account, the money moves directly from their bank to yours. No card network. No interchange fee. No chargeback fraud from stolen card details.
The infrastructure exists. What has been missing is the regulatory framework to make it scale with confidence. That is precisely what 2026 changes.
The Digital Markets, Competition and Consumers Act 2024 granted the FCA the powers it needs to become the long-term regulatory authority for open banking. The transition away from the OBIE's oversight structure, and towards an FCA-led framework, is now well underway. The new entity responsible for overseeing open banking infrastructure, provisionally referred to as the Future Entity, is expected to be fully operational and under formal FCA oversight by 2026.
This is not a minor administrative handover. It represents a fundamental shift in how open banking is governed, funded, and enforced in the UK.
Under the new framework, the FCA will have the authority to:
That last point is significant. One of the reasons open banking adoption has been slower in retail and hospitality than the headline numbers suggest is that merchants have been uncertain about liability. If a payment fails, or is disputed, who bears the cost? The FCA's forthcoming framework is designed to answer that question definitively.
Let us be specific about what is at stake commercially.
The average interchange fee on a consumer credit card transaction in the UK sits at around 0.3% for domestic transactions, capped by post-Brexit retained EU regulation. But that cap applies to card-to-issuer interchange. Total card acceptance costs, once you factor in scheme fees from Visa and Mastercard, acquirer margins, and payment gateway charges, typically land between 1.2% and 2.5% for most small and medium-sized businesses. For a business turning over £500,000 per year, that is somewhere between £6,000 and £12,500 leaving your revenue annually, purely in payment processing costs.
Open banking payments, by contrast, carry no interchange fee and no scheme fee. The cost model is fundamentally different: you pay for the payment initiation service rather than a percentage of the transaction value. For higher-value transactions in particular, this is a material saving.
The FCA's 2026 framework accelerates this opportunity by giving the market the regulatory certainty it needs to invest in open banking infrastructure at scale. Banks will be required to maintain reliable, high-quality APIs. Payment providers will operate under clear rules. And critically, Variable Recurring Payments will create the mechanism for open banking to replace not just one-off card payments but subscriptions and repeat billing.
If there is one development within the 2026 framework that UK merchants should understand, it is VRPs.
A Variable Recurring Payment allows a customer to authorise a merchant to take payments of varying amounts, at varying intervals, directly from their bank account, within parameters the customer sets. Think of it as a smarter, more flexible direct debit. The customer controls the maximum amount. The merchant gets reliable, low-cost payment collection. No card expiry dates causing failed renewals. No card network fees.
The FCA's current pilot has been limited to so-called sweeping, which covers moving money between accounts owned by the same person. The 2026 framework is expected to open VRPs to commercial use cases, meaning merchants can finally use them for subscriptions, instalments, and on-demand billing.
For gyms, software providers, subscription box businesses, tradespeople billing on completion, and anyone else whose revenue depends on reliable repeat payment collection, this is transformative.
It is worth noting that the Payment Systems Regulator continues to operate alongside the FCA in this space, specifically overseeing the interbank payment systems like Faster Payments that underpin open banking transactions. The two regulators have been working to clarify their respective mandates, and the emerging division is broadly: the FCA governs the open banking ecosystem and its participants, the PSR governs the rails those payments travel on.
For merchants, this coordinated oversight is a positive sign. It suggests that consumer protection, reliability standards, and commercial fairness are being addressed from multiple regulatory angles rather than falling through the gaps.
You do not need to overhaul your payment setup today. But you should be having certain conversations and making certain preparations.
1. Ask your current payment provider what their open banking roadmap looks like. If they cannot give you a clear answer, that tells you something about whether they are the right long-term partner.
2. Look at your transaction mix. If your average transaction value is above £50, the cost savings from open banking payments become increasingly meaningful. Run the numbers on your current processing costs versus a flat-fee A2A model.
3. Consider your subscription and repeat billing model. If you currently rely on card-on-file for recurring revenue, VRPs will offer you a more reliable and cheaper alternative once the commercial framework opens. Start understanding how your billing systems would need to adapt.
4. Do not wait for perfection. Open banking payment initiation works reliably today for one-off payments. Merchants who start accepting it now are building customer familiarity ahead of the wider rollout.
5. Engage with the consultation. The FCA has run and continues to run consultation processes on the open banking framework. If you are a merchant with relevant experience, your voice matters. The PSR and FCA have both stated explicitly that they want merchant perspectives in shaping the commercial VRP framework.
The UK was the first country in the world to mandate open banking. That gave us a head start, but that lead has been uneven. Brazil's Pix system now processes over 40 million transactions per day. India's UPI handles more than 10 billion transactions per month. The UK's open banking ecosystem, for all its promise, has not yet achieved that kind of commercial velocity.
The 2026 regulatory settlement is the mechanism by which the UK stops treating open banking as an experiment and starts treating it as infrastructure. For merchants, that means lower costs, faster settlement, and payment methods that work in the interests of businesses rather than card network shareholders.
This is not hype. It is a structural shift in UK payments, and the businesses that understand it earliest will be best placed to benefit from it.
Klipy UK is a payment solutions provider working with UK SMEs to simplify card and account-to-account payments. If you want to understand how the evolving open banking landscape affects your specific business, speak to our team.
Suggested Data Visualisation: A side-by-side bar chart comparing the total cost of acceptance for a £10,000 monthly card payment volume versus the equivalent open banking A2A volume, broken down by interchange, scheme fees, acquirer margin, and gateway cost. Overlay a timeline showing key FCA milestones from 2018 to 2026.
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Disclaimer
The views and information shared in this post are for educational and informational purposes only and do not constitute financial, legal, or professional advice. While every effort is made to ensure accuracy, Klipy UK Limited accepts no liability for decisions made based on this content. Payment processing rates, regulations, and product features referenced are subject to change. Klipy UK is an authorised seller of Teya payment solutions. Where third-party sources are cited, links are provided for reference; Klipy UK does not endorse or guarantee the accuracy of external content. For personalised guidance on your business payment needs, please contact us directly at editor@klipy.uk.
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This content is published by Klipy UK, a Teya-authorised reseller of payment solutions. The views expressed are for informational purposes only and do not constitute financial advice. All content is the intellectual property of Klipy UK. Reproduction without permission is prohibited.
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