UK SMEs Cautious but Curious: Interest Shown in Open Banking but Knowledge Gaps and Fragmented Barriers Slow Progress

UK SME Open Banking continues to gain attention, but there are still big problems with knowledge gaps and complicated integration. New research shows that small businesses are interested in the possibilities of Open Banking solutions, but they are also wary because they don't know what the benefits are or how to use digital finance tools. In a survey of 500 senior decision-makers across UK SMEs, The Payments Association found that while awareness of open banking is relatively strong, more than a third of businesses still don’t fully understand what it entails, underscoring a pressing need for education, clear terminology and consistent messaging. Riccardo Tordera Ricchi, Director of Policy & Government Relations at The Payments Association, said: “Account-to-account payments are clearly on the radar of UK businesses, but our research shows there’s a significant gap between awareness and understanding. To unlock its full potential, we urgently need to demystify the terminology, streamline messaging and provide tailored education that speaks to the unique concerns of different sectors. “A2A payments, typically powered by open banking APIs, were not the original focus of open banking, which centred on improving access to financial data. As a result, frameworks for consumer protection and standardisation in payments are still evolving. Clearer guidance and stronger messaging are essential to help merchants fully realise the benefits of A2A. “Our findings reveal a fragmented adoption landscape shaped by competing priorities – from fraud fears to functionality gaps. If we want to accelerate meaningful uptake, industry and policymakers must work together to simplify integration, boost consumer confidence and ensure the regulatory framework evolves in step with business needs.” Key Findings at a Glance:

• Over a third of SMEs are unclear about how A2A payments work.
• Customer experience, faster settlement, and lower fees top the list of perceived benefits.
• No single barrier dominates: fraud concerns, lack of consumer demand and technical complexity are cited almost equally.
• A2A ranks sixth out of nine in perceived payment method suitability—below cards, direct debits and digital wallets.
• London leads with 75% of firms having a timeline for adoption, while the Midlands and South lag behind.

The study reveals that despite the UK SME Open Banking opportunity, many businesses still use old systems and do their finances by hand. The survey reveals significant differences in attitudes across various industries. Retail and healthcare businesses show the greatest enthusiasm, with 58% and 66%, respectively, highlighting open banking’s potential to enhance the customer experience. In contrast, real estate and legal services firms cite security and consumer demand concerns as significant barriers. Larger businesses (those with over £25 million in turnover) are especially interested in faster settlement times (69%), while medium-sized firms express heightened concerns about fraud, dispute processes and limited recurring payment functionality. Notably, the survey found that “Pay by Bank App” had higher recognition than the broader term “open banking.” This suggests that simplified, consumer-facing language, alongside a consistent brand mark, could significantly improve comprehension and engagement across demographics. Open banking adoption is poised to rise gradually over the next three years, but the road is far from straightforward. A patchwork of motivations and reservations -  ranging from enhanced security to low consumer demand - means that businesses will need targeted support to move forward confidently. To drive open banking adoption, The Payments Association urges the industry to:

• Communicate the wide array of benefits that open banking payments offer, clearly and consistently.
• Agree on consistent language and terminology when referring to open banking payments
• Address integration and security concerns directly.
• Boost consumer education and engagement.
• Work with regulators to clarify rules and enable greater functionality, including Variable Recurring Payments.

Click here to read the report Open Banking Survey 2025: Insights from 500 UK SMEs | The Payments Association For more information on the work and services of The Payments Association, you can visit https://thepaymentsassociation.org/ or contact natasha.healy@thepaymentsassociation.org mailto:jay.bennett@thepaymentsassociation.org. To fully unlock the benefits of UK SME Open Banking, the ecosystem needs to fill in knowledge gaps and make it easier for small businesses to get access to new financial products.