A domestic card alternative is necessary but Open Banking alone isn’t enough
Chris Jones, managing director at PSE Consulting said: “UK banks’ plans to develop a domestic alternative to the global card schemes reflect a growing recognition that payments are strategic national infrastructure, not just a commercial service.
“With roughly 95% of UK card transactions dependent on Visa and Mastercard, the UK has limited room for manoeuvre if those networks were ever disrupted or constrained. History shows that payment systems can be caught up in wider geopolitical or sanctions-related decisions, which makes resilience and optionality essential.
“Open Banking is often cited as the UK’s natural fallback, but it is not yet a like-for-like substitute for cards. While Open Banking payments reached close to 200 million transactions in 2024, that remains a fraction of overall card volumes, and consumer usage, trust and protection mechanisms are still maturing. Initiatives led by Open Banking Limited, alongside recent reimbursement requirements for authorised push payment fraud, are steps forward but they do not yet deliver the familiarity or ubiquity consumers associate with card payments.
“There are also structural challenges on the supply side. Many Open Banking payment providers continue to struggle with profitability, reflecting low barriers to entry, intense competition and limited commercial incentives. That makes it difficult for the sector, in its current form, to act as core national payments infrastructure at scale.
“Most importantly, Open Banking does not yet cover the full range of use cases cards support – from frictionless in-store payments and cross-border transactions to recurring payments and travel-related pre-authorisations. Without those capabilities, it cannot credibly replace cards in a crisis scenario.
“This is why the move towards a dedicated domestic payments rail, supported by banks and overseen with the involvement of the Bank of England, is so significant. But success will depend on whether the UK can align incentives, liability frameworks and technology in a way that builds consumer trust and merchant acceptance.
“Payments sovereignty will not be achieved through a single solution. It will require coordinated public–private investment, closer interoperability with European schemes, and a clear recognition that payments resilience sits alongside energy, food and data as a matter of national security.”