Open banking payments continue to reshape the competitive landscape for merchants, banks, and payment providers by enabling direct account-to-account (A2A) transactions that bypass traditional card networks. As open banking regulations mature and APIs become more widely available, fintech companies are developing innovative ways to reduce payment costs, improve settlement speeds, and give merchants greater flexibility at checkout. While these solutions promise operational efficiencies, they also introduce new considerations around consumer protections, dispute resolution, and the overall payment experience.
One emerging approach involves identifying eligible debit card transactions during the checkout process and offering consumers the option to complete the purchase through an account-to-account payment instead of the traditional card rails. This strategy leverages the infrastructure established under Europe’s PSD2 framework, including Strong Customer Authentication (SCA), to authenticate payments directly with the consumer’s bank. By eliminating card network interchange and processing fees, these open banking payments can lower merchant costs while maintaining a familiar checkout experience. However, they also raise important questions about whether consumers fully understand the differences between A2A payments and card transactions, particularly regarding chargebacks, purchase protections, and dispute rights that have long been associated with major card networks.
Yesterday we identified an alternative network being built on the open banking rails. Now Kevi, a Lithuanian start-up has indicated that it will use the open banking infrastructure to intercept traditional card transactions even as the cardholder types in the card data. Its unclear if consumers will recognize that this eliminates the dispute process enabled by the major card rails:
“How it works, according to Mr Sokolovas, is that when customers start typing in their card number, the system can detect from the first eight digits whether it’s a credit or debit card and from which bank it is issued. If it’s a debit card, the system gives the customer the option to switch to an A2A payment.
And since PSD2 includes the provision that banks must institute safety checks for card transactions (Strong Customer Authentication, or SCA) consumers must confirm at bank side. Kevin’s method excludes the card scheme middlemen, offers savings to merchants, and doesn’t alter the user experience for the end consumer.
“It’s maybe not so magic, it’s very simple. But nobody was using this to compete with Visa or MasterCard. So yes, it’s simple, but very very powerful,” explains Mr Sokolovas.
Partners, not competitors
The objective for Kevin is not to build on top of the infrastructure of others, but to let others build on its infrastructure.”
As open banking payments continue to mature, innovations that seamlessly redirect transactions from traditional card rails to account-to-account transfers are likely to become more common. Merchants stand to benefit from lower acceptance costs and faster settlement, while fintech providers have an opportunity to build new payment infrastructure that operates alongside—or in some cases competes directly with—established card networks. The long-term success of these models will depend on balancing efficiency with transparency and consumer confidence.
The evolution of open banking is demonstrating that competition in payments is no longer limited to issuing banks and card networks. Fintech innovators are finding new ways to leverage regulatory frameworks and modern APIs to create alternative payment experiences. As these solutions gain traction, ensuring that consumers understand how open banking payments differ from traditional card transactions—including the protections that may or may not apply—will be critical to driving sustainable adoption.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group