Open banking in the UK is entering its next phase of development, moving beyond the initial read-only account information and payment initiation services into more sophisticated use cases including variable recurring payments, premium APIs and broader data sharing. At the same time, the EU has agreed PSD3 and the Payment Services Regulation (PSR), which replace PSD2 and the Electronic Money Directive. UK firms are affected where they serve EU customers or run an EU entity. UK payment firms need a plan for both the domestic changes and growing UK-EU divergence. This article examines the key developments and their practical implications.
The Next Phase of UK Open Banking
The UK's open banking framework began with a 2017 Competition and Markets Authority (CMA) order requiring the nine largest banks (the CMA9) to build standard APIs. Separately, the PSRs 2017 already require every account provider offering online payment accounts to give regulated third parties, such as firms with API authorisation for payment initiation, access. The framework is now moving to a long-term regulatory structure, and the FCA plans to consult on a new open banking framework, subject to legislation. Key developments include:
Variable recurring payments (VRPs). VRPs allow customers to authorise payment service providers to make recurring payments of variable amounts from their bank accounts: enabling use cases such as subscription management, utility bill payments and automated savings. Sweeping VRPs (moving money between a customer's own accounts) are already mandated for the CMA9. Commercial VRPs for payments to businesses launched in 2026 through a scheme run by the UK Payments Initiative, with early use cases expected in financial services, government, utilities and charities.
Premium APIs. The open banking ecosystem is developing premium API services that go beyond the regulatory minimum, offering enhanced data, faster payment processing and additional functionality. Premium APIs create commercial opportunities for both banks and payment service providers.
Smart data and open finance. The Data (Use and Access) Act 2025, which received Royal Assent on 19 June 2025, gives the government powers to create smart data schemes. The FCA published its open finance roadmap on 14 April 2026, starting with SME lending and mortgages.
EU PSD3 and the Payment Services Regulation
The European Parliament and Council reached provisional agreement on PSD3 and the PSR on 27 November 2025, and the agreed text was published on 23 April 2026. Key changes include:
- Strengthened customer authentication requirements
- Enhanced liability frameworks for payment fraud
- Expanded open banking obligations for payment accounts
- New requirements for payment initiation services
- Harmonised rules on transaction fees and pricing transparency
For UK payment firms serving EU customers through a locally authorised entity, PSD3 and the PSR will be a significant implementation programme. Official Journal publication is expected around the end of 2026. Most provisions then apply 21 months after entry into force, and existing EU payment institutions and EMIs have up to 27 months (30 months in limited cases) to show they meet the new rules.
| Milestone | Date |
|---|---|
| Commission proposals | June 2023 |
| Provisional political agreement | 27 November 2025 |
| Agreed text published | 23 April 2026 |
| Official Journal publication | Expected around end of 2026 |
| Main application date | 21 months after entry into force (2028) |
UK-EU Regulatory Divergence
Post-Brexit, the UK and EU payments regulatory frameworks are increasingly diverging. While both systems share common roots in PSD2, the UK's approach to open banking, safeguarding (CASS 15, in force since 7 May 2026 under PS25/12) and cryptoasset regulation differs from the EU's approach under PSD3, the PSR and MiCA. Firms operating in both markets must maintain parallel compliance frameworks and monitor developments in both jurisdictions.
What UK Payment Firms Should Prepare For
- VRP capabilities. If your business model involves recurring payment initiation, prepare for commercial VRP. Payment institutions and EMIs that collect recurring payments can offer VRP alongside cards and Direct Debit. This includes technology readiness, customer consent management and risk management for variable payment mandates.
- API strategy. Assess whether premium API services create commercial opportunities for your business.
- PSD3 impact assessment. If you serve EU customers, begin assessing the impact of PSD3/PSR on your EU operations.
- Authentication upgrades. Both the UK and EU are strengthening customer authentication requirements. Ensure your SCA implementation is robust and adaptable.
- Regulatory monitoring. Establish a structured process for monitoring UK and EU payments regulatory developments and assessing their impact on your business.
Regulatory Counsel advises payment firms on open banking strategy, PSD3 preparation and UK-EU regulatory compliance. Contact us for a written proposal.
Frequently asked questions
VRPs allow customers to authorise payment service providers to make recurring payments of variable amounts from their bank accounts: enabling subscription management, utility payments and automated savings.
PSD3 directly affects EU operations. UK firms serving EU customers through locally authorised entities will need to comply with PSD3 requirements.
The CMA-led framework is moving to a long-term regulatory model. The FCA plans to consult on a new open banking framework, subject to legislation, and commercial VRP launched in 2026 through the UK Payments Initiative.
Yes. Firms operating in both the UK and EU should maintain parallel compliance frameworks and actively monitor developments in both jurisdictions.
PSD3 and the PSR are expected to be published in the Official Journal around the end of 2026. Most provisions apply 21 months after entry into force, so firms should plan for 2028.
PSD3 repeals the second Electronic Money Directive. E-money issuance becomes a payment service, and existing EMIs move into the payment institution framework through a transitional regime.
Variable recurring payments that let a customer authorise a business to collect payments of varying amounts directly from their bank account through open banking. A commercial scheme run by the UK Payments Initiative launched in 2026.
Definitive guides on this topic
The permanent reference pages this article relates to.
UK Authorised Payment Institution licence
FCA API requirements, own funds methods, safeguarding, cost and timeline.
UK Small Payment Institution registration
FCA SPI requirements, the EUR 3 million threshold, cost and timeline.
Payment institutions
Licensing and ongoing compliance for UK and international payment firms.