Getting turned down by a payment processor is not a rare event for high-risk businesses — it’s practically a rite of passage. Whether you operate in forex, iGaming, adult content, CBD, or crypto, you have likely encountered account terminations, rolling reserves, or flat-out rejections from mainstream acquiring banks. The frustration is real. So is the financial damage.
Open banking is changing that dynamic — quietly, but meaningfully.
Open banking is a regulated payment framework that allows licensed third-party providers to initiate direct bank-to-bank transfers on behalf of customers, bypassing card networks entirely. In Europe, it is governed by the Payment Services Directive 2 (PSD2), which legally compels banks to open their APIs to authorised providers. For high-risk merchants who have spent years navigating Visa and Mastercard’s high-risk restrictions, this represents a fundamentally different path forward.
At inquid.net, we work with high-risk businesses across Europe and beyond to build payment stacks that actually hold up. This guide covers everything you need to know — how open banking works, its real advantages and limitations, how it fits with offshore processing, and what the European landscape looks like heading into 2026 and beyond.
What Is Open Banking and Why Should High-Risk Merchants Actually Care?
Open banking is a financial services framework in which banks are required, by regulation, to share customer account data and enable payment initiation through standardised, secure application programming interfaces (APIs). In practical terms, this allows authorised third-party providers — payment processors, fintech platforms, and specialist providers like inquid.net — to move money directly from a customer’s bank account to a merchant’s account, without involving a card network at any point.
This is not an experimental technology. In the United Kingdom, open banking has been operational since 2018 under the Open Banking Standard, overseen by the Open Banking Implementation Entity (OBIE). In the European Union, PSD2 has been in effect since 2019, mandating that all EU-regulated banks provide API access to licensed Payment Initiation Service Providers (PISPs).
The scale is significant. According to OBIE data, over 11 million consumers and businesses in the UK now actively use open banking-enabled services. Across the EU, transaction volumes processed through open banking rails are projected to reach €57 billion by 2027, with Germany, the Netherlands, and France leading adoption among member states.
For high-risk merchants specifically, the relevance is direct. Card networks — Visa, Mastercard, and American Express — maintain their own risk classification systems. Entire industries are either prohibited outright or subjected to significantly higher fees, rolling reserves, and enhanced monitoring. Open banking operates outside these card-network frameworks entirely. The payment moves from a customer’s bank to yours, authorised by the customer, processed through a PSD2-licensed provider. There are no card scheme rules to violate, no card-network chargeback mechanisms to exploit, and no interchange fees to absorb.
| Feature | Traditional Card Processing | Open Banking |
| Chargeback Risk | High | Very Low |
| Processing Fees | 2–4% + interchange | 0.1–0.5% |
| Settlement Time | 1–3 business days | Real-time or same day |
| Fraud Exposure | Medium–High | Low (bank-authenticated) |
| Card Network Dependency | Yes | None |
| Availability | Global | Primarily EU / UK (expanding) |
The shift from card-dependent infrastructure to open banking rails is not about chasing a trend. For high-risk merchants, it is about accessing a payment system that was not designed to exclude them in the first place.
Open Banking Payment Solutions: How They Work — and Why They’re Built for Risk
An open banking payment solution is, at its core, a direct account-to-account (A2A) transfer mechanism. Unlike card payments — which route through a merchant’s acquirer, a card network, and the customer’s card issuer before funds even begin moving — open banking payments follow a dramatically shorter path. The result is lower cost, faster settlement, and a fraud profile that is structurally different from anything card processing can offer.
Here is how a typical open banking transaction works in practice:
- The customer chooses “Pay by Bank” at checkout. This option appears alongside card payment methods on the merchant’s checkout page.
- The customer is redirected to their own bank’s interface. This might be their banking app or online banking portal — an environment they already know and trust.
- Authentication happens through the bank’s own Strong Customer Authentication (SCA) system. This typically involves biometric verification (fingerprint or face ID) or a one-time password. SCA is a PSD2 requirement, meaning it is mandated by law, not optional.
- A payment instruction is sent directly from the customer’s bank to the merchant’s account. No card details are ever shared. No intermediary card network handles the transaction.
