James Rowe: As we become an increasingly cashless society, could we become less reliant on bank cards altogether?
Hello, I’m James Rowe and welcome to Which? Shorts, your free weekly insight into Which? magazine as well as our money, tech, travel, and gardening titles too.
Today I’m bringing you a piece that Chiara Cavaglieri wrote for the April/May issue of Which? Tech all about something called open banking. Now, this is a new system that aims to give you greater control over your financial data, making it easier and more secure for you to share the data with trusted third parties. So, is it safe and should you use it? Here is Chiara’s piece, adapted for the podcast this week, read by Kat Cereda.
Kat Cereda: After decades of almost no innovation in the finance industry, the government-backed open banking initiative in January 2018 forced the largest current account providers to loosen their grip on their customers’ data in the hope that it would boost competition and improve services. Today it underpins an increasingly interconnected financial system where regulators, businesses, and their customers alike are grappling with the emerging benefits and pitfalls. Some say it will spark a revolution, while others are labelling it a white elephant.
So, what is open banking? Well, you may have already tried it without even realising, as it often works behind the scenes using application programming interfaces, or APIs – the digital bridges that let two systems talk to each other in real time, as with Uber and Google Maps. You can use it to settle a tax bill with HMRC for instance, or link to multiple financial accounts in one dashboard provided by a budgeting app such as Snoop. You might have even seen it as an option at online checkouts and in real life at small businesses, but more on that later.
Open banking essentially boils down to two services: sharing your financial data and instantly moving your money from one account to another. Useful examples of the former include highly accurate credit affordability checks and tools that analyse your spending habits to suggest helpful money-saving tips or boost your savings. Which? is even working on its own open banking solution which will let you connect your bank accounts via our app to identify key household costs like car insurance and broadband bills in exchange for our impartial verdict on whether you could get a better deal.
Embedded services can make sense. Why would you download yet another standalone app if you could get the same service from an app you already use? After budgeting apps Mint, Money Dashboard, and Yolt all disappeared from the market, Bristol-based Moneyhub switched gears, axing its own consumer-facing app before announcing a partnership with Nationwide to offer spending insights to its 16 million customers. Open banking is also powering automated accounting tools for small businesses and digital identity checks, therefore making it harder for fraudsters to use forged documents or stolen identities. But it’s gaining the most traction in payments.
So, how can you use open banking to pay for something instead of using a card? It’s called Pay By Bank and it lets you pay a business directly from your current account, bypassing Mastercard and Visa entirely – meaning you don’t have to share your card details which could be stolen or lost. It’s quick and easy too. You select your provider from a drop-down menu, log in to your online account or banking app as normal, then approve or decline the payment before being redirected back to the retailer where the purchase is confirmed.
Unlike a manual bank transfer that you initiate yourself, you don’t need any payee details as these are pre-populated, reducing the chance of sending the money to the wrong account. The industry calls this an account-to-account or A-to-A payment, although the term you’ll come across most often at the checkout is Pay By Bank. It’s growing rapidly too, hitting a new high of 35 million payments in December 2025, up 53% year-on-year. It’s still dwarfed by card payments which see over 2 billion a month, but it could hit the mainstream with more and more retailers signing up.
But while it might be appealing for retailers as they receive the money from their customers instantly and save on the card processing fees sent to Visa and Mastercard, the benefits for customers are less clear. There are currently no purchase protections if something goes wrong. It doesn’t mean you’re defenceless though. You are legally protected if a fraudster makes an unauthorised open banking payment from your account. It’s also likely that purchase protection will be introduced at some point. It’s hard to see open banking payments becoming a success without it, although it’s unclear what will be offered and when. Until then, we think you should avoid using Pay By Bank for future-dated purchases such as flights and event tickets, or when you’re paying less-known retailers.
So, what’s actually in it for shoppers like you and me? Even once purchase protections are in place, retailers may struggle to convince shoppers to choose Pay By Bank over, say, Apple Pay and Google Pay, which already offer a secure, seamless way to make payments without revealing your card details. Instant refunds might help, given that card refunds can take as long as 14 days. Rewards on spending could be another draw. We’ve already seen some moves in this direction. For example, Ryanair briefly offered 5% cashback, capped at £10, last year for customers who booked their flights using Pay By Bank.
Beyond enticing shoppers with financial incentives, building trust is key – and that means open banking services need to be both reliable and secure. Speaking of which, let’s mention fraud. The real-time nature of open banking presents a chance for scammers, but the latest figures are reassuring. Open banking payments continue to experience very low levels of fraud.
But a more pressing worry for now is scammers using Pay By Bank to trick you into sending them money by bank transfer, known as authorised push payment fraud. Tactics might include sending texts that impersonate HMRC and invite you to follow a malicious link to a fake Pay By Bank checkout page. Even with legitimate open banking services, your personal data could be at risk. When you connect your bank account to a third party, you rely on that firm’s security systems. Your data could be exposed if they face a cyberattack, putting you at serious risk of identity theft and unauthorised transactions. This is true of your existing banks too, but you may have more faith in a provider you’ve used for decades than a shiny new startup.
Despite a relatively promising start, regulators have a massive task. As open banking is more widely adopted, fraud levels, data breaches, and outages could become more volatile. If the vision of a smart data economy bringing together energy, retail, telecoms, and transport is to be a reality, the industry must come together to shield users from attacks and errors.
James Rowe: That brings to an end another podcast from Which? There’s loads more for you to read about everything we discussed today; just head to the episode description for more useful everyday advice. There you’ll also find an exclusive offer for podcast listeners like you to become a Which? member for 50% off the usual price, giving you access to our product reviews, our app, one-to-one personalised buying advice, and every issue of Which? magazine across the year. Plus your membership helps us to make life simpler, fairer, and safer for everyone. If you’d like to know when we release a new episode then make sure you press subscribe wherever you listen. That way you can be one of the first to listen. And for any questions, comments, or anything in between, follow us on social media @WhichUK or email us: podcast@which.co.uk. Goodbye.
