Can small retailers cut card fees by switching to open-banking payments and how do they start?

I’ve spent years watching payments evolve — from cash to cards to contactless wallets — and lately one question keeps popping up from the small retailers I talk to: can we cut card fees by switching to open-banking payments, and how do we actually start? I’ve tested options, talked to merchants, and dug into the providers. Below I’ll walk you through what open-banking (account-to-account) payments really offer, the trade-offs, and a practical step-by-step to begin the move.

What do we mean by open-banking payments?

When people say “open-banking payments” they usually mean payment initiation using the banking APIs introduced under PSD2 — essentially, redirecting a customer to their bank (or using a trusted provider) to authorise a direct debit-style transfer from their account to the merchant’s. These are often called PISP payments (Payment Initiation Service Provider), “Pay by Bank”, or account-to-account (A2A) payments. In the UK you’ll also see the Pay by Bank scheme referenced; technology providers include TrueLayer, Yapily, Token, Trustly and others, while platform players like Stripe and Adyen now offer their own bank-debit / open-banking options.

Can small retailers materially cut fees?

Short answer: yes — but it depends on your sales mix, transaction size, and the provider you pick.

Card fees are made of interchange, scheme fees (Visa/Mastercard), and your acquirer’s margin. For small retailers with low average order values, interchange and scheme fees can eat a big chunk of margin (often 1.5–3% or more for consumer debit/credit depending on type). Open-banking payments remove interchange and scheme fees because the funds move directly between bank accounts. In practice you’ll still pay the payment service provider (PSP) for facilitating the API call and settlement, but those fees are typically a fixed per-transaction cost or a very low percentage — often cheaper than card fees for mid-to-large ticket items.

Some realistic examples I’ve seen:

• A local furniture shop processing £800 average orders cut costs by ~1% of value after switching checkout transactions to an A2A provider that charged £0.20–£0.40 per transaction.
• A cafe with dozens of low-value transactions per day found cards still competitive because the PSP fixed fee made small transactions relatively expensive versus contactless card interchange caps.

So if your typical basket is moderate or high, or you process lots of recurring/B2B payments, open-banking can be a meaningful saving. If you rely on tiny, impulse buys, the savings may be marginal unless the PSP has very low per-transaction charges.

Other financial and operational benefits (and risks)

Beyond fee savings, open-banking payments can help in several ways:

• Lower fraud and chargebacks: Because the customer authenticates with their bank and funds are pulled directly, payment reversals and friendly fraud are often lower than card chargebacks. That can save on disputes and operational headaches.
• Faster reconciliation: Many providers can mark payments as confirmed immediately after bank authorisation, which reduces “pending” states and simplifies accounting.
• B2B friendliness: For wholesale or higher-value B2B sales, account-to-account is familiar and trusted by buyers and can replace slow manual bank transfers.

But there are caveats:

• Customer familiarity and friction: Some customers still prefer cards or are wary of bank redirect flows. UX matters: a seamless experience (in-app bank linking or instant confirmation) makes adoption higher.
• Refunds and returns: Refund mechanics can differ. Some open-banking providers support refunds; others require separate bank transfers. Policies must be tested and explained to customers.
• Availability: Not every bank or customer will be supported initially — although coverage has grown rapidly in the UK.
• Compliance and liability: You’ll work with regulated PISPs and need to understand dispute and liability rules under PSD2 and your PSP terms.

How to evaluate whether switching makes sense

Before jumping in, run a quick maths and UX test:

• Calculate your card fees today (interchange + acquirer margin + fixed fees). Multiply by average order value and monthly volume to see total monthly card cost.
• Get quotes from 2–3 open-banking providers (TrueLayer, Yapily, Trustly, Token, or built-in options with Stripe/Adyen). Ask for per-transaction cost, settlement time, refund support, and coverage of bank apps.
• Segment your sales: which SKUs or channels have higher average ticket sizes? Those are your best targets for A2A adoption.
• Survey or test customers about willingness to pay via bank checkout — you can A/B test on a portion of traffic or run an in-store trial.

Step-by-step: how to start implementing open-banking payments

I recommend this practical path I’ve advised several retailers to follow:

• 1. Identify use-cases: Decide whether you’ll offer A2A for online checkout only, in-person QR/pay-by-bank, or for invoices and B2B collections. Start with one channel to limit complexity.
• 2. Evaluate providers: Compare fees, integration effort (API, SDK, or plugin), settlement timing, refund/support policies, and bank coverage. Get demos and ask for references from similar merchants.
• 3. Technical integration: For ecommerce platforms like Shopify, WooCommerce, or Magento, look for ready-made plugins (Stripe, PayByBank plugins, or provider modules). If you run custom checkout, arrange API integration with your provider and plan the redirect or in-app experience.
• 4. POS and in-store options: If you take payments in-store, some providers offer QR codes or terminal integrations. Decide whether to present “Pay by Bank” as a payment option on the till or receipts.
• 5. UX design and messaging: Tell customers what to expect: “Secure bank payment — no card fees” or “Pay with your banking app.” Provide help copy for refunds and receipts.
• 6. Test thoroughly: Run end-to-end tests for happy path, failed authorisations, refunds, and partial refunds. Ensure reconciliation lines up in your accounting software.
• 7. Launch gradually and monitor: Start with a small percentage of traffic or a single store. Track conversion rates, average order value, settlement lag, and customer support tickets.
• 8. Iterate: Tweak messaging, experiment with incentives (small discount for using bank pay), and expand if results meet your KPI for cost savings and conversion.

Comparing card payments and open-banking at a glance

Practical tips I’ve learned

• Don’t expect zero fees. Aim for lower overall cost and better dispute outcomes rather than a mythical free option.
• Offer both payment methods side-by-side. Let customers choose; many adopt bank pay when it’s fast and explained well.
• Consider hybrid setups: use open-banking for high-value or B2B orders and keep cards for low-value consumer purchases.
• Negotiate with providers based on volume. If you can show a predictable volume, you can often get better per-transaction pricing.

If you want, I can help you run the numbers for your specific store: tell me your average order value, monthly transaction volume, and current card fees and I’ll estimate potential savings and recommend providers that fit your needs.