- The merchant receives real-time confirmation and the funds settle rapidly — often within seconds or minutes, and almost always the same business day.
For high-risk merchants, each of these steps carries meaningful advantages. SCA is far more robust than the 3DS authentication used in card payments — it is authenticated entirely within the customer’s bank, using credentials only that customer possesses. This eliminates a significant category of card fraud.
The cost difference is also substantial. Card interchange fees in Europe typically range from 0.2% to 0.3% for consumer cards under the EU Interchange Fee Regulation, but acquirer fees, processing margins, and scheme fees push the effective rate to 1.5–3.5% for most high-risk merchants. Open banking transaction fees generally fall between 0.1% and 0.5% with no interchange component, because there is no card network involved at all.
Settlement timing is equally important. High-risk merchants operating in volatile sectors — forex, iGaming, time-sensitive subscriptions — lose operational flexibility when funds take two or three days to settle. Open banking’s same-day or near-real-time settlement directly improves cash flow.
The combination of bank-grade authentication, low fees, and fast settlement is not incidental. Open banking was architected in a regulatory environment that prioritised security and efficiency over legacy card-network convenience. For merchants who have been penalised by that legacy system, these features are precisely what they need.
Open Banking for High-Risk Merchants: Real Benefits vs. Real Limitations
Open banking is a powerful tool for high-risk merchants — but it is not a complete solution to every payment challenge, and it would be dishonest to present it as one. Here is a straightforward assessment of both sides.
Real Benefits
Dramatically reduced chargebacks. This is the single most important benefit for most high-risk merchants. Chargebacks occur within card networks: a cardholder disputes a transaction with their card issuer, and the merchant bears the burden of proof and the financial loss. Open banking payments are direct bank transfers. Once a customer authorises a payment through their bank using SCA, reversing that transaction requires the customer to go through their bank’s dispute process — not an automated card-scheme chargeback mechanism. Fraudulent chargebacks, which plague high-risk industries, become structurally much harder to execute.
No card-network dependency or rule exposure. Visa and Mastercard impose prohibited merchant category codes (MCCs) and enforce compliance policies that have led to mass account terminations in sectors like adult content, firearms accessories, and certain nutraceuticals. Open banking operates outside these scheme rules entirely. A PSD2-licensed provider can process payments for businesses that card networks decline to serve.
Lower, more predictable processing costs. For a high-risk merchant paying 3% or more per transaction after fees and reserves, moving even a portion of transaction volume to open banking — at 0.1–0.5% — materially improves margins.
Built-in regulatory compliance. Every open banking payment made through a PSD2-licensed provider is compliant with EU payment law, Strong Customer Authentication requirements, and GDPR data handling standards by design. Merchants do not need to build compliance separately.
Improved cash flow. Real-time or same-day settlement removes the 1–3 day float that can strain working capital, particularly for businesses with high transaction volumes.
Real Limitations
Consumer adoption is still growing in some markets. The UK has the most mature open banking ecosystem. Adoption is strong in the Netherlands, Germany, and the Nordic markets, but in Southern and Eastern Europe, consumer familiarity with bank-redirect checkout flows is lower. Merchants targeting customers in these regions should expect a lower conversion rate on open banking options compared to card payments — at least for now.
Geographic coverage is not global. Open banking under PSD2 covers the EU and EEA. The UK has its own framework. Australia, Brazil, and several other markets are developing their own equivalents. But for merchants with significant customer bases in the US, parts of Asia, or Latin America, open banking is not yet a reliable primary payment rail.
Refunds require more coordination. Card chargebacks, for all their problems, do provide a consumer refund mechanism. With open banking, refunds must be processed as separate outgoing transfers. This is manageable with the right payment provider, but it is a more manual process than automated card refunds.
Older demographics and less digitally-active customers may have friction. Bank-redirect flows assume the customer has mobile or online banking set up and is comfortable using it. For some customer segments, this is a genuine barrier.
