Open banking is the regulatory framework, born in Europe under PSD2 and spreading globally, that requires banks to expose account access through APIs so licensed third parties can initiate payments and read account data with the customer’s consent. As a payment method it means paying directly from a bank account at checkout, no card involved.
Why it matters
For merchants the pitch is structural: bank to bank payments settle without interchange, and because the customer authenticates directly with their bank, there is no chargeback mechanism, so open banking volume cannot touch a chargeback ratio. For high risk verticals that combination, lower cost and dispute immunity, makes it one of the most interesting alternative payment method plays in Europe. The honest caveats: consumer adoption varies widely by market, refunds need their own process since there is no built in reversal, and the fraud burden shifts toward account takeover rather than card fraud.