Thought Leadership

Cyber Monday – how open banking payments are protected for consumers  

27 November 2023
Thought leadership

Sometimes, going to America feels like you’re going back in time. You finish your meal in a restaurant, you get the bill and suddenly your bank card is spirited away to be swiped (although not always!). Here in the UK, signing receipts was replaced by chip and pin, which was, in turn, replaced by contactless payments. Now we are on the road to widespread adoption of open banking as a next-gen way to pay, and taking the next step in that journey.

The UK has always been a leader in financial innovation, and open banking is no different – 11% of consumers and 17% of small businesses are already using this powerful financial technology. We know that the average value of an open banking transaction is around £450, taking the total value of open banking payments to around £4.5bn each month. The first six months of 2023 saw double the volume of payments compared with the same period last year.  And a record 9.7m payments were made in June 2023, up 87% on the same month in 2022. 

This is a huge amount and vital to the future of the UK economy. On Black Friday and Cyber Monday, when it is predicted that over half of UK adults will spend £3bn in shops and online, understanding whether this new technology is safe is a pertinent question.  

“Open banking is a safe and secure way for consumers to spend and transfer money. It was designed with protection in mind - it uses the banks’ own secure systems, and there are robust and constantly evolving protections to spot fraudsters.” Richard Mould, Senior Policy Manager, OBL

Payment protection

The categorical answer is yes, open banking is a safe and secure way to spend and transfer money. Firstly, it was designed with protection in mind. Fingerprints, passcodes or face scans are used to ensure only an authorised customer can make the payment, and all the details are shown in the customer’s own banking app.

Secondly, the Financial Conduct Authority (FCA) has regulations to ensure that customers are protected if something goes wrong with any bank payment – not just open banking. As open banking uses the banks’ own secure systems, there are robust and constantly evolving protections to spot fraudsters. For example, your bank might use geolocation checks, and ‘value and velocity monitoring’ (checking the value of transactions and the speed at which a consumer tries to make multiple purchases).

Some consumers may view these as extra and unnecessary steps that can slow down purchases, but safety always needs to be a top priority and the speed is such that most people won’t even notice.

Purchase protection

Open banking is a safe way to pay but how do you know the person you are paying is legitimate? Again, legislation comes to our aid as the Consumer Rights Act requires merchants to treat customers fairly.    

However, when buying things online, consumers need to treat these purchases in the same way as they would in the physical world. If it seems too good to be true, then it probably is! Do you trust the person you are sending money to? Does the website look genuine? This is why it is always best to only buy from trusted suppliers. Card payments do have additional protections, but often these can only be accessed after you to resolve the matter with the retailer. Card protections do incur extra cost for the retailer, which can end up being passed on to you, the consumer.  

Just because open banking is new, it doesn’t mean that it doesn’t have functionality that consumers know and trust – like the familiar Direct Debit guarantee. It is simply a new journey for payments, that results in the same, safe outcomes.