Variable Recurring Payments (VRPs) are not yet mainstream. Subscription billing through open banking is technically possible via VRPs, but the infrastructure is still maturing across European banks. For businesses with a heavy subscription model, card payments remain more reliable for now.
| Benefit | Impact Level |
| Reduced chargebacks | Very High |
| No card-network restriction | Very High |
| Lower processing fees | High |
| Faster settlement | High |
| Built-in SCA compliance | High |
| Limitation | Severity |
| Lower consumer adoption in some EU regions | Medium |
| Limited global coverage | Medium |
| Refund process complexity | Low–Medium |
| VRP subscription maturity | Medium |
Open banking is best understood as a strategic payment layer for high-risk businesses — not a wholesale replacement for every payment method you currently use, but a powerful addition that addresses many of the specific pain points card processing creates.
Offshore Payment Processing and Open Banking: A Smarter Stack for Declined Merchants
Many high-risk merchants encounter two distinct problems at the same time: they cannot get a merchant account with a domestic bank because of their industry, and even when they do obtain card processing, the chargeback ratios and restriction policies make it unstable. Open banking alone does not fully solve the first problem. Offshore payment processing does — and when combined with open banking, the result is a far more resilient payment infrastructure.
Why Offshore Processing Exists
Offshore payment processing refers to the use of merchant accounts held with banks or payment institutions registered outside the merchant’s home country — typically in jurisdictions with more accommodating regulatory frameworks for high-risk industries. Common offshore jurisdictions used by high-risk merchants include Malta, Cyprus, Gibraltar, Seychelles, and certain Caribbean financial centres.
Offshore banks and processors are more likely to approve merchant accounts for industries that domestic UK or German banks routinely decline — including adult entertainment, forex trading, online gambling with international licences, and cryptocurrency-related services. The trade-off is typically higher processing fees and more documentation requirements, but for businesses that cannot obtain domestic accounts at all, offshore processing is not optional — it is the only viable route.
How Open Banking and Offshore Processing Work Together
The combination works like this: your offshore merchant account gives you the banking relationship and account structure that domestic banks refused to provide. Your open banking payment solution gives you the payment rail — the mechanism through which your customers actually send you money.
Here is what that means in practice:
- The offshore account receives funds without being subject to domestic card-network restrictions.
- Open banking A2A payments bypass Visa and Mastercard entirely, so card-scheme compliance rules are irrelevant.
- The customer experience is clean — they authenticate through their own bank, and the payment arrives in your account rapidly.
- PSD2 compliance is maintained through a licensed Payment Initiation Service Provider, regardless of where your merchant account is domiciled.
This pairing is particularly effective for businesses in EU-adjacent markets — merchants incorporated in Seychelles or similar jurisdictions who nonetheless serve European customers. The open banking rail operates on the customer’s side (their EU bank), so the PSD2 compliance obligation sits with the PISP, not with the merchant’s incorporation jurisdiction.
| Jurisdiction | Offshore Processing | Open Banking (PSD2) | Combined Setup Viability |
| UK | Available | Full PSD2 coverage | Ideal |
| EU — Malta / Cyprus | Available | Full PSD2 coverage | Ideal |
| Gibraltar | Available | PSD2-adjacent | Strong |
| Seychelles | Available | Requires EU PISP partner | Achievable |
| USA | Selective | No PSD2 equivalent | Complex |
Regulatory compliance across this combined stack still requires attention — GDPR applies to data handling, AML (Anti-Money Laundering) obligations apply to transaction monitoring, and PSD2 applies to payment initiation. Working with a provider that understands the intersection of these frameworks is critical.
At inquid.net, we specifically help high-risk merchants navigate exactly this combination — offshore merchant account access paired with PSD2-licensed open banking payment initiation, structured to meet EU compliance requirements. If your current payment stack is fragile, incomplete, or costing you too much, we can help you build something more durable. [Get in touch with our team →]
Open Banking Opportunities and Challenges in the European Payments Landscape
The European payments landscape is not static. PSD2 opened the door to open banking, but the regulation that follows it — PSD3 and the Payment Services Regulation (PSR) — is expected to go further, standardising APIs more aggressively, strengthening consumer protections, and expanding the scope of payment initiation services. The European Commission published its PSD3 proposal in 2023, with implementation expected across member states between 2026 and 2026.
For high-risk merchants, the direction of travel is favourable. More standardised APIs mean more reliable payment initiation across more European banks. Stronger consumer authentication requirements mean a more secure payment environment. And expanded PISP rights mean more specialist providers will be able to serve high-risk verticals that mainstream acquirers avoid.
