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How Does Open Banking Payment Initiation Work?

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Last editedMay 20222 min read

Payment initiation is a type of payment method facilitated by open banking. Put simply, it involves customers allowing third-parties to connect to their banks and authorise payments directly from their bank account. In this post, we’ll explore how payment initiation works in more detail, and take you through the perks it can offer for your business.

What is payment initiation?

With payment initiation, customers give their consent for third-party providers (TPPs) to connect to their bank account and initiate payments for them. This means that, instead of needing to open their banking app or payment interface to make and authorise payments, customers can make payments directly with the service they’re using. This can make the payment process significantly quicker and more convenient for customers, and can mean businesses get paid quicker too.

Benefits of payment initiation for customers

Customers have a lot to gain from using open banking payment initiation, including the following perks:

Quick and convenient

The main benefit of payment initiation from a customer perspective is the ease and convenience of it. Instead of having to search for their debit or credit card, manually type in numbers, or even open up their banking app, customers can make transfers and payments. The process simply involves an authentication with the bank, the selection of the account they wish to pay from and a confirmation click.

Allowing for customer convenience and satisfaction can boost business too, as individuals are much more likely to keep coming back if their experience is positive.


With payment initiation (PI), businesses don’t need to hold consumers’ payment details, making the transaction much more secure.

Benefits of payment initiation for businesses

Businesses can also gain a lot from providing a quick, simple and reliable payment experience for their customers. As a business that offers open banking PI, you can enjoy:

Better conversion rates

Without card payments, there is less room for errors as customers don’t need to manually enter a myriad of card details. This results in fewer failed transactions and therefore better conversion rates. And, it goes without saying, better conversion rates equals more sales and more sales equals more revenue.

Better customer engagement

Providing an integrated payment flow can result in better engagement as users don’t need to leave the service to carry out their transaction.

Lower costs

There are also benefits to be had vis-a-vis costs. Payment initiation costs far less than other payment methods, such as credit card payments. This is because you don’t need to pay interchange fees or credit card processing fees.

Quicker payments

With payment initiation, businesses can receive funds instantly. Indeed, there is no settlement period. This can make a huge difference as credit or debit card payments can take 3-5 business days to be processed and deposited. With more rapid payments, companies can better manage their cash flow, pay bills on time and even make investments more promptly. All this can have a hugely positive effect on business operations.

More security

In addition to being speedy and cost-effective, payment initiation is also a highly secure payment method. This is because it does not require businesses to hold customer payment details. This is a perk for customers, who can enjoy a safe shopping experience, but also for merchants who often lose customers and sales due to safety concerns.

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