Can Open Banking secure Europe’s financial sovereignty?

In an era where geopolitical uncertainty increasingly influences the flow of money, the security and sovereignty of national payment infrastructures have never been more vital.

As economic sanctions disrupt financial corridors and global tensions rise, Open Banking is emerging not only as a force for innovation — but potentially, as a bulwark of financial independence.

Nowhere is this more relevant than in the UK and Europe.

With entrenched reliance on US-based card networks like Visa and Mastercard, these regions face growing pressure to diversify their payments architecture.

Open Banking, born from regulatory foresight, may hold the key — but only if it can evolve from a regulatory artefact into a robust, scalable alternative.

The Strategic Stakes of Open Banking

The strategic relevance of payments infrastructure became clear in the aftermath of the 2022 sanctions against Russia.

With Russia removed from the SWIFT network, banks in Armenia, Georgia and Kazakhstan scrambled to suspend cross-border services to avoid secondary sanctions.

The result? Severed remittance channels, strained liquidity, and deep financial fragmentation.

For the UK, heavily dependent on US-owned networks and infrastructure — Vocalink (Mastercard) and the long-defunct Switch scheme come to mind — the implications are sobering.

“Our entire retail payment ecosystem is effectively an outsourced American export,” one senior policymaker recently remarked.

This reality raises a pressing question: could Open Banking offer a sovereign payments rail for the UK and Europe?

Open Banking: Not Yet an Alternative — But Close

Open Banking in the UK has made tangible strides.

More than 200 million Open Banking payments were processed in 2024—a sharp rise, yet dwarfed by card volumes (e.g. 383 million credit card transactions in September 2024 alone).

Despite steady growth, Open Banking still lacks the scale, consumer trust and functionality to supplant card rails.

Yet foundational change is underway. Open Banking Limited is working on Section 75-style consumer protections, while the Payment Systems.

Regulator’s (PSR) newly implemented liability framework for Authorised Push Payment (APP) fraud — effective from October 2024 — provides a legal framework for consumer redress.

These are not minor adjustments; they are foundational enablers of systemic trust.

Still, such reforms are in their infancy and largely untested at scale.

“Consumer protections are the bedrock of adoption,” says Charlotte Crosswell, Chair of the Open Banking Implementation Entity (OBIE). “Without trust, there is no usage. Without usage, there is no alternative.”

Infrastructure Matters: API Performance and Security Gaps

The health of Open Banking ultimately depends on the infrastructure that supports it — especially APIs, the connective tissue of modern financial ecosystems.

Yet recent assessments paint a mixed picture.

The 2023–2024 UK Open Banking API Performance Report, published by APIContext, revealed both encouraging and concerning trends.

While CMA9 banks have significantly improved reliability and uptime, many traditional institutions continue to suffer from latency issues exceeding 4,500ms, well above acceptable thresholds.

Cloud provider performance also varies widely, with Microsoft Azure underperforming across Northern Europe.

Security, too, remains a moving target. Common vulnerabilities — broken authorisation protocols, injection attacks, excessive data exposure — have become more frequent as the number of APIs proliferates across cloud-native and legacy environments.

“Each endpoint is a potential breach point,” notes the Verizon 2024 Data Breach Investigations Report.

To address these risks, experts advocate for a zero-trust architecture, continuous API monitoring and mandatory penetration testing.

“Security isn’t a barrier to innovation — it’s a precondition,” says David Head, CTO at a London-based fintech.

Scaling Open Banking: Three Glaring Product Gaps

Despite its potential, Open Banking suffers from critical product limitations that inhibit mainstream adoption:

• In-store payments: The absence of a tap-to-pay equivalent makes Open Banking irrelevant in physical retail — a major shortcoming in a country where contactless card use is ubiquitous.
• Cross-border payments: Limited interoperability renders Open Banking ineffective for travel, remittances or international commerce.
• Recurring payments: While Variable Recurring Payments (VRP) show promise, their deployment remains fragmented and largely confined to sweeping use cases between accounts owned by the same user.

Closing these gaps will be pivotal. Industry observers suggest that modest commercial incentives, such as micro-level interchange equivalents, could stimulate investment from banks and improve merchant acceptance.

“Payments are about economics as much as engineering,” a senior PSP executive commented.

Europe: Convergence, Fragmentation, and the PSD3 Opportunity

Across the Channel, the story is one of promise tempered by patchiness.

Under PSD2, member states implemented Open Banking at different paces and to varying standards.

While markets like the Netherlands and Germany saw vibrant ecosystems emerge, others lagged due to inconsistent regulation and infrastructural inertia.

Now, PSD3 and the Financial Data Access (FIDA) framework aim to harmonise the landscape.

A key proposal is the introduction of a premium API layer—mandatory for banks, commercialised for fintechs — which could eliminate one of the sector’s most enduring frictions: differential access.

If aligned with real-time payments infrastructure like SEPA Instant, Europe could see the emergence of a pan-European account-to-account (A2A) payment network — a credible alternative to cards, and perhaps even to SWIFT.

Global Lessons: What the UK and EU Can Learn from Brazil, India and Korea

Other markets are already demonstrating what comprehensive, scalable Open Banking regimes can achieve.

• Brazil: By integrating Open Banking with Pix, the central bank’s real-time payments network, Brazil processed over 64 billion transactions in 2024 — more than credit and debit cards combined.
• India: Through voluntary participation and ultra-low infrastructure costs, India’s Account Aggregator framework has enabled over 148 million data-sharing requests, extending financial access to underserved populations.
• South Korea: With a regulator-driven approach, Korea extended Open Banking beyond finance to sectors like energy and healthcare, creating a true open data economy.

These models share three traits: regulator-led design, mandatory interoperability and close integration with instant payments.

“It’s not just about data; it’s about delivery,” said one senior official from South Korea’s Financial Services Commission.

Toward a Sovereign, Resilient Payments Future

Open Banking’s promise is no longer theoretical. It is functioning, evolving, and — importantly — being watched by those who shape the future of national security and economic resilience.

As the UK and EU consider their next regulatory moves, they must ask not just what Open Banking can do, but what it must do.

That means:

• Mandating robust, standardised APIs across banks.
• Introducing real commercial incentives for providers and merchants.
• Fortifying security and liability frameworks at scale.
• Driving product innovation across in-store, recurring and cross-border use cases.
• Recognising Open Banking as critical national infrastructure.

As political and financial systems become more entangled, the sovereignty of payments systems becomes more than a technical question — it becomes a matter of national policy.

“If we treat Open Banking as a fintech experiment,” one EU regulator warned, “we’ll miss its geopolitical significance. This is infrastructure. It’s time we treated it that way.”