Opportunities Worth Understanding
Variable Recurring Payments (VRPs). VRPs allow customers to authorise a payment provider to make recurring payments on their behalf, up to agreed limits and frequencies — without re-authenticating every single time. For subscription businesses, this is a significant development. While VRPs are currently live in the UK (initially for sweeping use cases), the technology is expanding. For high-risk subscription services — membership platforms, digital content services, forex signal subscriptions — VRPs offer a route to recurring billing without card-network dependency.
Embedded finance infrastructure. Open banking APIs are becoming the foundational layer for embedded finance products — lending, insurance, account management, and payment services built directly into non-financial platforms. High-risk merchants who build open banking payment flows into their platforms position themselves as infrastructure-adjacent, not just end-users of someone else’s payment rail.
Expanded EU adoption. The UK leads in raw open banking usage, but EU member states are accelerating. The Netherlands (via iDEAL’s open banking integration), Germany (via instant SEPA credit transfers and open banking APIs), and France are all seeing significant growth. As consumer familiarity grows, the checkout conversion rates for open banking payment options in these markets will improve substantially.
Challenges That Remain
Fragmented API standards across EU member states. Despite PSD2’s intent to create a unified framework, the practical reality is that different banks implement their APIs differently. Payment latency, authentication flows, and error handling vary significantly between institutions. For a PISP serving merchants across multiple EU markets, this fragmentation creates integration complexity that adds cost and slows development.
Consumer trust and UX friction. For customers unfamiliar with bank-redirect checkout flows, the experience of being sent away from a merchant’s checkout page to their banking app — even temporarily — can trigger anxiety about whether the payment will work correctly. This is a UX challenge, not a technical one, and it is diminishing as open banking becomes more familiar. But it remains a real conversion rate consideration for merchants in markets where adoption is still early.
No unified cross-border dispute resolution. When a card payment goes wrong across borders, the card-scheme chargeback mechanism provides a resolution framework. Open banking lacks an equivalent cross-border dispute resolution system at the EU level. This is likely to be addressed through PSD3 implementing measures, but it is a genuine gap today.
Is Open Banking the Future of High-Risk Business Payments? Here’s the Honest Answer
The honest answer is: yes, for specific use cases — and no, not as a complete replacement for everything else.
Card payments are not disappearing. They have three to four decades of consumer familiarity, global infrastructure, and entrenched checkout UX behind them. For merchants who can access card processing without significant restriction — who are not classified as high-risk, who do not face elevated chargeback exposure, and who serve global customer bases outside PSD2’s reach — open banking is an interesting optimization, not a revolution.
For high-risk merchants in Europe, however, the situation is different. The structural advantages of open banking — no card-network restrictions, lower chargebacks, faster settlement, reduced fees, built-in compliance — solve the specific problems that card processing creates for this merchant category. Where high-risk card processing is expensive, unstable, and subject to termination without notice, open banking is comparatively stable, cost-effective, and governed by regulation rather than by private card-scheme policy.
Where Open Banking Will Dominate by 2027
Across high-risk verticals, the use cases where open banking will become the primary payment method rather than a supplementary option are already visible:
- Forex and currency exchange platforms, where real-time settlement aligns with trading windows and chargebacks represent an existential threat to business models
- EU-licensed iGaming and online gambling, where regulatory compliance is already deeply embedded and open banking’s PSD2 framework fits naturally
- Subscription billing for high-risk digital services, as VRP infrastructure matures and removes the current friction in recurring payment initiation
- Cross-border B2B payments within the EEA, where the cost efficiency of A2A transfers over SEPA rails makes open banking significantly cheaper than card-based alternatives
What High-Risk Merchants Should Do Today
If you are operating in a high-risk vertical and your current payment infrastructure relies solely on card processing, here is a practical three-step starting point:
- Audit your current payment stack. Identify where your chargeback ratio is highest, where processor terminations have occurred, and where settlement delays are hurting cash flow. These are the specific pain points open banking addresses.
- Explore PSD2-licensed open banking providers with high-risk compatibility. Not all PISPs serve high-risk industries. Look for providers with demonstrated experience in your specific vertical, an EU or UK licence under PSD2, and transparent fee structures.
- Consider pairing open banking with an offshore merchant account. For merchants who cannot obtain stable domestic card processing, the offshore + open banking combination provides both the account access and the payment rail needed to operate reliably.
At inquid.net, helping high-risk businesses build payment stacks that don’t collapse under regulatory pressure is precisely what we do. Whether you’re starting from scratch, recovering from a processor termination, or looking to reduce your chargeback exposure, our team can walk you through the options.
[Explore inquid.net open banking payment solutions →]
FAQs About Open Banking
What is open banking in simple terms?
Open banking is a regulated financial system that allows authorised third-party providers to access a customer’s bank account — with the customer’s explicit consent — through secure APIs. Rather than entering card details to make a payment, a customer using open banking authorises a direct transfer from their own bank account. In Europe, this is governed by PSD2, which legally requires banks to provide API access to licensed providers. For businesses, the result is faster settlements, lower processing costs, and payments that operate entirely outside card-network infrastructure.
Is open banking safe for high-risk businesses?
Yes. Open banking is considerably more secure than card processing for high-risk merchants, for two structural reasons. First, every transaction is authenticated through the customer’s own bank using Strong Customer Authentication (SCA) — biometric or two-factor verification that is mandated by PSD2 and far more robust than standard card 3DS. Second, direct bank transfers are not subject to the card-scheme chargeback mechanism that fraudsters routinely exploit against high-risk merchants. The bank-verified authorization trail makes fraudulent disputes significantly harder to pursue.
What is the difference between open banking and a payment gateway?
A payment gateway is the technology layer that routes card transactions between a customer, the acquiring bank, the card network (Visa, Mastercard), and the issuing bank. Open banking is a different payment rail entirely — it bypasses card networks and routes payments directly from the customer’s bank account to the merchant’s account. This means no interchange fees, no card-scheme compliance rules, and no card-network chargeback exposure. A payment gateway can theoretically support open banking as one of its payment methods, but open banking itself is the underlying infrastructure, not the gateway.
Can offshore merchants use open banking payment solutions?
Yes, with the right structure in place. Open banking under PSD2 is most mature in the UK and EU, so offshore merchants — those incorporated in Seychelles, BVI, or similar jurisdictions — typically need to work with an EU or UK-licensed Payment Initiation Service Provider (PISP) to access PSD2-compliant open banking rails. The compliance obligation sits with the PISP, not the merchant’s incorporation jurisdiction. Providers like inquid.net are experienced in structuring offshore merchant accounts alongside PSD2-licensed payment initiation, giving offshore high-risk merchants access to European open banking infrastructure.
Is open banking available outside Europe?
Open banking originated in Europe through PSD2 (EU) and the Open Banking Standard (UK), but the framework is expanding globally. Australia has implemented the Consumer Data Right (CDR), which enables open banking functionality. Brazil launched Open Finance in 2021, one of the most comprehensive implementations in any market. The United States does not yet have a federal open banking mandate, though the Consumer Financial Protection Bureau’s Section 1033 rulemaking is moving in that direction. For high-risk merchants serving Western and European customers, PSD2-based open banking remains the most mature, reliable, and legally defined option available.
How does open banking reduce chargebacks?
Chargebacks are a card-network mechanism: a cardholder disputes a charge with their card issuer, and the card network enforces a reversal against the merchant. Open banking payments do not travel through card networks. When a customer authorises a payment through their bank using Strong Customer Authentication, the transaction is a direct bank transfer — not a card transaction. To dispute it, the customer must engage their bank directly, which involves a different, more scrutinised process. There is no automated chargeback pathway. This structural difference is why open banking’s chargeback rates are substantially lower than those of card payments, particularly for high-risk merchants who face disproportionate friendly-fraud exposure.
By the inquid.net Editorial Team | Published: June 2026 | Last Updated: June 2026 Reading time: ~12 minutes
This article was produced by the inquid.net editorial team. inquid.net provides open banking payment solutions, offshore payment processing, and high-risk merchant account services for businesses across Europe and internationally. For tailored payment infrastructure advice, contact our team.